13/02/2014 11:28:10 1 VOLUME 109 FEBRUARY 2014 FEBRUARY Time to revisit revisit to Time definition the port”? a “safe of Chemical tanker outlook – market at a market a crossroads POOLCON B adopted by B adopted POOLCON Documentary Committee BIMCO events in Dubai – Dubai in events BIMCO programme announced

BIMCO BULLETINBIMCO BULLETIN VOLUMEVOLUME 109103 ·· NO.NO. 16 ·· FEBRUARYDECEMBER 2014 2008 The BIMCO House, February 2014 (William A. Foster) intention, sincere effort, sincere effort, intention, choice of many alternatives. Quality is never an accident; Quality is never it is always the result of high it is always intelligent direction and skillful direction and skillful intelligent execution; it represents the wise execution; it represents BIMCO 161 Bagsvaerdvej 2880 Bagsvaerd Denmark www.bimco.org cover-01-14.indd 1 Get more Ef cient voyage planning and chart management in a single service

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BIMCO_280x215_print.inddcover-01-14.indd 2 1 28/01/2014 16:22 13/02/2014 11:28:13 CONTENTS BIMCO 2 The BIMCO Awards Gala Dinner 3 Welcome to BIMCO 4 Perspectives in Shipping 2014 BIMCO Awards Gala Dinner 5 Dubai Perspectives in Shipping preliminary programme 12 NYPE update heads 2014 documentary work progress and programme for Dubai 14 BIMCO Education round-up Perspectives in Shipping pp.2, 4 -11 16 Watchkeeper

General 18 Time to revisit the definition of a “safe port”? 20 Enhanced safety through the use of real-time dynamic chart overlays 24 Plotting a course to better profits: how e-navigation can reduce operating costs 28 Live testing of new AVANTI port information software 30 No all ballast water treatment system type approvals

PRELIMINARY are equal PROGRAMME 32 High quality flag with focus on user-friendliness 34 Protecting marine environments: the MARPOL V Regulation 38 Malaysia’s Trans-Peninsular Pipeline Project: will it take off? 40 Light upon the waters Chemical tanker market 44 New books

outlook – a market at a Shipping Market Overview & Outlook crossroads p.54 46 Macro economics 48 Dry bulk shipping 50 Tanker shipping 52 Container shipping 54 Chemical tanker market outlook – a market at a crossroads 56 The deveil in the detail of time charter damages calculation 58 Moore Stephens says 2015 should see return of healthy shipping industry

Round-ups 60 Ongoing Chinese shipping issues 62 No lack of challenges in Asia at the start of 2014 64 Ongoing EU shipping issues 66 Ongoing US shipping issues

Shipping Law POOLCON B adopted by 68 POOLCON B adopted by Documentary Committee Documentary Committee p.68 74 Anniversaries galore! 76 Judgment – The Ladytramp 78 London Arbitration – Incompetent versus negligent stevedoring 82 New York Arbitration – Shelltime (1984) – ST additional clause 48 – Major’s approvals – Impossible condition – Charterer’s wrongful cancellation – Owner’s damages

BULLETIN 2014 VOLUME 109 #1 1

gen-01-14.indd 1 13/02/2014 12:41:28 Published by BIMCO Bagsvaerdvej 161 2880 Bagsvaerd Denmark BIMCO Awards

Telephone: +45 4436 6800 Telefax: +45 4436 6868 Gala Dinner [email protected] www.bimco.org You are invited to join us on 29 April 2014 for the Secretary General - Angus R. Frew BIMCO Awards Gala Dinner at the Jumeirah Beach Editor - Stephen Gadd Hotel in Dubai. It promises to be a night of great All articles written by outside contributors do not necessarily networking and celebration. reflect the views or policy of BIMCO.

© Copyright – No article may he new BIMCO Awards have been A distinguished judging panel has been be reproduced by any means created to celebrate and draw established headed by BIMCO’s President in whole or in part without the attention to shipping companies John Denholm. He will be joined by Jamal written permission of BIMCO. andT individuals who have excelled in areas Majid Bin Thaniah (TBC), Vice Chairman reflecting BIMCO’s global activities. of DP World and Captain Jitendra Misra, Details of publication dates and Managing Director of Emarat Maritime deadlines for advertising may The nominations will come from BIMCO and Director of BIMCO, Philippe Louis- be obtained by applying to the members, but the winners can be any com- Dreyfus, President of Louis Dreyfus Arma- Editor. pany or individual that has excelled within teurs and President Designate of BIMCO the category. (TBC) and Angus Frew, Secretary General ISSN 0901-814X. & CEO of BIMCO. Award categories The 5 BIMCO Award categories are: We need your nominations! So please go • The BIMCO President’s Award ahead and nominate your favourites within • The BIMCO Regional Shipping each category, and then come and join us at Personality of the Year the BIMCO Awards Gala Dinner in Dubai • The BIMCO Shipping Company on 29 April 2014 for a night of celebration. of the Year • The BIMCO Education & Perspectives in Shipping 2014 Training Award Make a whole day of it and join us at • The BIMCO Cairns-Hansen Award BIMCO’s Annual Conference. The theme Named after two of BIMCO’s founding of this year’s conference is Perspectives in fathers, whose vision to create standard Shipping 2014 – Protecting and Develop- forms of charter party, the basic princi- ing Your Business. ple that underpins BIMCO’s documentary activities today. The Conference starts at 9:30 and runs DP World terminal at Jebel Ali. through to 16:00 on 29 April at the Jumei- How to nominate candidates rah Beach Hotel. BIMCO members can nominate candi- dates for the last 4 awards categories, start- Further information ing today, and the closing date for entry More information, including buying seats/ of nominations from BIMCO members is tables for the Gala Dinner, nomination Friday 7 March 2014. Simply go to the nom- forms for the BIMCO Awards, and sponsor- Printed in compliance with ination forms on this site: http://dubai. ship opportunities, is available on the dedi- Enviromental Certificate DS/ES ISO 14001 bimco.org cated website at http://dubai.bimco.org ll

BIMCO

gen-01-14.indd 2 14/02/2014 08:17:21 Welcome to BIMCO!

BIMCO would like to extend a warm welcome to the following new members, admitted during the period from 1 December 2013 to 31 January 2014.

Owner Members Qingdao, Shandong Province, China Seacon Ships Management Co. Ltd. Dragør, Denmark Licvem Shipping & Trading Aps Lagos, Nigeria West African Ventures Ltd. Doha, Qatar Trelco Marine Services Co. W.L.L Abu Dhabi, United Arab Emirates Sea Horse Middle East Marine Services LLC Dubai, United Arab Emirates IPC Marine Services L.L.C.

Broker Members Icici, Croatia R & B Globalni Projekti d.o.o. Weding/Handewitt, Germany BOW Shipping GmbH Thessaloniki, Greece Seawind Shipping Services St. Petersburg, Russia Arvensa Transport Ltd. Dubai, United Arab Emirates GSS Marine Shipping Services LLC

Agency Members Luanda, Angola Offshores Marine Service Lda. Montreal, Canada Robert Reford Agency Tehran, Iran Blue Gulf Shipping Services Co. Ltd.

Associate Members Shanghai, China Industrial and Commercial Bank of China Ltd. Shanghai, China Wärtsilä Management (Shanghai) Co. Ltd. Sandefjord, Norway Jotun A/S Rotterdam, The Netherlands Port of Rotterdam New Orleans, LA, United States Galloway Johnson Tomkins Burr & Smith

BIMCO BULLETIN 2014 VOLUME 109 #1 3

gen-01-14.indd 3 13/02/2014 12:41:35 Perspectives in Shipping 2014 BIMCO announces the programme for its annual conference Perspectives in Shipping 2014 – Protecting and Developing Your Business at the Jumeirah Beach Hotel, Dubai on 29 April 2014.

ou are invited to join us on London, Nevil Phillips, Barrister, Lon- tions you should be asking? The key issues 29 April 2014, where the full-day don, Han van Blanken, Ship owner, Rotter- will be presented by high-powered profes- conference Perspectives in Ship- dam, John Tsatsas, LMAA Arbitrator and sionals from Wärtsilä, Alfa Laval, and pingY 2014 will focus on issues impacting Mediator, Chartered Shipbroker, Chartered ClassNK. all ship owners and help you to protect Arbitrator, London. The media role will be and develop your business. played by Julian Bray, the Editor-in-Chief Emission control regulations are fast of TradeWinds. approaching and high oil prices are set to His Excellency Sultan Ahmed Bin Sulayem, stay. Everyone is worrying about the avail- the Chairman of DP World (TBC), will The mock arbitration will have a unique ability and price of low sulphur diesel, but open the conference. He will be followed by twist – it will involve high-profile maritime what are your options? Will scrubber tech- Captain Jitendra Misra, Managing Direc- arbitrators from the world’s three main nology really work? Is there a business case tor of Emarat Maritime. The scene will be arbitration venues as listed in BIMCO’s Dis- for continuing to use heavy fuel? Is LNG set by Peter Sand, BIMCO’s Chief Shipping pute Resolution Clause, represented by Jude really a possibility, and what other fuels may Analyst, who will present a Shipping Mar- Benny, Lawyer and Maritime Arbitrator be available? In the past, everyone burnt ket Overview & Outlook. from Singapore, Bruce Harris, Maritime heavy fuel oil; the future may not be so sim- and Commercial Arbitrator from London, ple! This may be the biggest game-changer The conference will then split into two excit- and David Martowski, Arbitrator/Media- for the industry since the end of the sailing ing parallel tracks for you to choose from. tor from New York – each with possible dif- era over 100 years ago. ferent approaches to resolving the dispute. Track one This session will elaborate on the concepts Track 1: A role playing exercise on Most importantly, this exercise will of multi-fuelled ships, the availability and resolving a maritime casualty – the mess, involve the audience at each stage as the effectiveness of scrubber technologies and the media and the mediators story unfolds. Armed with an interactive the practicalities of using LNG. To make Through the muddle and confusion that voting meter, each member of the audience this come alive, a group of high-pow- immediately follows a maritime casualty will be asked what they would do next and ered representatives from DNV-GL, Rolls – a grounding, a collision or even a total help determine the outcome of the affair. Royce, MAN Diesel & Turbo, Wärtsilä, loss – the ship owner must think clearly We can’t stop your phone ringing in the and Clean Marine Energy will present the and tread carefully, looking after the wel- middle of the night – but this event might issues at stake in this context. fare of his crew and minimising damage to just help you be better prepared when that the environment. phone rings. To wrap up Track 2, a panel of ship owners will debate the outcome and provide some What are the “do’s” and “don’ts” for the Track two key take-aways for the audience on how best prudent ship owner? Who should he con- Track 2: Upcoming regulatory to navigate the regulatory minefields ahead fide in, and to whom should his lips be requirements may erode your ticket of us. PRELIMINARY sealed? Co-operation is the key to success- to trade ful crisis management, but of equal impor- Never have regulatory changes been more BIMCO Awards Gala Dinner PROGRAMME tance is managing the media. And then challenging for ship owners than those Make a whole day of it and join us at the there will be claims to be dealt with. Many coming into force in the next decade. BIMCO Awards Gala Dinner. The Gala claims. Arbitrators will be appointed, each dinner starts at 19:30 on 29 April at the side will gather a small army of lawyers and A Ballast Water Treatment System will be Jumeirah Beach Hotel. experts, and battle lines will be drawn. one of the most expensive pieces of equip- ment on board your ship, but will it work? Further information This track will include a vibrant and inter- The marketing material says their system More information – including the pro- active casualty simulation against this com- works in all conditions, and is suitable for gramme, registration, fees, information on plex backdrop of events. The role playing any vessel. Will it really work reliably in the Gala dinner, and sponsorship opportu- exercise will be directed by Lindsay East, all water conditions? Will all port states nities – is available on the dedicated BIMCO Consultant, Reed Smith, London, and will be happy with the results? Acquiring the event website http://dubai.bimco.org ll further include experts well-versed in mar- wrong system will be an expensive mistake. itime casualty work: Chirag Karia Q.C., What are the pitfalls? What are the ques-

4 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 4 17/02/2014 08:04:29 PRELIMINARY PROGRAMME

gen-01-14.indd 5 13/02/2014 12:41:36 WELCOME TO PROTECTING & DEVELOPING PERSPECTIVES IN ShIPPING YOUR BUSINESS AND ThE PROGRAMME BIMCO AWARDS GALA DINNER TUESDAY, 29 APRIL 2014 IN DUBAI 09:30-10:15 Opening Session Venue: Safinah Ballroom 3 + 4 - Jumeirah Track 1: Beach Hotel A Role Playing Exercise on Resolving a Maritime Casualty – The Mess, the Media and the 09:30-09:35 Opening Speech by BIMCO’s President Mr. Mediators John Denholm You are invited to join us on 29 April 2014 for the BIMCO Annual Conference followed Through the muddle and confusion that immediately 09:35-09:45 Official Opening by His Excellency Sultan follows a maritime casualty – a grounding, a collision by the BIMCO Awards Gala Dinner at the spectacular Jumeirah Beach Hotel in Dubai. or even a total loss – the shipowner must think clearly It promises to be a day to remember and a night of great networking and celebration. Ahmed Bin Sulayem The Chairman of DP World (TBC) and tread carefully. Conference - Perspectives in Shipping This track will include a vibrant and interactive 09:45-09:50 Official Speaker Representing the casualty simulation. The role playing exercise will be His Excellency Sultan Ahmed Bin Sulayem, the Chairman of DP World (TBC) will open Shipowning Community: Managing directed by Lindsay East, Consultant, Reed Smith, the conference. He will be followed by Captain Jitendra Misra, Managing Director of Director, Captain Misra of Emarat Shipping London, and will further include experts well- versed in maritime casualty work: Chirag Karia Q.C., Emarat Maritime. The scene will then be set by Peter Sand, BIMCO’s Chief Shipping 09:50-10:15 Market Overview & Outlook by BIMCO London, Nevil Phillips, Barrister, London, Han van Analyst. The conference will then split into two exciting parallel tracks for you to choose Chief Economist Peter Sand Blanken, Ship Owner, Rotterdam, John Tsatsas, LMAA from: Arbitrator and Mediator, Chartered Shipbroker, 10:15-10:30 Coffee Break Chartered Arbitrator, London. The media role will Track 1: A role playing exercise on resolving a maritime casualty – the mess, the media Venue: Lobby area of Jumeirah Beach Hotel be carried out by the Editor-in-Chief Julian Bray and the mediators from TradeWinds. The mock arbitration will have a 10:30-16:00 Track 1: A Role Playing Exercise on unique twist – it will involve high-profile maritime Track 2: Upcoming regulatory requirements may erode your ticket to trade Resolving a Maritime Casualty – The Mess, arbitrators from the world’s three main arbitration the Media and the Mediators venues as listed in BIMCO’s Dispute Resolution Clause Participation in the conference is free to all BIMCO members. Venue: Meyana Auditorium - Jumeirah Beach represented by: Jude Benny, Lawyer and Maritime Hotel Arbitrator from Singapore, Bruce Harris, Maritime BIMCO Awards Gala Dinner and Commercial Arbitrator from London, and David Martowski, Arbitrator/Mediator from New York - You are invited to join us at the BIMCO Awards Gala Dinner in the evening of 29 April each with possible different approaches to resolving 2014. The highlight of the Gala Dinner will be the presentation of the prestigious BIMCO (programme continued on the next page) the dispute. Awards to shipping companies and individuals who have excelled in areas reflecting The audience will be armed with an interactive voting BIMCO’s global activities. meter, and will be asked what they would do next and help determine the outcome of the affair. The nominations for the awards will come from the BIMCO members, but the winners can be any company or individual. Make a whole day of it and join both the BIMCO Annual Conference and the BIMCO Awards Gala Dinner. In addition to these exciting events, the full programme includes a number of BIMCO Committee and Board meetings that will also draw in top shipping professionals from around the world, providing participants with a unique opportunity to refresh old business contacts and make new ones. See you in Dubai!

6 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 6 13/02/2014 12:41:37 WELCOME TO PROTECTING & DEVELOPING PERSPECTIVES IN ShIPPING YOUR BUSINESS AND ThE PROGRAMME BIMCO AWARDS GALA DINNER TUESDAY, 29 APRIL 2014 IN DUBAI 09:30-10:15 Opening Session Venue: Safinah Ballroom 3 + 4 - Jumeirah Track 1: Beach Hotel A Role Playing Exercise on Resolving a Maritime Casualty – The Mess, the Media and the 09:30-09:35 Opening Speech by BIMCO’s President Mr. Mediators John Denholm You are invited to join us on 29 April 2014 for the BIMCO Annual Conference followed Through the muddle and confusion that immediately 09:35-09:45 Official Opening by His Excellency Sultan follows a maritime casualty – a grounding, a collision by the BIMCO Awards Gala Dinner at the spectacular Jumeirah Beach Hotel in Dubai. or even a total loss – the shipowner must think clearly It promises to be a day to remember and a night of great networking and celebration. Ahmed Bin Sulayem The Chairman of DP World (TBC) and tread carefully. Conference - Perspectives in Shipping This track will include a vibrant and interactive 09:45-09:50 Official Speaker Representing the casualty simulation. The role playing exercise will be His Excellency Sultan Ahmed Bin Sulayem, the Chairman of DP World (TBC) will open Shipowning Community: Managing directed by Lindsay East, Consultant, Reed Smith, the conference. He will be followed by Captain Jitendra Misra, Managing Director of Director, Captain Misra of Emarat Shipping London, and will further include experts well- versed in maritime casualty work: Chirag Karia Q.C., Emarat Maritime. The scene will then be set by Peter Sand, BIMCO’s Chief Shipping 09:50-10:15 Market Overview & Outlook by BIMCO London, Nevil Phillips, Barrister, London, Han van Analyst. The conference will then split into two exciting parallel tracks for you to choose Chief Economist Peter Sand Blanken, Ship Owner, Rotterdam, John Tsatsas, LMAA from: Arbitrator and Mediator, Chartered Shipbroker, 10:15-10:30 Coffee Break Chartered Arbitrator, London. The media role will Track 1: A role playing exercise on resolving a maritime casualty – the mess, the media Venue: Lobby area of Jumeirah Beach Hotel be carried out by the Editor-in-Chief Julian Bray and the mediators from TradeWinds. The mock arbitration will have a 10:30-16:00 Track 1: A Role Playing Exercise on unique twist – it will involve high-profile maritime Track 2: Upcoming regulatory requirements may erode your ticket to trade Resolving a Maritime Casualty – The Mess, arbitrators from the world’s three main arbitration the Media and the Mediators venues as listed in BIMCO’s Dispute Resolution Clause Participation in the conference is free to all BIMCO members. Venue: Meyana Auditorium - Jumeirah Beach represented by: Jude Benny, Lawyer and Maritime Hotel Arbitrator from Singapore, Bruce Harris, Maritime BIMCO Awards Gala Dinner and Commercial Arbitrator from London, and David Martowski, Arbitrator/Mediator from New York - You are invited to join us at the BIMCO Awards Gala Dinner in the evening of 29 April each with possible different approaches to resolving 2014. The highlight of the Gala Dinner will be the presentation of the prestigious BIMCO (programme continued on the next page) the dispute. Awards to shipping companies and individuals who have excelled in areas reflecting The audience will be armed with an interactive voting BIMCO’s global activities. meter, and will be asked what they would do next and help determine the outcome of the affair. The nominations for the awards will come from the BIMCO members, but the winners can be any company or individual. Make a whole day of it and join both the BIMCO Annual Conference and the BIMCO Awards Gala Dinner. In addition to these exciting events, the full programme includes a number of BIMCO Committee and Board meetings that will also draw in top shipping professionals from around the world, providing participants with a unique opportunity to refresh old business contacts and make new ones. See you in Dubai!

BIMCO BULLETIN 2014 VOLUME 109 #1 7

gen-01-14.indd 7 13/02/2014 12:41:37 PROTECTING & DEVELOPING PROTECTING & DEVELOPING YOUR BUSINESS YOUR BUSINESS PROGRAMME PROGRAMME REGISTRATION

TUESDAY, 29 APRIL 2014 (cont.) TUESDAY, 29 APRIL 2014 (cont.) WEDNESDAY, 30 APRIL 2014 REGISTRATION

10:30-16:00 Track 2: Upcoming Regulatory 12:30-13:30 Lunch 08:00-12:00 BIMCO Documentary Committee Meeting Please fill in and submit the Registration Form by Tuesday, Requirements May Erode Your Ticket to Venue: Lobby - Jumeirah Beach Hotel For members of the Documentary Committee 1 April 2014. By meeting this deadline, you will ensure Trade 2013-2015 only that your company is shown in the Final Programme and Venue: Safinah Ballroom 3 + 4 - Jumeirah 14:45-15:00 Coffee Break Venue: Safinah Ballroom 1 + 3 - Jumeirah Attendance list. Beach Hotel Venue: Lobby - Jumeirah Beach Hotel Beach Hotel BIMCO will continue to accept registrations after this date. 19:30-23:00 BIMCO Awards Gala Dinner 12:00-13:00 Lunch Delegate details will be included in a Supplement to the Venue: Safinah Ballroom 1 + 2 - Jumeirah For members of the Documentary Committee Attendance List. Track 2: Beach Hotel & Board of Directors only Upcoming Regulatory Requirements May Erode Venue: Lobby - Jumeirah Beach Hotel Your registration will be handled on a first-come, first-served Your Ticket to Trade basis. Each delegate must use a separate form. Photocopies 10:30-11:30 Session 1: Ballast Water Treatment The new BIMCO Awards have been created to celebrate 13:00-17:00 Board of Directors Meeting of the Registration Form are acceptable. A Ballast Water Treatment System will be one of For members of the Board of Directors 2013- the most expensive pieces of equipment on board and bring attention to shipping companies and your ship, but will it work? The marketing material individuals who have excelled in areas reflecting BIMCO’s 2015 only REGISTER ONLINE: says their system works in all conditions, and is global activities. The nominations will come from the Venue: Safinah Ballroom 4 - Jumeirah Beach http://dubai.bimco.org suitable for any vessel. Will it really work reliably in BIMCO members but the winners can be any company all water conditions? Will all port states be happy Hotel with the results? Acquiring the wrong system will be or individual that has excelled within the category. The All registrations, cancellations and alterations must be IN an expensive mistake. Is this possible, what are the 5 BIMCO Award categories are: The BIMCO President’s 17:15-18:00 BIMCO Annual General Meeting WRITING to: pitfalls? What are the questions you should be asking? Award, The BIMCO Regional Shipping Personality of the Year, The BIMCO Shipping Company of the Year, The For BIMCO members only 10:30-10:50 Wärtsilä Corporation, Mr. Leonardo BIMCO Education & Training Award, and The BIMCO Venue: Safinah Ballroom 2 - Jumeirah Beach BIMCO Sonzio Director, Environmental Cairns-Hansen Award. BIMCO members can nominate Hotel 161 Bagsvaerdvej Solutions candidates for the last 4 awards categories and the 2880 Bagsvaerd Technology options for compliance with the IMO closing date for entry of nominations from BIMCO 18:15-21:00 Farewell Reception Denmark Ballast Water Convention. Prospects of US type- approval to provide audience with an expected members is on Friday, 7 March 2014. It is not possible to Venue: Jumeirah Beach Hotel (TBA) timeline for initiating installations on ships calling nominate for The BIMCO President’s Award. Email: [email protected] the US. More details at http://dubai.bimco.org. Telephone: +45 4436 6800 Dress code: Formal business attire / national dress 10:50-11:10 Alfa Laval (TBC) Fax: +45 4436 6868 Scaling systems to suit large capacity ships. How should a ballast tank transfer system ideally be designed when ballast water must be treated in the future? 11:10-11:30 ClassNK (TBC) 12:30-13:30 Lunch A Classification Society view on compliance. How will 13:30-14:50 Session 2 (cont.) Class engage with Authorities from Flag and Port State when compliance with the Convention is scrutinised 13:30-13:50 MAN Diesel & Turbo by PSC? Multi fuel options for large 2-stroke engines. Solutions 11:30-11:50 Short Break for Oil, LNG and Methanol. 11:50-12:30 Session 2: Future Fuels 13:50-14:10 Alfa-Laval (TBC) Abatement of SOx from the exhaust gas. What is Emission control regulations are fast approaching and possible? Are solutions for very large engines realistic? high oil prices are set to stay. Everyone is worrying about the availability and price of low sulphur diesel, but what are your options? Will scrubber technology 14:10-14:30 Wärtsilä Corporation, Mr. Tomas really work? Is there a business case for continuing to Aminoff, Director, Technology Strategy, use heavy fuel? Is LNG really a possibility, and what Ship Power other fuels may be available? In the past everyone Advice from a supplier that delivers solutions for all burnt heavy fuel oil. The future may not be so simple! compliance methods: Scrubbers, LNG, Methanol? This may be the biggest game-changer for the industry since the end of the sailing era over 100 years ago. 14:30-14:50 Alisdair Pettigrew, BLUE Com., Senior The session will elaborate on the concepts of multi- fuelled ships, availability and effectiveness of scrubber advisor to Clean Marine Energy technologies and practicalities of using LNG. Novel finance means to facilitate retrofitting of expensive compliance methods. Could 3rd party 11:50-12:10 DNV-GL (TBC) financing be a solution for some owners? Scenarios for fuel use in the shipping industry beyond 2020. Setting the scene for the session by delivering 14:50-15:00 Short Break some insights to the future product mix. 15:00-16:00 Panel Discussion 12:10-12:30 Rolls Royce To wrap up the day, a panel of shipowners will debate Natural gas as fuel for ships. Which technologies are the outcomes of the two sessions and provide some suitable and which sectors of the industry are likely to key take-aways for the audience on how to navigate go for LNG? the regulatory minefields ahead of us.

8 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 8 13/02/2014 12:41:38 PROTECTING & DEVELOPING PROTECTING & DEVELOPING YOUR BUSINESS YOUR BUSINESS PROGRAMME PROGRAMME REGISTRATION

TUESDAY, 29 APRIL 2014 (cont.) TUESDAY, 29 APRIL 2014 (cont.) WEDNESDAY, 30 APRIL 2014 REGISTRATION

10:30-16:00 Track 2: Upcoming Regulatory 12:30-13:30 Lunch 08:00-12:00 BIMCO Documentary Committee Meeting Please fill in and submit the Registration Form by Tuesday, Requirements May Erode Your Ticket to Venue: Lobby - Jumeirah Beach Hotel For members of the Documentary Committee 1 April 2014. By meeting this deadline, you will ensure Trade 2013-2015 only that your company is shown in the Final Programme and Venue: Safinah Ballroom 3 + 4 - Jumeirah 14:45-15:00 Coffee Break Venue: Safinah Ballroom 1 + 3 - Jumeirah Attendance list. Beach Hotel Venue: Lobby - Jumeirah Beach Hotel Beach Hotel BIMCO will continue to accept registrations after this date. 19:30-23:00 BIMCO Awards Gala Dinner 12:00-13:00 Lunch Delegate details will be included in a Supplement to the Venue: Safinah Ballroom 1 + 2 - Jumeirah For members of the Documentary Committee Attendance List. Track 2: Beach Hotel & Board of Directors only Upcoming Regulatory Requirements May Erode Venue: Lobby - Jumeirah Beach Hotel Your registration will be handled on a first-come, first-served Your Ticket to Trade basis. Each delegate must use a separate form. Photocopies 10:30-11:30 Session 1: Ballast Water Treatment The new BIMCO Awards have been created to celebrate 13:00-17:00 Board of Directors Meeting of the Registration Form are acceptable. A Ballast Water Treatment System will be one of For members of the Board of Directors 2013- the most expensive pieces of equipment on board and bring attention to shipping companies and your ship, but will it work? The marketing material individuals who have excelled in areas reflecting BIMCO’s 2015 only REGISTER ONLINE: says their system works in all conditions, and is global activities. The nominations will come from the Venue: Safinah Ballroom 4 - Jumeirah Beach http://dubai.bimco.org suitable for any vessel. Will it really work reliably in BIMCO members but the winners can be any company all water conditions? Will all port states be happy Hotel with the results? Acquiring the wrong system will be or individual that has excelled within the category. The All registrations, cancellations and alterations must be IN an expensive mistake. Is this possible, what are the 5 BIMCO Award categories are: The BIMCO President’s 17:15-18:00 BIMCO Annual General Meeting WRITING to: pitfalls? What are the questions you should be asking? Award, The BIMCO Regional Shipping Personality of the Year, The BIMCO Shipping Company of the Year, The For BIMCO members only 10:30-10:50 Wärtsilä Corporation, Mr. Leonardo BIMCO Education & Training Award, and The BIMCO Venue: Safinah Ballroom 2 - Jumeirah Beach BIMCO Sonzio Director, Environmental Cairns-Hansen Award. BIMCO members can nominate Hotel 161 Bagsvaerdvej Solutions candidates for the last 4 awards categories and the 2880 Bagsvaerd Technology options for compliance with the IMO closing date for entry of nominations from BIMCO 18:15-21:00 Farewell Reception Denmark Ballast Water Convention. Prospects of US type- approval to provide audience with an expected members is on Friday, 7 March 2014. It is not possible to Venue: Jumeirah Beach Hotel (TBA) timeline for initiating installations on ships calling nominate for The BIMCO President’s Award. Email: [email protected] the US. More details at http://dubai.bimco.org. Telephone: +45 4436 6800 Dress code: Formal business attire / national dress 10:50-11:10 Alfa Laval (TBC) Fax: +45 4436 6868 Scaling systems to suit large capacity ships. How should a ballast tank transfer system ideally be designed when ballast water must be treated in the future? 11:10-11:30 ClassNK (TBC) 12:30-13:30 Lunch A Classification Society view on compliance. How will 13:30-14:50 Session 2 (cont.) Class engage with Authorities from Flag and Port State when compliance with the Convention is scrutinised 13:30-13:50 MAN Diesel & Turbo by PSC? Multi fuel options for large 2-stroke engines. Solutions 11:30-11:50 Short Break for Oil, LNG and Methanol. 11:50-12:30 Session 2: Future Fuels 13:50-14:10 Alfa-Laval (TBC) Abatement of SOx from the exhaust gas. What is Emission control regulations are fast approaching and possible? Are solutions for very large engines realistic? high oil prices are set to stay. Everyone is worrying about the availability and price of low sulphur diesel, but what are your options? Will scrubber technology 14:10-14:30 Wärtsilä Corporation, Mr. Tomas really work? Is there a business case for continuing to Aminoff, Director, Technology Strategy, use heavy fuel? Is LNG really a possibility, and what Ship Power other fuels may be available? In the past everyone Advice from a supplier that delivers solutions for all burnt heavy fuel oil. The future may not be so simple! compliance methods: Scrubbers, LNG, Methanol? This may be the biggest game-changer for the industry since the end of the sailing era over 100 years ago. 14:30-14:50 Alisdair Pettigrew, BLUE Com., Senior The session will elaborate on the concepts of multi- fuelled ships, availability and effectiveness of scrubber advisor to Clean Marine Energy technologies and practicalities of using LNG. Novel finance means to facilitate retrofitting of expensive compliance methods. Could 3rd party 11:50-12:10 DNV-GL (TBC) financing be a solution for some owners? Scenarios for fuel use in the shipping industry beyond 2020. Setting the scene for the session by delivering 14:50-15:00 Short Break some insights to the future product mix. 15:00-16:00 Panel Discussion 12:10-12:30 Rolls Royce To wrap up the day, a panel of shipowners will debate Natural gas as fuel for ships. Which technologies are the outcomes of the two sessions and provide some suitable and which sectors of the industry are likely to key take-aways for the audience on how to navigate go for LNG? the regulatory minefields ahead of us.

BIMCO BULLETIN 2014 VOLUME 109 #1 9

gen-01-14.indd 9 13/02/2014 12:41:39 REGISTRATION & h OTEL REGISTRATION & h OTEL

REGISTRATION FEES HOTEL RESERVATION CANCELLATION AIRPORT SERVICE BIMCO Members: Accommodation is available at a special rate at the Jumeirah All cancellations must be received in writing by BIMCO. Jumeirah Beach Hotel is in Dubai’s Jumeirah Beach area, BIMCO Conference, 29 April ...... Free of charge Beach Hotel. Please refer to your Event Registration Number on 15 kilometres from the city centre and 25 kilometres from BIMCO Awards Gala Dinner, per seat ...... USD 140 all correspondence. A 50% refund will be obtained if Dubai International Airport. BIMCO Awards Gala Dinner, per table (10 seats) ...USD 1200 Settlement of hotel bills must be made individually upon cancellations are received prior to 1 April 2014. Thereafter, If you’d like to book a car to take you straight from the departure. All major credit cards are accepted. no refunds will be made. airport to the hotel, we can arrange a wide range of Non-members: vehicles – from limousines to luggage vans. Whatever you BIMCO Conference, 29 April ...... USD 250 Please make your reservation not later than Friday, 28 Please note that refunds will only be handled after the choose, you’ll find our rates very competitive. BIMCO Awards Gala Dinner, per seat ...... USD 175 March 2014, as the hotel will not be able to guarantee events have taken place. Conference + Dinner ...... USD 340 rooms or the special rate after this date. Transport to and from Dubai International Airport is BIMCO Awards Gala Dinner per table (10 seats) ....USD 1500 Hotel cancellations must be made directly with the complimentary for guests staying in Club Executive, Premium The Jumeirah Beach Hotel hotel. Leisure, Suites, Villas and to Sirius Gold card holders. PAYMENT P.O. Box 11416 Dubai, UAE REGISTRATION IN DUBAI Transport to and from Abu Dhabi International Airport All payments for the BIMCO Awards Gala Dinner & and Al Maktoum Airport in Jebel Ali is also available for all Conference on 29 April will be handled by BIMCO. Telephone: +971 4 348 0000 All delegates are kindly asked to register at the BIMCO guests at an additional charge. Website: www.jumeirah.com Registration Desk – see below. Delegates will receive the FOR MORE INFORMATION, PLEASE CONTACT US: BIMCO only accepts the following credit cards: Reservations: Please refer to link on the dedicated BIMCO Final Programme and Attendance List and name tags plus any additional material. MasterCard, Visa, Eurocard and JCB. event website http://dubai.bimco.org Telephone: +971 4 348 0000 E-mail: [email protected] CONFIRMATION Double Room (2 pax) ...... AED 1700 BIMCO REGISTRATION DESK Double Room (1 pax) ...... AED 1700 Destination BMW-7 Lincoln Coaster Bus Luggage van Please note that we prefer to receive your Registration Opening hours: Navigator 26 seater (Hiace) Form electronically. Upon completion, please press “Submit The above rate is per room per night and are subject to 7 seater (semi luxury) Form”. You may also scan the Registration Form and e-mail 10% municipality fee and 10% service charges. Any further Monday, 28 April One way One way One way One way it to us or forward the form via fax with your name marked change in taxes imposed by the government will be reflected Lobby area of Conference Centre Dubai Airport AED 375 AED 375 AED 600 AED 250 clearly. in the final invoice. 14:00-18:00 Sharjah Airport AED 450 AED 450 AED 750 AED 300 Abu Dhabi Apt AED 575 AED 575 AED 900 AED 400 Once your Registration Form has been received, an e-mail Buffet Breakfast is available from AED 180 per person Tuesday, 29 April Abu Dhabi City AED 675 AED 675 AED 1,000 AED 450 will be sent to you confirming your official registration and inclusive of 10% municipality fee and 10% service charges. Lobby area of Conference Centre Bab Al Shams AED 375 AED 375 AED 600 AED 250 your attendance at specific events. 08:00-18:00 Hourly rental AED 375 AED 375 AED 600 AED 250 CHECK IN / CHECK OUT Please check the e-mail confirmation carefully to ensure Wednesday, 30 April that all items requested have been correctly registered. Hotel check in time is 15:00. Lobby area of Conference Centre Room assignments prior to this time is subject to availability. 07:30-16:00 Hotel check out prior to 12:00. VISA After this time, a supplementary charge may be charged in respect of a late check out subject to availability. All participants are advised to check their nearest UAE No change may be made to these arrangements unless Embassy/Consulate for up-to-date visa requirements. agreed by the Hotel in writing.

100% of the booked period will be charged should a guest depart ahead of the booked date of departure. In case of advanced payment, the amount will be non-refundable.

10 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 10 13/02/2014 12:41:40 REGISTRATION & h OTEL REGISTRATION & h OTEL

REGISTRATION FEES HOTEL RESERVATION CANCELLATION AIRPORT SERVICE BIMCO Members: Accommodation is available at a special rate at the Jumeirah All cancellations must be received in writing by BIMCO. Jumeirah Beach Hotel is in Dubai’s Jumeirah Beach area, BIMCO Conference, 29 April ...... Free of charge Beach Hotel. Please refer to your Event Registration Number on 15 kilometres from the city centre and 25 kilometres from BIMCO Awards Gala Dinner, per seat ...... USD 140 all correspondence. A 50% refund will be obtained if Dubai International Airport. BIMCO Awards Gala Dinner, per table (10 seats) ...USD 1200 Settlement of hotel bills must be made individually upon cancellations are received prior to 1 April 2014. Thereafter, If you’d like to book a car to take you straight from the departure. All major credit cards are accepted. no refunds will be made. airport to the hotel, we can arrange a wide range of Non-members: vehicles – from limousines to luggage vans. Whatever you BIMCO Conference, 29 April ...... USD 250 Please make your reservation not later than Friday, 28 Please note that refunds will only be handled after the choose, you’ll find our rates very competitive. BIMCO Awards Gala Dinner, per seat ...... USD 175 March 2014, as the hotel will not be able to guarantee events have taken place. Conference + Dinner ...... USD 340 rooms or the special rate after this date. Transport to and from Dubai International Airport is BIMCO Awards Gala Dinner per table (10 seats) ....USD 1500 Hotel cancellations must be made directly with the complimentary for guests staying in Club Executive, Premium The Jumeirah Beach Hotel hotel. Leisure, Suites, Villas and to Sirius Gold card holders. PAYMENT P.O. Box 11416 Dubai, UAE REGISTRATION IN DUBAI Transport to and from Abu Dhabi International Airport All payments for the BIMCO Awards Gala Dinner & and Al Maktoum Airport in Jebel Ali is also available for all Conference on 29 April will be handled by BIMCO. Telephone: +971 4 348 0000 All delegates are kindly asked to register at the BIMCO guests at an additional charge. Website: www.jumeirah.com Registration Desk – see below. Delegates will receive the FOR MORE INFORMATION, PLEASE CONTACT US: BIMCO only accepts the following credit cards: Reservations: Please refer to link on the dedicated BIMCO Final Programme and Attendance List and name tags plus any additional material. MasterCard, Visa, Eurocard and JCB. event website http://dubai.bimco.org Telephone: +971 4 348 0000 E-mail: [email protected] CONFIRMATION Double Room (2 pax) ...... AED 1700 BIMCO REGISTRATION DESK Double Room (1 pax) ...... AED 1700 Destination BMW-7 Lincoln Coaster Bus Luggage van Please note that we prefer to receive your Registration Opening hours: Navigator 26 seater (Hiace) Form electronically. Upon completion, please press “Submit The above rate is per room per night and are subject to 7 seater (semi luxury) Form”. You may also scan the Registration Form and e-mail 10% municipality fee and 10% service charges. Any further Monday, 28 April One way One way One way One way it to us or forward the form via fax with your name marked change in taxes imposed by the government will be reflected Lobby area of Conference Centre Dubai Airport AED 375 AED 375 AED 600 AED 250 clearly. in the final invoice. 14:00-18:00 Sharjah Airport AED 450 AED 450 AED 750 AED 300 Abu Dhabi Apt AED 575 AED 575 AED 900 AED 400 Once your Registration Form has been received, an e-mail Buffet Breakfast is available from AED 180 per person Tuesday, 29 April Abu Dhabi City AED 675 AED 675 AED 1,000 AED 450 will be sent to you confirming your official registration and inclusive of 10% municipality fee and 10% service charges. Lobby area of Conference Centre Bab Al Shams AED 375 AED 375 AED 600 AED 250 your attendance at specific events. 08:00-18:00 Hourly rental AED 375 AED 375 AED 600 AED 250 CHECK IN / CHECK OUT Please check the e-mail confirmation carefully to ensure Wednesday, 30 April that all items requested have been correctly registered. Hotel check in time is 15:00. Lobby area of Conference Centre Room assignments prior to this time is subject to availability. 07:30-16:00 Hotel check out prior to 12:00. VISA After this time, a supplementary charge may be charged in respect of a late check out subject to availability. All participants are advised to check their nearest UAE No change may be made to these arrangements unless Embassy/Consulate for up-to-date visa requirements. agreed by the Hotel in writing.

100% of the booked period will be charged should a guest depart ahead of the booked date of departure. In case of advanced payment, the amount will be non-refundable.

BIMCO BULLETIN 2014 VOLUME 109 #1 11

gen-01-14.indd 11 13/02/2014 12:41:40 NYPE update heads 2014 documentary work programme This year, we will see the wraps come off a newly revised NYPE 93 charter party.

or over a year now, BIMCO, Bunker contract revision Clubs – Electronic Shipping Solutions (ESS) working together with ASBA in Bunkers also feature highly on BIMCO’s and Bolero – neither of whom charge own- New York and the SMF in Singa- documentary agenda this year. A revision ers for issuing e-Bills on their systems. What pore,F has pored over the numerous pro- of the Standard Bunker Contract is under- is important now is that with the increas- visions of the 20 years old NYPE form way, this time with the benefit of a much ing use of e-Bills there needs to be proper and reviewed the many amendments and heavier duty marketing campaign among provision made for their use under charter additional clauses that are commonly suppliers and purchasers to raise awareness parties. Work will begin shortly on such a added when fixing on this charter party. of the contract and the benefits that har- clause using the expertise of the two e-Bill monisation of bunker terms and conditions solution providers as well as valuable input A real pattern of common amendments can bring. from owners, charterers and P&I Clubs. and riders has emerged indicating that the NYPE in its current form falls some way In addition, we are also looking at a new Anti-bribery solutions short of reflecting current time chartering Bunker Non-lien Clause for time charter Measures to counter bribery and corruption commercial practice. The new version will parties as a possible means of combatting continue to be a hot topic in the industry certainly be longer but it will require far less the double-whammy that some unfortunate with an ever increasing number of industry additional clauses than present. ship owners occasionally face when a time players working together to find solutions charter goes bankrupt leaving hire unpaid and meet compliance requirements. With a more comprehensive and up to date and then, a few months later, the owners’ edition of the widely used charter available, ship is arrested for non-payment of bun- Part of this process is taking into consid- users will no longer have to spend negotiat- kers by the bankrupt charterers. The clause eration what provision should be made ing, and sometimes even drafting, numer- under development places an obligation on in charter parties to address compliance ous additional clauses. It is not a complete the charterers to obtain a waiver from bun- issues and to ensure that innocent parties re-write – the drafting team has pre- ker suppliers of their right to place a lien are not persecuted or prosecuted for refus- served wherever possible the overall struc- over the vessel for unpaid bunkers, even ing to make “facilitation” payments to port ture of NYPE. Many of the clauses remain though the bunkers have been purchased officials. A charter party clause should, unchanged where it was felt unnecessary not by the owners but by the charterers. of course, be very protective of the own- to revise perfectly workable and tried and ers’ position as it is their vessel and their tested wordings. To help maintain famil- Electronic bills of lading crew that will be exposed to the pressure iarity, many of the unchanged clauses have Electronic bills of lading have been a sub- of making such payments in order to avoid exactly the same clause numbers as found ject much discussed by the industry for unwarranted delays to the vessel. Prelimi- in the ’93 edition. many years but with little evidence of solid nary work to investigate the feasibility of implementation into mainstream business. developing a sufficiently robust anti-brib- An essential part of the final stages of the However, in the last year a number of major ery clause will begin during the first quar- revision process will be an all-important charterers have started to initiate large scale ter of 2014. consultation with the industry – the end projects on some trades to introduce elec- users of NYPE. Copies of the draft revised tronic bills of lading. In terms of using Other work NYPE charter party will be posted on electronic bills of lading from an owners’ Other new or revised BIMCO Clauses the BIMCO website for all to review dur- perspective, the has changed that will appear this year include an Asian ing the first quarter of 2014. During this considerably in the past few years. P&I Gypsy Moth Clause, a Ship to Ship Transfer period a series of “road shows” to explain cover has up until recently been an issue, Clause for Voyage Charter Parties (formerly the changes to NYPE will be conducted in but now owners enjoy the same degree of Double Banking Clause) and a revised Europe, the US and Asia. This will give the liability cover when using e-Bills as they do North American Cargo Declaration Clause industry an opportunity to provide feed- with their paper counterpart. reflecting changes in cargo notification and back on the changes and see for themselves bonding requirements in Canada. (GH) ll what’s coming. The target publication date Only two companies to date have been for the revised NYPE is December 2014. approved by the International Group of P&I

12 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 12 13/02/2014 12:41:41 BIMCO Intervention works!

In late June, at the request of one of our owner members, we approached an agent who had not returned unused funds in the amount of USD 4,900 and urged him to arrange for remit- tance. As we did not receive any reply, we warned him in early September that this default would be reported in a forthcoming BIMCO Notice to Members. This prompted the agent to respond and from the reply it transpired that he had confused the identity of his princi- pals in respect of several vessel calls. Clarifications were provided and finally our member confirmed receipt of the said amount on 4 November 2013.

At the end of September 2013, acting on behalf of one of our agency members, we approached an owner who had failed to pay a balance on disbursements and enquired as to the reasons for the delay. The owners attempted to avoid liability alleging that they were acting on behalf of a third party. Our attempts to clarify the owners’ obligations did not have the desired Further information effect and we finally had to caution them that a BIMCO Notice to Members would be issued, Read more about this service here: should they refuse to fulfil their obligations. A few days later our member informed us that the parties had reached an agreement and that the case could now be closed. https://www.bimco.org/en/About/ Company_information/Intervention. In early October, at the request of one of our owner members, we approached an agent who aspx had not returned unused funds in the amount of USD 12,200 and suggested that remittance of that amount be arranged. The agent reacted promptly, confirming that this would be done, and our member confirmed receipt of the said amount a few weeks later.

On 4 October 2013, acting on behalf of one of our owner members, we approached an agent who had withheld unused funds in the amount of USD 5,000 for nearly a year and urged him to arrange remittance of that sum. No rely was received and on 1 November, we cautioned the agent that his default would be reported in a forthcoming BIMCO Notice to Members. Later the same day our owner member confirmed receipt of the amount due.

On 10 October 2013, acting on behalf of one of our owner members, we approached a char- terer who had left the amount of USD 164,000 in respect of freight and demurrage outstand- ing, and urged him to arrange for remittance of same. Two weeks later, our owner member confirmed receipt of the said amount.

On 31 October 2013, we approached a charterer who owed balance hire in the amount of USD 24,000 to an owner member of BIMCO and suggested that arrangements should be made for the remittance of that amount. The charterer responded immediately and our member confirmed receipt of funds on 7 November.

On 5 November 2013, acting on behalf of one of our owner members, we approached a char- terer who had not paid incurred demurrage in the amount of EUR 2,700 and enquired as to the reasons for the lack of payment. The charterer responded promptly and ten days later, our member could confirm receipt of the said amount.

Over the last five years, BIMCO has assisted members in collecting an average of USD 5.9 million p.a.

BIMCO BULLETIN 2014 VOLUME 109 #1 13

gen-01-14.indd 13 13/02/2014 12:41:44 BIMCO Education round-up

Dubai Masterclass on Voyage Chartering: “Premium hospitality, perfect organisation, and a good dose of knowledge made this masterclass a unique opportunity and an eye opener for future dealings”.

he BIMCO Masterclass on Voy- age Chartering in Dubai from 10-12 December was a truly Tinternational event and attracted 35 participants from countries as diverse as Angola, Belgium, Egypt, Ghana, Greece, India, Italy, Jordan, Malta, The Netherlands, Norway, Singapore, Thai- land, Turkey, Ukraine, United Arab Emirates and the .

BIMCO has developed the Voyage Char- tering Masterclass with Haris Zografakis and Andrew Rigden-Green from Stephen- son Harwood with a view to covering a broad range of issues, both for the dry and Masterclass on Voyage Chartering, Dubai. Opening remarks by Capt. Jitendra Misra, member of the tanker side of the industry. BIMCO Board of Directors and Documentary Committee, representing the United Arab Emirates.

This particular Masterclass Workshop also includes a Mock Mediation and Arbi- in hand with the more detailed Master- tration, designed to help understand the classes on Bills of Lading and Laytime & mechanisms involved when dealing with Demurrage. The next Masterclass on Voy- disputes on voyage charters. The Voyage age Chartering will take place in Geneva Chartering Masterclass goes well hand from 1-3 October 2014.

Masterclass on Voyage Chartering, Dubai. Haris Zografakis Masterclass on Time Chartering, Limassol. Debriefing of Stephenson Harwood addresses the participants. for Case Study 1 from Richard Williams.

14 BULLETIN 2014 VOLUME 109 #1 BIMCO

gen-01-14.indd 14 17/02/2014 08:05:07 Masterclass on Time Chartering Limassol,. Richard Willams speaking.

SHIPMAN Seminar in Limassol Today, SHIPMAN 2009 is one of On 4 February, BIMCO conducted a full day BIMCO’s best-selling standard forms and seminar on the SHIPMAN, jointly organised enjoys almost universal usage in the ship with the Cyprus Shipping Chamber. management sector.

The BIMCO Documentary Committee For the more than 40 representatives from formally approved the revised SHIPMAN primarily the large shipmanagement com- and CREWMAN documents in November munity in Cyprus and Greece, it was an 2009. Given the importance that the ship- excellent opportunity to provide the two management sector places in SHIPMAN, speakers Grant Hunter, BIMCO’s Chief the revision process was undertaken with Documentary Affairs Officer, and Stephen great care so as not to upset the basic princi- Mackin, Partner in Eversheds shipping ples enshrined in the agreement and which, group, Newcastle, with input on the use of in many respects, have come to be regarded the contract. as the “law” of shipmanagement.

Case Studies are comprehensive and require great attention to detail.

Masterclass on Time Charter in Limassol Immediately following the SHIPMAN Seminar, BIMCO conducted a Master- class on Time Chartering in Limassol, also jointly organised with the Cyprus Shipping Chamber. As many as 36 participants from Belgium, Cyprus, Denmark, France, Ger- many, Netherlands, Norway, Sweden, Swit- zerland and the United Kingdom attended the three-day course.

The next Masterclass on Time Chartering will take place in Hong Kong from 29-31 Masterclass on Time Chartering, Limassol. October 2014. ll Case Study Group 1 at work.

BIMCO BULLETIN 2014 VOLUME 109 #1 15

gen-01-14.indd 15 13/02/2014 12:42:05 Designing for human performance

What has become known as “ergonomics” has come late to the shipping industry. This might be considered a pity, as much of shore side industry, where it has been well established fully, recognises the connection between productivity and the best possible design of the manufacturing process.

n the automobile manufacturing mooring rope, or the maintenance or even Optimised for efficiency sector, notably led by the Japanese the operation of a pump or valve is ineffi- Ergonomics and the importance of a well- giants such as Toyota and Nis- cient or cumbersome because of its loca- designed working environment aboard ship san,I enormous efforts have been made tion? If it had been possible to have brought are increasingly being considered in terms to perfect what might be described as the ship’s operating staff into the design of contemporary design. It is very reason- the “man-machine interface”. The end process, it would have been an easy mat- ably argued that with the smaller crews result, according to the combination of ter to have found the optimum situation. operating today’s ships, it is important that engineers and industrial psychologists But by the time the owner’s operating staff the equipment being used is suitably opti- who constantly try to further “tune” is able to see their new ship, changes will mised for efficiency. the processes, is more motivated work- be judged too expensive to make and the ers, fewer errors and accidents and bet- new crew will be the first of many which An interesting debate was held in London ter products. will complain about the inadequate design, recently by the Nautical Institute in which which makes their lives harder. the problems caused by a lack of bridge and Now at first sight, there may be limited equipment standardisation were identified correlation between the design of a car Early attempts at consensus as the cause of preventable accidents. Cap- production line and that of a ship, but a As far back as the 1960s, an interesting col- tain Tim Crowch, president of Advanced moment’s thought can discern how issues laboration between UK ship owners and System Safety Management (his book Navi- like functionality and habitability can shipbuilders resulted in a useful design gating the Human Element was reviewed in influence ship operation. And while sea- exercise that was to improve the detailed Bulletin No. 4/2013) contrasted the some- farers might have something of a reputa- operational design of ships. Improved what anarchic approach to the design of tion for complaining, one does not have designs of navigation bridges, mooring lay- controls in the maritime world to that of his to be long in the company of marine pro- outs, machinery spaces and even galleys own industry of aviation. He makes the very fessionals to hear complaints about badly resulted from the advice of practising mar- salient point that because nearly every ves- designed ships which, as operators, they iners, engineers and cooks, who were con- sel is effectively a “prototype”, every bridge are forced to work around, when they can sulted as to the optimum design of these will tend to be different. see how much better it might have been. spaces from the operator’s point of view. Updated to reflect latest practice Design detail left to shipyards And while it might be easy to dismiss such It is notable that a rare exception to this prac- Much of this is because so much of the an exercise by suggesting that consensus is tice is the design process with the passen- design detail has been left to the shipyard, almost impossible to reach when opinions ger ships of Royal Caribbean Cruise Lines, with the eventual owner and those who are sought from a variety of people, the very where all the ships in the fleet have stan- will actually operate the new vessel left opposite was found, and the shipbuilders dardised bridges, with older ships updated to out of the design loop. Thus, areas like the and owners whose staff participated found reflect the latest practice, along with a formal detailed design of a mooring layout on bow it immensely worthwhile. The participants process of continuous evaluation of the ves- or stern, the position of auxiliary equip- often found that detailed design by the sels and their performance, with the empha- ment in the machinery space, the design of shipyards was almost an iterative process; sis on continuous improvement. Speaking at working spaces like bridge or galley will be the phrase “we’ve always designed it that the International Maritime Organization’s undertaken by the shipyard’s design team way!” becoming, in time, a sort of defence seminar on regulation last year, RCCL’s to afford the greatest convenience to those mechanism against change, or anything Harry Kulovaara acknowledged the compa- assembling and building the ship. better. Sadly the project was overtaken by ny’s in-house design debt to the aviation and the virtual collapse of the UK shipbuilding automobile manufacturing industry. How often will it be found, once the ship is industry, and with this was lost much con- in operation, that there is a poor lead for a structive progress. Habitability, with its obvious effects upon

16 BULLETIN 2014 VOLUME 109 #1 WATCHKEEPER

gen-01-14.indd 16 13/02/2014 12:42:05 productivity, performance and morale, is accommodation which is affected, occu- same issue of Alert! an example is given of an integral part of the new ILO Maritime pants will almost certainly be adversely a ship in which excellent habitability was Labour Convention, specifying criteria for affected. Writing in a recent issue of the an important feature of the design. Built accommodation areas, vibration, noise, the human element bulletin Alert!, Dr. Kevin for stand-by duties in Arctic waters for its “indoor” climate and lighting. The con- McSweeney of ABS Corporate Technol- Danish owner, the designers of the Esvagt nection of these elements with ergonomics ogy points out that “whole body vibra- Aurora have homed in on the need to mini- and the seafarer’s ability to work effectively tion” needs to be actively controlled if it is mise noise and vibration. is obvious, as is their connection to health not to alter worker perception (reading text and safety. and instruments, depth perception) and The solution, which has been found highly influence control movements such as tac- effective in operation, has included extra Bad vibrations tile sense, head/hand movements, manual special insulation, shock absorbers under How often is it found that with a ship tracking etc. the main and auxiliary machinery, noise in operation, there are parts of that ves- absorbent flooring material and special sel which become known for excessive or It is also pointed out that there is no great attention in the accommodation. The crew unpleasant vibration with the ship at full mystery about how improvements can be has been highly positive about their ship, sea speed, or at a certain draught? If it is the made, preferably at the design stage. In the which is a good result all round. ll

More than a lick of paint

In a cruise ship fleet, where powers of adhesion and resistance to heavy stamping their own brand personality on one multi-decked white- weather, although cruise lines generally their ship’s sides with ever more adventur- avoid anything too uncomfortable. ous designs. painted giant looks very much like another and owners External personality Curiously, ferry operators, apart from are clearly searching for a The trend seemed to begin with Aida Moby in the Mediterranean, whose ships Cruises, the German branch of Carnival, can sometimes be mistaken by enormous means of making their brand with an attempt to give their ships an exter- whales, have eschewed this form of dec- “distinctive”, it is notable that nal personality, with a pair of huge red lips oration, preferring to merely advertise around the stem and an enormous piercing their brand, or perhaps even their web- ship’s hulls are increasingly eye on each bow, with vivid colours trailing site address, as they evidently believe that being used to provide that all away towards the stern. this is more useful and productive infor- important brand difference. mation. But to the observer, it all makes Successive Aida newbuildings have been shipping more interesting and much less even more spectacular and others are now homogeneous. ll mazing brightly coloured designs Aare now being featured on the huge white sides of ships, which probably have the effect of encouraging a degree of cus- tomer differentiation, as they peruse their cruise brochures. It could also ensure that returning passengers manage to get aboard the right ship, when there is more than one in port.

A boatswain responsible for ensuring that huge areas of shell plate remain in a pris- tine condition on a cruise ship might be appalled at the notion that his team will have to produce every colour in the rainbow from the paint stores to keep these extraor- dinary designs fresh.

Happily, the use of plastic “decals” of the sort used ashore will mostly be used to pro- vide the designs. These have astonishing “It doesn’t make us go any faster, but it’s cheaper than a more powerful engine!”

WATCHKEEPER BULLETIN 2014 VOLUME 109 #1 17

gen-01-14.indd 17 17/02/2014 08:07:39 BY MICHAEL GREY Time to revisit the definition of a “safe port”? Almost as far back as there have been ports themselves, the concept of a “safe” port has been one of consuming interest to marine professionals. Sailing directions or charts have often noted that a or anchorage would be “exposed to a south westerly wind or swell”, providing a caution to mariners that its safety was conditional upon the prevailing weather.

harterers have warranted to in these will be “judgement calls”, in which ship operation, and the near impossibil- owners that they will direct their the local knowledge of professionals in ity of ever eliminating such perils as are ships to those ports or berths directing a ship to leave or weigh anchor, multiplied by extreme weather, despite the Cwhich can be considered “safe”. Implicit or shift ship, will be critical, although these development of brilliant communications, in this definition of safety has been the may be subject to professional or legal chal- accurate weather forecasting and sophisti- assumption that the port facilities will be lenge, particularly in the event of an acci- cated 21st century ships. adequate, that the ship can lie alongside dent occurring. or at anchor without undue danger and It might be that such cases, in which the that in accessing and leaving the port, A recent case well worth exploring is that strict definition of the safe port wording the vessel will not be exposed to unrea- of the Ocean Victory, in which a charterer saw these massive liabilities left on the char- sonable risk. was found to be liable to the tune of USD terer’s doorstep, might encourage a more 138 million for a breach of the “safe port” precautionary principle among those hiring But can a safe port become one that is unsafe? warranty, following the loss of a part-laden ships, in looking more closely at the poten- Very easily, it seems, if the weather condi- Capesize trying to leave a Japanese port in tial for harm in ports to which they might tions deteriorate to such an extent that it is extreme weather. After this particular case, send ships. Is this naive? hazardous for a ship to attempt to enter or judged to be of great importance, the UK to leave the port. A port that is perfectly safe P&I Club published an insightful review by Just as shipmasters (usually through their for small or modest sizes of ship can become the Holman Fenwick & Willan LLP partner professional associations) comment on the risky or marginal for a large vessel. It might Alistair Feeney, of just how far charterers’ commercial pressures they increasingly be that extreme weather conditions makes warranties of port safety extend. find themselves to take risks they would it necessary for a vessel to seek safety at sea, rather minimise or avoid, so Harbour Mas- and the difficulties of negotiating a channel Both charterers and marine profession- ters complain that they too are under heavy in order for a vessel to make her escape may als perhaps ought to study this 2013 judge- pressure to ensure that their ports stay open place that vessel, which appeared to be lying ment from the Commercial Court (EWHC when they might prefer to see them closed. alongside in safety, at great peril, before she 2199), as it offers important lessons for both. Threats that the contract to use the port will reaches the safety of the open sea. In practical terms, the situation in which be terminated, or to use competitor ports, the Master of the part discharged Capesize are not infrequently used to put pressure on Considerable scope for disputes found himself was an unenviable one, with responsible people. Such issues have provided consider- the berth becoming untenable in the increas- able scope for dispute, and indeed litiga- ingly fierce weather, the anxiety of all for A port safety code tion, over the years. Charterers sometimes the vessel to proceed to sea and the compli- Some suggest that a port safety code should become enraged by the decisions of Har- cations of another vessel being was lost in a specify the operating criteria for a port in bour Masters and port authorities to deny similar situation, although this did not play the same way that an airport is limited by ships access to a port because of weather any part in the particular judgement. strict operating conditions. Harbour Mas- conditions which they consider to make ters, however, make the reasonable point their port temporarily unsafe. Not an isolated case that except for specialist terminals, ports But the Ocean Victory, while by no means an will generally have to cope with a wide vari- There have sometimes been costly acci- isolated case, is a stark reminder of the cru- ety of ship types and while it might be haz- dents arising from the hazards involved in cial decision-making that has to be taken by ardous to admit one type or size of vessel, entering or leaving a port in marginal con- marine professionals in their “normal” pro- other craft may offer a far more acceptable ditions and some notable legal cases emerg- cess of ship operation. It is also a reminder risk in bad weather. They are, nevertheless, ing from them. Often, the crucial element of the intrinsically risk-laden business of resentful at people who do not have their

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gen-01-14.indd 18 13/02/2014 12:42:06 responsibilities attempting to second-guess or influence their decisions.

In our consideration of the “safe” port, it is a fact that we are living at a time of consider- able change, not least with the huge increase in individual ship sizes. Pilots frequently find that they are handling ships that are at the very limits of their “envelopes” in term of draught or width or length, in channels and berth approaches which had always been regarded as perfectly adequate for the ton- nage normally expected. Does this not alter the appreciation of “safety” in port waters?

Port operators often comment on the assumption that is always made that ports must just adapt to the changing ship dimen- sions by undertaking the necessary dredg- The notion of what constitutes a “safe” berth might be considered ing, channel widening, and that terminals something that is developing with the prevailing technology. need to equip themselves to handle the scal- ing up of their customers’ ships. Ports which before they could be brought under con- for the structural integrity of the vessel, or develop new facilities will invariably under- trol. The notion of what constitutes a “safe” those where the unloaders are completely take extensive engineering and hydraulic berth might be considered something that careless about the damage done by enor- research to ensure the practical feasibility of is developing with the prevailing technol- mous grabs, or bulldozers or other machin- the development. But if the size or type of ogy, as bigger ships, new mooring systems, ery put into the holds by the stevedores. vessel rapidly changes over just a few years, thrusters and tugs all have to be brought Is a port or terminal, which has an inex- it may be that the berth is far less optimal into the equation, along with berths argu- act appreciation of the weight (or content for the present purposes and the latest ships ably more exposed to the elements as ports of containers to be considered “safe”? Is a presenting themselves. extend out into the open sea. berth where there is no security, or where the risk of armed robbery from criminals Not safe enough? Although it might be stretching the point, ashore or ranging around the port is very In a recent incident, a large container ship it is worth also considering whether a port great offering adequate safety? was damaged as it tried to swing off the or terminal where ships are quite routinely berth, where the port had simply failed to exposed to unacceptable levels of steve- We may have come a long way from the sim- provide a swinging basin that would take doring damage can be described as per- plicity of the “always afloat” clause in the the size of ship the port was attracting. It fectly “safe”? There are, for instance, bulk charter party, or what those considering probably had seemed safe enough to the export ports and terminals where ships are charter parties meant by warranties covering commercial management for shiphandling required to deballast to what their Masters port safety. But the shipping world is chang- (although pilots had warned otherwise), might consider an unwise extent before they ing, and with it our concept of acceptable but experience subsequently illustrated that are expected to steam down a narrow chan- and manageable risks. Is this something we this was not the case. nel where they can be exposed to difficult should be thinking about rather more? ll cross-winds, often without the tugs being In other instances ships offering a huge fast. There are terminals which require windage have been blown off their berths ships to make their approach at speeds in extreme weather that would almost cer- which are thought to be thoroughly haz- tainly have left the smaller ships of the ardous, ships which cannot steer properly Editor’s Note: Michael Grey is BIMCO’s past lying safely alongside. Bollards, which at their lowest engine speed in an approach Correspondent in London. He is a former were perfectly adequate in the past, have channel? Is all this quite safe? Editor of Lloyd’s List and a regular con- been torn out of their concrete founda- tributor to many maritime publications. tions and ships, cast adrift in the harbour, Then there are terminals which will load have caused mayhem among other craft, at speeds which are considered excessive

GENERAL BULLETIN 2014 VOLUME 109 #1 19

gen-01-14.indd 19 13/02/2014 12:42:11 BY CAPTAIN JONATHON PEARCE Enhanced safety through the use of real-time dynamic chart overlays In today’s economic climate, ports need to maximise their efficiency while ensuring safety of passage. As vessels increase in size, the dilemma facing many ports is that their existing static underkeel clearance (UKC) rules are inflexible, thus deeper vessels cannot transit without compromising safety.

he problem is that static rules do and under static rules, the clearance for a consider all factors that affect the UKC to not change with the environmental vessel varies for every transit. Most of the determine the minimum safe UKC require- conditions, so the actual clearance, time the static rules will be conservative, ments. Instead of using the vessels draught andT the potential for vessel groundings, but evidence shows that up to 5% of transits as the baseline, it implements a pre-deter- varies on any given day. For this reason, are marginal, even unsafe. mined safety limit which must not be static rules need to be conservative. breached. Tidal and channel variances, In contrast, dynamic UKC systems calcu- vessel dynamic movements, which are The majority of authorities in the world late the required UKC depending on the modelled using real-time (and predicted) use static rules to determine the underkeel prevailing environmental and vessel con- environmental conditions, are added to this clearance and they normally use the vessel’s ditions; this ensures every transit satis- limit and this results in a minimum transit draught as the baseline. However, it is con- fies appropriate risk standards. With safety water level that is required to ensure safety tended that this method can be erroneous, assured, economic and efficiency benefits at all times. as it is based on the assumption that this are realised when conditions allow deeper clearance is sufficient, regardless of the pre- draughts and/or extended tidal windows. Users gain an advantage from DUKC® sys- vailing environmental conditions. tems because enormous economic benefits Dynamic under keel clearance systems can be gained when environmental condi- So in practice, the actual safety clearance (DUKC®) calculate real time under-keel tions allow. This is achieved by reducing is determined by the conditions on the day, clearances to maximise channel safety and the inefficiencies (conservatism) inher- ent in the static rules and allows safe tran- sits outside the restrictive static rules. This increases productivity of the port with Figure 1: Static Rule components deeper draughts and larger tidal windows; ship operators (owners/charterers) indi- rectly benefit because cargo is maximised for the vessel, but still with ensured safety.

The methodology behind dynamic under- keel clearance has been internationally recognised. The improved certainty and information that dynamic systems can deliver has seen regulatory bodies regard such systems as an essential Aid to Navi- gation (AtoN) and consider DUKC® as an effective risk mitigation tool. For this rea- son AMSA has installed a DUKC® under- keel clearance management system in the Torres Strait to manage transiting vessels and is now mandatory for all deep draft vessels. This is the first coastal waterway in the world to have a mandatory UKC risk

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gen-01-14.indd 20 13/02/2014 12:42:11 system, and other regulators are looking to implement similar risk management sys- Figure 2: Dynamic Allowance components tems for their waterways. It should be noted that the ship does not need any additional equipment, as the system is installed ashore and can be remotely accessed through exist- ing communication equipment.

Static rules Traditionally, authorities have utilised static rules to govern the minimum UKC to ensure the safe transit of a vessel. These static rules were devised when vessels were smaller, their speeds lower, ship/shore com- munications poor and technology gener- ally unavailable to determine ship motions accurately. There needed to be a sim- ple method of calculating a safe under- keel clearance and the accepted practice was/is to calculate the underkeel clear- ance as a proportion of the vessels draught. The most common clearance ratio is “10% transit may now be unsafe. Once underway, Dynamic systems can be considered as a of draught”, but this is unfortunate as the changes to UKC can be difficult to assess “bottom up” approach and the system has, PIANC guidelines state that this is a mini- and are often overlooked. at its core, minimum limits that must not mum suggested safety clearance, and is for be breached. Every factor is computed and calm waters only, which may be unsafe in Another problem is that many authori- then added until the minimum tide height is many ports today. ties use a generic squat formula, but there found that ensures a safe transit. Thus, when are many formulae in existence and the conditions are favourable, vessels may have The static rule tries to capture all antici- most appropriate formula depends on the greater tidal windows and/or can sail with a pated factors in a single allowance. Essen- bathymetry, channel design and the type deeper draught; but when conditions are not tially, the only controllable factors are the of vessel. Squat is often calculated for a sin- then tidal windows are reduced and may even tide height (transit time) and speed (which gle critical point, but in practise a vessels’ be closed, or a vessel may be able to proceed determines the amount of squat). There- squat is continually changing throughout but with a reduced draught. (see Figure 2) fore, where depths are critical and condi- the entire length of the transit. tions variable, there may be times when the Environmental conditions, ship speed and allowance is marginal. The biggest drawback with static rules is water depths vary continually along the that they have to cater for the “worst case” transit; therefore net clearances need to It could be suggested that the “static rule” scenario; they cannot be too optimistic as be continually computed and updated to approach is a “top-down” approach, where safety could be jeopardised, but cannot be determine the UKC factors. The system is the gross clearance is determined from the too conservative as they become uneco- predictive, so if a navigator wishes to adapt draught, but the actual net underkeel clear- nomic; so they are blunt compromises. his transit plan or if there is an unforeseen ance is unknown. The actual net clearance is wholly reli- event (e.g. an engine issue or berth conges- ant on the environmental and transit con- tion) or there is a change in the environmen- Some ports try to assess some of the fac- ditions and static rules are unresponsive tal conditions, the system will automatically tors, and whilst some of these factors can be to change. This means an authority can- update the calculations. Integration of the pre-calculated, predicted wave response (in not maximise efficiency when conditions sophisticated numerical calculations with real time) is impossible to calculate without allow, but more worryingly, an authority real time environmental data ensures integ- significant processing power and access to will be unaware when conditions are actu- rity and quality that cannot be matched by environmental data; so in practical terms ally unsafe because, when static rules are a static system; clearances are calculated wave motions are undeterminable once a used, the level of risk is variable and the net individually for every ship. transit commences. (see Figure 1) underkeel clearance on any particular tran- sit is unknown. The channel characteristics for the whole Speed is an absolutely critical element transit are combined in validated numeri- in maintaining safe UKC. Evidence has Dynamic allowance cal models to ensure accurate vertical dis- shown that vessels do not always maintain By contrast, dynamic underkeel clearances placements for the vessel type, size and the planned, or proceed at an appropriate, are determined in real time and are based stability condition. This integrates an speed for the transit. If the transit is too fast, on the actual vessel and its stability param- appropriate squat formula for the vessel the ship will squat in excess of the predicted eters, the prevailing met-ocean conditions and channel and includes the effect of tem- amounts which is approximately propor- (wave height, period and direction, water poral and spatial variations of tidal cur- tional to the square of the speed; and if the levels, currents, tidal plane, wind), vessel rents during the transit. vessel transits slower than planned, it will transit speed and waterway configuration, not reach way points at required times so including detailed bathymetry, for the time Therefore, every installation has to be fully may have less water than predicted and the of transit. customised because each port, its environ-

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gen-01-14.indd 21 13/02/2014 12:42:12 Figure 3: Voyage Planning Service – Max. draughts and Tidal Windows

mental conditions, and its trade, is unique. This includes high resolution multi- survey data that is in greater detail than is typically available from a standard ENC or navigational chart. The DUKC® is always operating on the latest available hydro- graphic depths and includes a daily accu- mulative allowance for siltation when available. For this reason, a dynamic system satisfies, and often exceeds, the internation- ally-accepted levels of risk for safely manag- ing the UKC of vessel transits.

Dynamic Underkeel Clearance Systems (DUKC®) DUKC® is a proven safety and risk manage- ment technology and is a recognised core e-Navigation concept. The first DUKC® sys- tem was created for Hay Point coal terminal in 1993 and the technology has now been installed in over 21 ports. Figure 4: Transit Planning Service – Transit and Speed Assessment The system is customised for every port or waterway and implements the “dynamic allowances” mentioned above. The core functions of DUKC® systems have always been to provide ports and users with dynamic passage planning advice on: • Maximum draft for tides • Earliest and latest sailing times (tidal windows) • UKC for specific transits.

The system provides comprehensive reports for ports and pilots, which improves the decision making process and enhances the master pilot information exchange. It also serves as a historical database for auditing and risk analysis purposes.

Examples of the information from the voy- age planning service, which provides advice

and maximum draughts and tidal windows, can be seen in Figure 3, and the transit plan- ning service which allows for speed (squat) versing, and which areas do not meet UKC to anticipate required deviations from the adjustment and information on calculated limits, and should be avoided. transit plan. This anticipation allows time for keel elevations in Figure 4. Figure 5 gives an various options to be considered and enables overview of the transit information report. The information is displayed geospatially proactive rather than reactive navigations. through a Marine Information Overlay Whilst these functionalities remain at the (MIO) on a compatible Electronic Charting Future developments core of the DUKC system, there is a growing System (ECS) and, in parallel; the overlays Chart overlays will be an important compo- requirement to deliver dynamic information are available on the web within the DUKC nent of any eNavigation system. The type of in a format that is readily understandable. portal, allowing a shore station to view the data that could be communicated is diverse Through consultation with the maritime same dynamic overlay that the ship handler and it is probable that it will revolutionise community, chart overlays have been devel- is viewing. today’s navigational practices. oped as they can be readily incorporated into the pilots’ portable pilotage unit (PPU) An example of the chart overlay is displayed Dynamic chart overlays are already well and potentially on an ECDIS. Chart overlays in Figure 6. The simple presentation of pre- established and whilst they are presently present a simple visual indication on which dicted Go/No Go areas for the time of the being delivered by geotifs via 3G, any rec- areas meet UKC limits, and are safe for tra- vessel arrival in those areas allows the pilot ognised overlay format and communication

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gen-01-14.indd 22 13/02/2014 12:42:12 Figure 5: Overview of Transit Information Report

channel could be implemented. Implemen- tation of the S100 standard is very likely to benefit the delivery of this information to a ship’s ECDIS, or other navigational systems, rather than just the pilot’s PPU, and the pro- posed VHF Data Exchange System (VDES) will also be an important/necessary devel- opment as data requirements increase.

Conclusion The use of static rules at many ports needs serious consideration about whether they are suitable, and if all factors are under- stood. The paradox of the static rules is that without an incident, a port’s static rules may appear validated and considered safe. In reality, where underkeel limits are critical

and conditions variable, there may be times when the clearance is marginal and the port has experienced an unknown “near miss”.

Dynamic underkeel clearance systems Figure 6: Actual PPU displays with overlays on/off and ensure safety through accurate planning and differing tidal conditions continual monitoring of the UKC of large vessels during transit along shallow water- ways. These decision support tools and the integration into navigation systems, also allow the effect of alternative speed/sailing options on UKC to be quickly investigated by pilots and masters in situation where the passage does not proceed as planned. It does not need additional ship equipment as exist- ing infrastructure can be used to access the information, however the level of informa- tion that can be delivered will benefit from newer technologies such as S100 charts.

Dynamic UKC chart overlays are an evolu- tionary step in delivering UKC information to the navigator in a visually understand- able format. It is an operational and proven eNavigation solution that can only increase

the safety of vessels. ll

Editor’s Note: Jonathon Pearce joined BP as a cadet in 1979 and qualified as a Master Mariner in 1990. He has served as Master on high speed ferries before returning back deep sea as Chief Officer. In 1994 he came ashore as pilot in Port Taranaki, New Zealand.

In 2006 he returned to the UK as a risk assessor and undertook numerous formal safety audits of UK ports, and risk assessments on LNG projects. In 2008 he joined OMC International as their Business Development Manager and Senior Pilotage Advisor due to his extensive knowl- edge of their DUKC systems as a user.

He is a recognised expert in underkeel clearance issues and ship squat and presents nationally, and internationally, at maritime conferences.

Captain Jonathon Pearce

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gen-01-14.indd 23 13/02/2014 12:42:13 BY WILLY ZEILER

Plotting a course to better profits: how e-navigation can reduce operating costs

Increased regulations are rarely a cause for celebration amongst the ship owning fraternity. Compliance inevitably incurs costs, time, training, and hard work, while delivering few direct benefits to a ship owner’s day-to-day operations.

n the face of it, the IMO’s Elec- view of fleet performance and status, and tion for example, but also clear parallels. tronic Chart Display & Informa- therefore provide superior decision making Airlines plan their departures and arrivals tion System (ECDIS) Carriage tools? Would that be reason to chill some- with precision, knowing exactly what time Requirement,O requiring vessels to install at thing celebratory? slot they’ve been allocated and how much least one ECDIS on the bridge, was prob- fuel they expect to burn en-route. Contrast ably met with similar, limited enthusiasm. In the ultra-competitive world of interna- that with a large container vessel, where tional shipping, still blighted by over-sup- fuel accounts for the lion’s share of opera- Hardly a reason to put the champagne on ply, low rates and often non-existent profit tional costs. Typical container ships might ice in anticipation of all mandated ves- margins, I think so… increase their speed by three to four knots sels switching to ECDIS and ENCs by July as they approach port only to find that 2018… or so you’d think. Fuel efficiency they then have to anchor for a day await- Fuel is usually the number one concern for ing their turn. All that extra fuel has been Safety, security, the environment ship owners. Fuel costs have climbed by burnt for nothing. and profit an average of 16% year-on-year since 2005 To date, discussions relating to the ECDIS (Wall Street Journal), with escalating mar- However, investing in a state-of-the-art Mandate have focussed on the important itime demand (an increase of 2.2% to 3.37 route planning service on the ECDIS will safety and security enhancements associ- million barrels a day was forecast for 2013: facilitate enhanced ship-shore interaction, ated with moving to ECDIS as the indus- JBC Energy GmbH) unlikely to lead to a providing in-depth information on voy- try’s primary navigational tool. This will, long-term reversal of this trend, despite cur- age progress, changing weather patterns it is believed, help counter the ever increas- rent price fluctuations. and arrival schedules. This is a key benefit, ing number of groundings and collisions, and the driving force behind, the roll-out which, according to the International Union In general, fuel accounts for between 50 of e-navigation technology, making ves- of Marine Insurance, can be attributed to and 80% of total vessel operational costs – sel traffic movements reliable and easier to human error in 60% of all recorded cases. dependent on size, performance etc. – for manage and track. the nearly 100,000 strong global SOLAS However, this focus has made the industry fleet. This means that any efficiencies have My company, NAVTOR, believes this lose sight of other compelling benefits of the power to instantly impact on a ship has the ability to revolutionise the indus- adopting the latest, state-of-the-art e-nav- owners’/operators’ bottom line. As a result, try and, as such, has joined the SESAME igation solutions, particularly with regards huge investments are made in adding more project (Secure, Efficient and Safe Mari- to ship management. fuel-efficient ships to an already oversup- time Traffic Management) in the Straits plied industry, impacting negatively on of Malacca and Singapore, which aims to What if I told you that exploiting such tech- rates. Isn’t it equally, if not more, impor- develop and implement innovative new nology could save ship owners between 5 tant to switch the emphasis to more effec- traffic management strategies for con- and 10% of their annual fuel costs? That it tive route planning and voyage monitoring? gested waterways worldwide. could lead to more efficient man and time management on board and on shore? That it Think of aviation, where there are obvi- When the competition is so fierce and mar- could help protect cargo? Give a better over- ous differences, in terms of voyage dura- gins are so low, this new level of efficiency

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gen-01-14.indd 24 13/02/2014 12:42:13 NAVTOR systems have been fitted to Hurtigruten’s cruise vessel MS Fram.

can transform business models (while also and our NavSync online synchronisation We have therefore developed a free fleet man- impacting positively on emission levels and feature. This ensures that all charts, updates agement “App” called the NavTracker, which vessel carbon footprints, a key focus for the and licences are the most recent versions. is included in our ENC subscription ser- IMO and associated regulatory bodies). vice. The tool, designed for use on internet- This high-tech approach negates the need to enabled computers and on iPhones, iPads The human factor apply for individual charts and licences prior and iPod Touch products, as well as Android And it’s not only fuel that can be used to voyages, download a series of CDs to the operating systems, allows onshore teams to more efficiently with e-navigation tech- ECDIS, and manually check for updates. track vessels, giving them a full overview of nology. Alongside the reduction in human Everything is available at the click of a few ship location, chart usage and management. navigational error achieved by switch- buttons, delivered instantaneously and with This includes a detailed insight into which ing to ECDIS (which in turn reduces costs no charge for any charts used for planning charts have been updated and when. and risks through accident avoidance) purposes but not utilised for voyages. there are also benefits in terms of utilising Such technology gives management a win- human resources. This user-friendly nature and lack of dow into navigational operations on indi- administration allows navigators and the vidual vessels that, up until now, has Here at NAVTOR we have devised a way rest of the bridge team to use their valuable never been possible. This kind of overview of seamlessly distributing and updating time to greater effect, saving precious man- empowers better fleet decision making, ENCs that dramatically cuts down on an hours and reducing fatigue. allowing onshore teams to make on-board otherwise laborious administrative work- calls that maximise profitable operations. load. Our ENC service, launched in 2011 On track for success and compatible with all makes of ECDIS, Communication is at the heart of suc- We have also included a free three-day is distributed on the pre-loaded USB-based cessful e-navigation. The IMO is keen to weather prediction service related to fleet NavStick, allowing navigators to instantly develop the concept globally to harmon- operational positions with NavTracker. access global charts and licences on their ise the exchange of electronic information Such services are another boon for e-navi- ECDIS consoles. between vessels and land-based opera- gators, allowing teams to plan routes that, tions. This will lead to added safety and where possible, bypass challenging weather Once installed, the service can be updated on enhanced services for mariners, but also conditions. a regular basis, as per the SOLAS chart car- to a better understanding of detailed fleet riage requirement, using the same USB stick movements globally. This increases personnel safety, optimises

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gen-01-14.indd 25 13/02/2014 12:42:16 fuel efficiency and reduces possible damage operator Hurtigruten last year – allow- to cargo caused by rough seas. ing ships that sail set routes the ability to deviate from those routes whenever nec- This kind of seamless connectivity between essary, for example, to collect special car- fleet assets, onshore management teams, gos or undertake repairs. In Hurtigruten’s ports and other relevant stakeholders is a case, this flexibility allows certain vessels game-changer for at-sea operations. to undertake new cruise routes, such as the MS Fram, which takes passengers on far- It’s so much more than just the use of dig- flung voyages in the waters of Greenland ital charts. Rather, it’s an opportunity to and the Antarctic. use the ECDIS requirement as a platform to help a new age of efficiency, whereby This “at sea” ease of access to charts, where Willy Zeiler user-friendly add-on services and solutions everything is readily available on board can be adopted to deliver powerful, tangi- – and the detailed onshore overview of ble benefits. exactly what charts are used and when, enabling effective cost management – is 70% of the national offshore fleet, even Flexible solutions impossible without today’s advanced e-nav- though the vessels do not fall under the The leap from paper to pixels has made it igation technology. ECDIS mandate. The owners have simply easier to create bespoke navigation solu- opted for cutting-edge e-navigation services tions for individual vessels. Whereas navi- The path to profitability because they are focused on safe, efficient gators were once forced to apply for paper When faced with regulations such as the and predictable operations in a notoriously charts and licences prior to voyages, neces- ECDIS Mandate it’s understandable that demanding and competitive sector. sitating detailed and time consuming plan- shipping companies and owners focus on ning, services such as ours enable them the price of compliance. However, there For the mandated SOLAS vessels that do to pick and choose what charts they need needs to be a greater appreciation of the have to invest in navigational equipment, when they need them – instantly accessing potential of this technology – not just in it’s clearly worth closer investigation into them online. terms of safe operations but in the cost effi- how it can be brandished, and what ser- ciencies, the more intelligent use of man- vices can be added on to the standard func- In addition, we offer clients the ability to power and the enhanced decision making tionality, to deliver day-to-day benefits to subscribe to the ENC service for a fixed tools it can deliver. fleet management practices. We believe this area for certain periods of time, dependant is one IMO regulation that everyone can on their individual needs, or simply “pay as Many ship owners already appreciate this, profit from. ll you sail”. In the latter case, vessels are only even if they’re not being “forced to” by reg- charged after using charts on their routes. ulations. Norwegian offshore support ves- sel owners provide an interesting case in Alternatively, the two models can be com- point. NAVTOR now supplies its ENC ser- Editor’s Note: Willy Zeiler, born 1950 bined – as we did for Norwegian cruise vice to ship owners controlling more than in Egersund, Norway, was educated as a graphic designer and has a diploma in communication as well as marketing economy. His professional occupations span from deckhand at sea to managing The NavStick advertising agencies servicing major cli- eXPERTISE ents in the maritime business.

His latest occupation is within electronic charting and the e-navigation sector, where he has worked for Primar, UKHO, C-MAP and now NAVTOR. IN mOTION

Born on the rugged South West Coast of Norway, Willy is a sailor himself, pas- sionate about the maritime industry and the ability of technology to facili- tate safe, reliable and efficient passage Local knowledge, global strength over the oceans. +65 6227 2026 | [email protected] | www.orientproject.sg

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gen-01-14.indd 26 13/02/2014 12:42:18 eXPERTISE IN mOTION

Local knowledge, global strength +65 6227 2026 | [email protected] | www.orientproject.sg

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gen-01-14.indd 27 13/02/2014 12:42:19 Live testing of new AVANTI port information software

Live testing of Avanti, a new on-line web-based application that provides validated nautical information for port users, is due to commence at a number of European ports. Following successful prototype testing at the Port of Rotterdam, the ports of Göthenburg, Marseille and Luela will commence live testing in Spring 2014.

vanti has been developed by the United Kingdom Hydrographic Office (UKHO) in collaboration withA the International Harbour Mas- ters’ Association (IHMA) and promises to make a major contribution to the rap- idly expanding field of e-Navigation.

The need for easily accessible and reliable nautical port information has never been more important as all players in the indus- try aim to increase efficiency, reduce costs and achieve environmental benefits.

By securely accessing their port’s informa- tion on the Avanti website, Harbour Mas- ters can speedily update port information making it instantly accessible to the marine industry and port community through a website that has been developed by an inter- nationally respected organization.

A professional interface mation in the same way. This lack of con- tomers, cargo or ship owners, have tradi- UKHO’s Publications Senior Product Man- sistent presentation makes finding port tionally collected nautical port information ager, Christine Trickett, said “Avanti is an information a time consuming and expen- themselves. This is a labour-intensive activ- important research and development proj- sive activity for port users and has rein- ity often requiring representatives from the ect for the UKHO and we are pleased to forced the need for a standardized format marine industry and hydrographic offices have reached the stage where we can fully that is now available through Avanti. to visit ports and terminals, or obtain infor- test the concept with industry players”. mation from captains’ reports after a port Why is nautical port information call. Despite these efforts, information can IHMA’s President, Captain Eric Atkinson, so difficult to obtain? go out of date very quickly. said “Avanti provides a professional inter- Why should a port’s most important cus- face for communicating information to tomers, the cargo or ship owners, collect Conflicting information port users and will help Ship Masters com- nautical port information themselves? Why At the same time, Harbour Masters must ply with IMO requirements for berth to doesn’t the port make this information eas- respond to requests for nautical port infor- berth passage planning in the interests of ily available to customers? mation, often about areas of frequent improved safety as well as well as increased change, and can find it difficult to update efficiency”. This question was raised by the vice pres- port information quickly and consistently. ident of a major container line during the As a result, the various parties dealing with A need for consistency 2006 Congress of the International Har- a single vessel may be using different infor- Although there has been a proliferation of bour Masters’ Association (IHMA). mation for loading, discharging, sailing and port websites providing information, no assistance with the potential to affect effi- two port websites present their entry infor- A port’s most economically important cus- ciency and safety.

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gen-01-14.indd 28 13/02/2014 12:42:19 Eight years on and for the first time in mar- itime history, the development of Avanti Editor’s Note: The above article was based on a joint press release issued by UKHO and IHMA. helps solve the nautical port information For further information contact: http://Avanti.envitia.com. Contact details for information and deficit by making updates to port informa- support: UKHO: [email protected] IHMA: Ben van Scherpenzeel, Scherpenzeel. tion easy for Harbour Masters and accessi- [email protected] ble for port users. ll

GENERAL BULLETIN 2014 VOLUME 109 #1 29

gen-01-14.indd 29 13/02/2014 12:42:20 BY JIM COSMAN Not all ballast water treatment system type approvals are equal Robust testing, in accordance with Environmental Technology Verification (ETV) Ballast Water Protocol, can help system manufacturers expedite United States Coast Guard (USCG) Type Approval. More importantly, it gives vessel owners the information, data and reassurance they need.

s readers will know, the Inter- charge standards and the United States • Can you prove that your scaled-up, national Maritime Organiza- Environmental Protection Agency (USEPA) larger flow systems will perform in a tion (IMO) launched the Ballast Vessel General Permit (VGP), in addition to similar manner as the smaller ones WaterA Management (BWM) Conven- State ballast water regulations. you tested during your IMO Type tion in 2004. It will enter into force 12 Approval process? months after 30 States representing 35% As a temporary measure, the USCG may • How is your system impacted by salinity, of the world’s merchant shipping ton- accept a system that has been type approved temperature, pH and organic loading? nage have ratified. by another flag state and according to IMO BWM Convention criteria. They call this an Too much time in Port State Control To date, it appears that nearly 40 ballast Alternate Management System (AMS). How- is a waste of time and money water treatment (BWT) system manufactur- ever, vessel owners need to understand that Getting in and out of ports, without delays, ers have obtained IMO type approval. How- AMS is merely an interim solution and that is an absolute necessity. And being able ever, it remains to be seen just how many of – if they’re bound for ports in the United to prove that your BWT system is Type them will have to undergo extensive retest- States – their vessels will ultimately have to be Approved to the highest of standards will ing in an effort to be granted USCG type equipped with a USCG type approved system. definitely help your cause. approval, and there’s no telling how long this retesting will take to complete. Furthermore, the USCG has been forthright That’s why, rather than focusing on being in stating that the receipt of an AMS desig- the first to get IMO Type Approval and test- Vessel owners deserve more than nation does not provide the manufacturer or ing to minimum standards, Trojan Marinex just beta technology the vessel owner any guarantee that the sys- decided to focus on refining the entire test- Vessels sailing in US waters will be required tem will eventually for type approval. ing process, turning it into one of the most to adhere with USCG ballast water dis- The specific risk to a vessel owner relying modern and robust in the industry. merely on an AMS system is that the system may be drastically undersized and that sub- The path to USCG type approval stantial capital improvements and engineer- The Trojan Marinex BWT system received ing will be required to rectify the situation. IMO Type Approval from Det Norske Ver- itas (DNV) on behalf of the Norwegian Be sure to ask the tough questions Maritime Directorate. DNV has been at the Vessel owners should be asking BWT man- forefront of ballast water type approval and ufacturers tough questions. Here are seven has set forth extremely strict requirements. of them: Here are five interesting (and differentiat- • During your IMO type approval test- ing) facts about the Trojan Marinex type ing, did you test in accordance USEPA approval process: ETV Ballast Water Protocol? • How do you plan on obtaining USCG 1. Testing was conducted in accordance type approval, and how long will it take? with USEPA ETV Ballast Water Pro- • Will you have to completely retest your tocol. In order to receive USCG type system with an independent labora- approval, systems must be tested to this tory (IL)? more prescriptive protocol. • Did you test your system in all salinities 2. Land-based testing was completed at (i.e., fresh, brackish and marine water)? the DHI Maritime Technology Evalu- • Can you prove (with quantitative data) ation Facility in Hundested, Denmark. that your BWT system will have little The DHI facility, together with DNV, Vessel owners should be asking BWT impact on my cargo operations? achieved independent laboratory sta- manufacturers tough questions.

30 BULLETIN 2014 VOLUME 109 #1 GENERAL

gen-01-14.indd 30 17/02/2014 08:01:34 tus in June 2013. This means that they are authorized by the USCG to eval- uate and test technologies, and offer class, IMO and USCG Type Approval to manufacturers. 3. Testing and reporting requirements have evolved since many of the early IMO type approvals. Many certificates awarded in the past contain little infor- mation articulating the limiting condi- tions of the BWT system. However, the Trojan Marinex IMO Type Approval satisfies the requirements of IMO Cir- cular BWM.2/Circ.43c, and contains more detailed water quality informa- tion, such as the UV transmittance under which the system was tested. 4. Testing was conducted at significantly higher flow rates (i.e., 1,250 m3/h) to ver- ify the efficacy of the system at higher flow rates than typically tested (i.e., 250 m3/h). This work was done to verify scale-up Computational Fluids Dynam- ics (CFD) modelling, and to satisfy the Trojan Marinex shipboard testing on board the training ship Golden Bear. requirements of IMO circular BWM.2/ Circ.33 (Guidance on the scaling of bal- last water management systems). infancy at the time, and the scientific and methodology by which efficacy and com- 5. Even though the USCG has been very engineering implications of the impending pliance can be determined. This collective clear in articulating that a BWT system regulations and compliance assessment cri- knowledge is reflected in a custom-designed operating in US waters must be tested teria were not yet thoroughly understood Trojan Marinex BWT system, and where in the condition in which it will operate, or developed. For example, while it was and when appropriate, has been shared with IMO guidelines state that testing only agreed in principle that the elimination of the international community through peer- needs to occur in two of the three salin- potential invasive species from ships’ bal- reviewed publications, regulatory submis- ities. The Trojan Marinex BWT system last water was beneficial, it was not known sions, presentations and partnerships. ll was tested and approved in all three – what the actual aquatic species in various brackish, fresh and marine. waters were.

The journey started long ago There were gaps in knowledge both in For us, the search for a ballast water treat- terms of identifying and quantifying the Editor’s note: Jim Cosman has nearly 15 ment solution dates back to 2006 – that’s species, and in determining the extent of years’ experience in the water industry, around the time when the start of a research their viability post-treatment. That’s why with in-depth involvement in technol- programme examining customer needs scientists and engineers at Trojan Marinex ogies used in several treatment appli- and basic scientific principles related to bal- (trojanmarinex.com) and Trojan Technolo- cations, including municipal drinking last water began. This research extended gies (trojantechnologies.com) engaged with water and ballast water treatment. He to an examination of the various types the international community of experts – has been with Trojan Technologies since of ships and their widely varying ballast including scientists at universities in Can- 1998. Prior roles included Regulatory water pumping requirements. Through this ada and abroad – to better understand the Affairs Manager, Business Development research it was identified that footprint and nature of the water and the organisms being Manager and Municipal Drinking Water power requirements must heavily influence effectively removed from it. Market Manager. any ballast water treatment system design, and that the system must have minimal Contribution was not just in the development Jim is currently Market Manager for Tro- impacts on a vessel’s overall operations. of clean technology that would eliminate jan Marinex (a Trojan Technologies busi- invasive species in ballast water discharge ness) and leads various global market Furthermore, although the international without the addition of any chemicals, but strategies. Jim is a regular participant community had already acted with the cre- also included fundamental contributions to in key IMO meetings related to ballast ation of agreements and conventions to the understanding of the nature of the spe- water as a member of the Canadian del- regulate the quality of ballast water dis- cies present in ballast water, their suscepti- egation to IMO. charge, the state of knowledge of the science bility to treatment, the mechanisms of action around ballast water quality was still in its against their viability, and the laboratory

GENERAL BULLETIN 2014 VOLUME 109 #1 31

gen-01-14.indd 31 17/02/2014 08:01:35 BY OLAV AKSELSEN High quality flag with focus on user-friendliness Is it possible for a traditional government authority to be user-friendly? In the Norwegian Maritime Authority (NMA) we strongly believe so.

or several years this has been a clients to participate and also commits the result, the majority of companies with NIS- main priority for the authority. NMA to initiate mutual collaboration. registered ships now only need to utilise one Providing accessible services for single on-line application form. This guar- ourF clients is a vital part in our efforts to New on-line services antees an efficient reimbursement of taxes ensure that the Norwegian Flag remains Newbuilding activity has been at an all- according to the rules of the NOK 1.6 bil- of high quality. time-high the past few years, with innova- lion total reimbursement scheme for NIS- tive new ship designs and breakthroughs in registered ships. User-friendliness ties into several of the the offshore industry leading to an increas- NMA’s responsibilities and strategic goals. ingly faster pace in the Maritime Norway. Seafarers dependent on personal certifi- The NMA is an administrative and author- At the same time, the NMA has been work- cates issued by the NMA are responsible itative body for issues related to safety on ing to streamline the authorisation pro- for manning all ships under the Norwegian board Norwegian registered ships and for- cesses for newbuildings by investing heavily flag. Until recently, the application pro- eign ships arriving in Norwegian ports. in electronic services. In 2012 we could cess required submission of numerous doc- Our clients represent a large part of the finally switch to on-line submission and uments by traditional mail. Considerable maritime industry. processing of ship drawings. internal resources were required for han- dling, approving and issuing the certificates. The vision Another example of progress is the reim- The NMA’s vision “Together for Safety at bursement scheme for seafarers which We are, therefore, proud to present our lat- Sea in a Clean Environment” challenges our made the move on-line in early 2013. As a est contribution to user-friendliness: from August 2013 it has been possible for Norwe- gian seafarers to apply for personal certifi- cates on-line.

The issuer submits required documenta- tion of qualifications (medical, educational and service records) to our database and the information is automatically paired with the seafarer’s own applications. Simplification and improvement of the application process will, without doubt, benefit our clients.

International ship register Since its establishment in 1987, the Norwe- gian International Ship Register (NIS) has provided the industry with a high quality option for registration. Ships registered in the NIS fly the Norwegian flag and are sub- ject to Norwegian jurisdiction.

This implies that the ordinary shipping leg- islation applies to ships registered in the NIS with some exemptions and special rules. Norway’s comprehensive code of mari- time law assures creditors that it represents The 2008 Korean-built, Norwegian-flagged, autoliner a secure and professional alternative. The Höegh London. (Photo: Höegh Autoliners)

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gen-01-14.indd 32 13/02/2014 12:42:24 The Norwegian-registered Susana S berthed in Malaysia, one of the Tokyo MoU countries. (Photo: Knut Revne)

Maritime law in Norway is known for its The Norwegian International Ship Register sophistication and predictability. As a gen- is a high quality register, serving fast mov- eral rule, self-propelled passenger and cargo ing international customers and providing ships, hovercrafts, drilling platforms and full service around the clock. Registrations other mobile installations may be entered may take place between 7 am and midnight into the Norwegian International Ship Reg- all days except Sundays and international ister, provided that they are not entered in holidays. The service is available by appoint- the registry of another country. ment and, if needed, on short notice. NIS is renowned for being . Both the According to the NIS Act, foreign shipping NIS-fees as well as Norwegian shipping tax- companies may register their vessels in the ation are regarded as highly competitive. NIS. However, ships owned by foreign ship- ping companies must be operated by a Nor- Quality flag with top rankings wegian shipping company with its head On 1 July 2014, Norway ranked as number office in Norway. seven on the Paris MoU’s White list, con- firming that the efforts put into force for Operation is understood to mean either improvement have been successful. technical management (manning, outfit- Olav Akselsen ting, maintenance, etc.) or commercial One of the objectives in the NMA’s strategic operation (chartering, marketing, etc.). The plan for the period 2012 to 2015 is keeping vessel can also be operated wholly or partly the position among the top ten on the Paris from management offices abroad which are MoU White list by the end of the period. for their list of quality ships, Qualship 21. owned by a Norwegian shipping company Accordingly, we can proudly state that the with its head office in Norway. We are very pleased with our current rank- Norwegian flag is a high quality flag within ing, but that does not mean that we are in a all the main Port State control rankings. ll Certain restrictions are imposed by the NIS position to relax. Ship owners, recognised Act on the areas where vessels in the reg- organisations, and the NMA will continue to ister can trade. NIS vessels may not carry work closely together to ensure that we con- cargo or passengers between Norwegian tinue to move in the same, positive direction. ports or engage in regular passenger service Editor’s Note: Olav Akselsen is Director between Norwegian and foreign ports. It is not, however, only in Europe that Nor- General of Shipping and Navigation at wegian registered ships are recognised the Norwegian Maritime Authority. He is Highly accepted standards as being of high quality. Norway has also also a Labour MP in the Norwegian Par- Great emphasis has been placed on main- climbed to sixth place on Paris MoU’s liament. He was Minister of Petroleum taining a quality register which ensures that equivalent in the Asia Pacific Region, the and Energy in 1997 and has served on vessels operating under the NIS regulations Tokyo MoU White List. This is yet another various committees on business and for- meet high safety and working standards. To encouraging development for our adminis- eign affairs. In 2012 he headed up the ensure this, the rules are based on the obli- tration as there are a total of 31 flags on the committee which produced “The Energy gations accepted by Norway, particularly Tokyo MoU White list. Commission report – value added, reli- with regard to IMO (the International Mar- ability of supply and environment”. itime Organization) and ILO (International Last, but not least, Norway is also qualified Labour Organization) conventions. by the United States Coast Guard (USCG)

GENERAL BULLETIN 2014 VOLUME 109 #1 33

gen-01-14.indd 33 13/02/2014 12:42:27 BY GERD SCHNEIDER Protecting marine environments: the MARPOL V Regulation

Oceans, estuaries, lagoons, mangroves and other marine ecosystems are sensitive to any environmental changes. These ecosystems cover two-thirds of our planet’s surface so it is no surprise that any imbalance, natural or otherwise, jeopardises not just the continuity of marine life, but has the potential to affect the planet as a whole.

ollution, in its various guises, is being transported. This documentation has By assessing and proving the ecological risk one of the negative impacts of to provide detailed chemical analyses of the of each solid bulk cargo that is transported, human interaction with nature. transported materials, and most impor- shippers can provide ship owners with the PAnd while the world’s oceans have long tantly, specify whether they have the poten- information they need to determine the been viewed as impervious to anything tial to damage the marine environment. correct process for wash water disposal. dumped into their depths, waste dis- Any residue that is considered dangerous to Ship owners are responsible for appropri- posal into ours seas is no longer viable. marine ecosystems (i.e. it has the potential ately disposing of any wash water that is to kill living marine organisms) is now cat- harmful to the marine environment due to Marine pollution does not just refer to rub- egorised as “Harmful to the Marine Envi- the chemical compound of the washed out bish or oil spills, although these are both ronment” (HME) by the IMO. solid bulk material. This more stringent areas of huge concern, it refers to anything version of the regulation is designed to pre- damaging that ends up in our oceans, for Providing evidence in the form of docu- vent the complete disregard for the oceans instance the residues from shipped solid mented analyses as to whether a chemical that was so commonplace previously. There bulk material cargoes. Knowing whether compound is HME is a critical factor in the are excepted practices and requirements for a chemical compound has the potential to latest revision of the Annex V regulation. It the disposal of the different categories of damage marine ecosystems is the first step is already a legal requirement to carry the HME substances. in determining how it needs to be treated, documentation related to Annex V, and as according to the latest revision of the Inter- of 1 January 2015 for any ship not in pos- What is considered HME? national Maritime Organization’s (IMO) session of this paperwork – whether the Cargo residues are considered HME, and MARPOL Regulation, Annex V. cargo is HME or not – there is the potential subject to regulations 4.1.3 and 6.1.2.1 of the of legal action against the cargo shipper and revised Annex V, if they meet one or more The MARPOL Regulation – Annex V the ship owner. of the seven criteria of the Global Harmon- MARPOL, the IMO convention that pre- ised System (GHS) revision 4, which states: vents pollution of the marine environment Specific to the compound by ships from operational or accidental The chemical compound of a solid bulk 1. Acute Aquatic Toxicity (Category 1) causes, is broken down into six technical material goes right back the mine it is 2. Chronic Aquatic Toxicity Annexes, each covering a different aspect extracted from and is often the result of (Category 1 or 2) of pollution. Annex V deals with differ- many different geological and geograph- 3. Carcinogenicity* (Category 1A or 1B)** ent types of garbage, one of which is resi- ical factors. It cannot therefore be said 4. Mutagenicity* (Category 1A or 1B)** dues from solid bulk cargoes. Originally that any solid bulk material with the same 5. Reproductive Toxicity* introduced on 31 December 1988, the most generic name is precisely the same chemi- (Category 1A or 1B)** recent revision, made in July 2011, came cal compound. Minerals from each mine 6. Specific Target Organ Toxicity into force on 1 January 2013. have to be individually analysed and very Repeated Exposure* (Category 1)** specific ecotoxicology analyses are required 7. Solid bulk cargoes containing or con- As of this date, shippers of solid bulk mate- to understand the impact they would have sisting of synthetic polymers, rub- rials were required to hold, and to provide to on marine ecosystems if they were to be ber, plastics, or plastic feedstock pellets ship owners, documentation for all cargoes released directly into open waters. (this includes materials that are shred-

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gen-01-14.indd 34 13/02/2014 12:42:27 Overview of MARPOL Annex V discharge restrictions

ded, milled, chopped or macerated or The Marine Environment Protection Com- include further details that expand on the similar materials). mittee’s implementation of the revised precise properties of the material, enabling Annex V, along with other revisions made the waste to be disposed of properly into a * Products that are classified for carcinoge- to the International Maritime Solid Bulk designated reception facility at the end of nicity, mutagenicity, reproductive toxicity or Cargoes code, means that the shipper – the the voyage. specific target organ toxicity repeated expo- party that owns the material and is asking sure for oral and dermal hazards or without for it to be transported – is now responsible Shippers should currently be taking all rea- specification of the exposure route in the for stopping HME solid bulk materials from sonable measures to provisionally classify hazard statement. being discharged into the sea. cargoes as HME or not and have been given ** Combined with not being rapidly degradable between 1 January 2013 to December 2014 and having high bioaccumulation. But, while it is the responsibility of the ship- to put these processes in place. From 1 Jan- per to hold and to provide the documenta- uary 2015, shippers are required to provide The GHS revision 4 covers all potentially tion on the classification of the cargo, any a complete classification for their cargo, and hazardous materials that could detrimen- ship owner transporting the cargo, with a declaration at both the loading and unload- tally affect health or the environment. It is vessel of 400 gross tonnages or above, needs ing port, as to whether the material trans- based on the intrinsic properties and com- this paperwork before loading the solid ported is HME or not. position of compounds and classifications bulk material in question. If a shipper is against the seven criteria in this list provide unable to provide this documentation, the SGS toxicologists provide the steps a basis for hazard communications and fur- ship owner should refuse to transport it on to compliance ther analyses. their behalf, until such time as the docu- To comply with Annex V regulations, ship- ments have been provided. pers need to have a clear ecotoxicology anal- Shippers versus ship owners ysis process in place to first assess whether a With a variety of stakeholders being in pos- Any shipper that has not already made pro- solid bulk material compound meets one or session of the cargo at different times of visions to chemically test their cargo needs more of the seven criteria of GHS revision 4 the journey to market, who is ultimately to action the process before the cargo is previously listed; and then secondly, to pro- responsible for HME classification and doc- loaded on to a vessel. If the material is vide the detailed chemical compound docu- umentation? found to be HME, the paperwork needs to mentation when needed.

GENERAL BULLETIN 2014 VOLUME 109 #1 35

gen-01-14.indd 35 13/02/2014 12:42:27 On the Horizon...

MARPOL Annex V HME Classification from SGS DATE VENUE EVENT CONTACT 10-13 Mar. 2014 Shanghai Breakbulk Event China Wayne Zhuang: [email protected]

10-14 Mar. 2014 London Sub-Committee on Ship Systems and Equipment (SSE) Aron Sørensen: [email protected]

11 Mar. 2014 London BIMCO Maritime Security Committee Meeting Giles Noakes: [email protected]

12-14 Mar. 2014 Rotterdam BIMCO Seminar: Cargo Claims Peter Grube: [email protected]

17 Mar. 2014 London IACS Quality Advisory Committee (AVC) Aron Sørensen: [email protected]

17-19 Mar. 2014 Stamford BIMCO participating in CMA Michael Lund: [email protected]

19 Mar. 2014 Bangkok BIMCO Heavy Lift Contracts Workshop Thomas Timlen: [email protected]

19-21 Mar. 2014 Singapore Asia Pacific Maritime Thomas Timlen: [email protected]

19 Mar.-4 Jun. 2014 eLearning Time Charter Parties Mette Juul Madsen: [email protected]

25 Mar. 2014 Copenhagen BIMCO Marine Committee Meeting Aron Sørensen: [email protected]

31 Mar-4 Apr. 2014 London Marine Environment Protection Committee Aron Sørensen: [email protected]

1 Apr. 2014 Shanghai BIMCO Seminar: Using SALEFORM 2012 Wayne Zhuang: [email protected]

2 Apr.-26 Jun. 2014 eLearning Introduction to Shipping Mette Juul Madsen: [email protected]

3 Apr. 2014 Hong Kong BIMCO Seminar: Using SALEFORM 2012 Wayne Zhuang: [email protected]

6-11 Apr. 2014 Singapore Singapore Maritime Week Thomas Timlen: [email protected]

9-11 Apr. 2014 Montreal BIMCO Masterclass Workshop - Bills of Lading Peter Grube: [email protected]

14 Apr. 2014 London Seatrade Awards Karin Petersen: [email protected] SGS has been providing analyses in this Our classification of sparingly soluble inor- 22-24 Apr. 2014 Odessa International Forum on Seafarers Education, Training and Crewing 2014 Aron Sørensen: [email protected] field for many years, and now, to meet the ganic substances that could be considered need of shippers and the marine industry, HME (i.e. IMDG Class 9, UN 3077) is made 23-25 Apr. 2014 Singapore Agency Peter Grube: [email protected] has developed a sampling, testing, interpre- according to the Transformation/Dissolu- 28 Apr.-2 May 2014 London IMO Legal Committee Christian Hoppe: [email protected] tation, and documentation method to pro- tion Protocol. 28 Apr.-2 May 2014 London IMO Editorial and Technical Group ( IMSBC Code) Ai-Cheng Foo-Nielsen: [email protected] vide shippers with a straightforward and 28 Apr. 2014 Dubai Executive Committee Meeting Karin Petersen: [email protected] globally available process through which to This method, developed by OECD and 29 Apr. 2014 Dubai BIMCO Conference Karin Petersen: [email protected] meet their document provision obligations. accepted through the GHS by international 30 Apr. 2014 Dubai BIMCO Documentary Committee Meeting Søren Larsen: [email protected] authorities such as the European Chemi- Using specialised equipment, and accord- cals Agency and the United Nations, pro- 30 Apr. 2014 Dubai BIMCO Board of Directors Meeting and Annual General Meeting Karin Petersen: [email protected] ing the ISO and ASTM standards, SGS vides a bioavailability test, checking the 13 May-23 May 2014 London Maritime Safety Committee Aron Sørensen: [email protected] Giles Noakes: [email protected] takes samples from the solid bulk cargo to capacity of ions to be released from the be analysed. This is an in-depth procedure compound into water. 14-15 May 2014 New York Contact Group on Piracy off the Coast of Somalia Giles Noakes: [email protected] which collects a number of samples from 14 May-17 Sep. 2014 eLearning Dry Cargo Laytime and Demurrage Mette Juul Madsen: [email protected] the same cargo to ensure that the results If ions are released, there is the potential that 19-21 May 2014 Otsu Asian Shipowners Forum AGM Thomas Timlen: [email protected] of subsequent analyses are reflective of the these are ecotoxic and further assessment is 19-21 May 2014 Copenhagen IMSF Annual Meeting Peter Sand: [email protected]

entire product. The elemental, chemical required. Bioaccumulation and biodegrada- 21-22 May 2014 Hamburg Motorship Propulsion Conference Lars Robert Pedersen: [email protected] and mineralogical composition of the rele- tion testing also form part of the comprehen- Gerd Schneider 22-23 May 2014 Hamburg Using SUPPLYTIME Peter Grube: [email protected] vant components are analysed, and a clear sive sampling, analysis and testing that SGS interpretation of the results is provided to provides for meeting Annex V requirements. 27 May 2014 Bruges 9th International Harbour Masters Conference Anna Wollin Ellevsen: [email protected] the shipper. 28-29 May 2014 Singapore Sea Asia, Offshore Marine Forum 2014 Thomas Timlen: [email protected] Ultimately, SGS services for shippers and Editor’s Note: Gerd Schneider has been 2-6 Jun. 2014 Athens Posidonia BIMCO stand Graeme Brown: [email protected] SGS classifies HME against criteria as ship owners give piece of mind by allowing working for the SGS group for 10 years. 2-6 Jun. 2014 Shanghai BIMCO Asia Shipping School Peter Grube: [email protected] He started as Marketing Sales Manager specified in GHS revision 4. Several other all the necessary documentation needed for 4-6 Jun. 2014 Shanghai Offshore Wind China Wayne Zhuang: [email protected] national and international codes for classi- port state authorities to be in place and in and for the last three years has been 4 Jun.-8 Oct. 2014 eLearning Tanker Chartering, Laytime and Demurrage Mette Juul Madsen: [email protected] fying dangerous goods, such as the Inter- accordance with the strict requirements of working in the Business Development national Maritime Dangerous Goods the latest revision of Annex V. Department of Environmental Services 30 Jun.-4 Jul. 2014 Copenhagen BIMCO Summer Shipping School Peter Grube: [email protected] (IMDG) Codes, are aligned with the GHS. as Global Project Manager Shipping. 30 Jun.-4 Jul. 2014 London Sub-Committee on Navigation, Communications and Search and Rescue Aron Sørensen: [email protected] Our Laboratory experts follow inter- Why SGS? 14-18 Jul. 2014 London Sub-Committee on Implementation of IMO Instruments Aron Sørensen: [email protected] nal procedures that consistently evolve to SGS is the world’s leading inspection, veri- For further information about HME 20 Aug.-5 Nov. 2014 eLearning Time Charter Parties Mette Juul Madsen: [email protected] testing and classification, contact Gerd stay up-to-date with the most recent revi- fication, testing and certification company. 8-9 Sep. 2014 Bahrain SHADE (Shared Awareness and Deconfliction) Giles Noakes: [email protected] sions to testing guidelines, as issued by the It is recognised as the global benchmark Schneider, SGS Global Project Manager 8-12 Sep. 2014 London Sub-Committee on Carriage of Cargoes and Containers Ai-Cheng Foo-Nielsen: [email protected] Organisation for Economic Co-operation for quality and integrity. With more than Shipping at [email protected] or 9-12 Sep. 2014 Hamburg Gmec/SMM BIMCO stand Graeme Brown: [email protected] and Development (OECD), and the United 75,000 employees, SGS operates a net- visit www.sgs.com/env Nations and Economic Commission for work of over 1,500 offices and laboratories 15-19 Sep. 2014 London IMO Editorial and Technical Group (IMSBC Code) Ai–Cheng Foo Nielsen: [email protected] Europe (UNECE). around the world. ll 21-23 Sep. 2014 Amsterdam Dry Bulk Europe Peter Sand: [email protected] 22-26 Sep. 2014 London Facilitation Committee (FAL 39) Giles Noakes: [email protected]

24 Sep.-10 Dec. 2014 eLearning Bills of Lading Mette Juul Madsen: [email protected]

6-11 Oct. 2014 Gothenburg FONASBA Søren Larsen: [email protected] 36 BULLETIN 2014 VOLUME 109 #1 GENERAL

gen-01-14.indd 36 13/02/2014 12:42:28 On the Horizon...

DATE VENUE EVENT CONTACT 10-13 Mar. 2014 Shanghai Breakbulk Event China Wayne Zhuang: [email protected]

10-14 Mar. 2014 London Sub-Committee on Ship Systems and Equipment (SSE) Aron Sørensen: [email protected]

11 Mar. 2014 London BIMCO Maritime Security Committee Meeting Giles Noakes: [email protected]

12-14 Mar. 2014 Rotterdam BIMCO Seminar: Cargo Claims Peter Grube: [email protected]

17 Mar. 2014 London IACS Quality Advisory Committee (AVC) Aron Sørensen: [email protected]

17-19 Mar. 2014 Stamford BIMCO participating in CMA Michael Lund: [email protected]

19 Mar. 2014 Bangkok BIMCO Heavy Lift Contracts Workshop Thomas Timlen: [email protected]

19-21 Mar. 2014 Singapore Asia Pacific Maritime Thomas Timlen: [email protected]

19 Mar.-4 Jun. 2014 eLearning Time Charter Parties Mette Juul Madsen: [email protected]

25 Mar. 2014 Copenhagen BIMCO Marine Committee Meeting Aron Sørensen: [email protected]

31 Mar-4 Apr. 2014 London Marine Environment Protection Committee Aron Sørensen: [email protected]

1 Apr. 2014 Shanghai BIMCO Seminar: Using SALEFORM 2012 Wayne Zhuang: [email protected]

2 Apr.-26 Jun. 2014 eLearning Introduction to Shipping Mette Juul Madsen: [email protected]

3 Apr. 2014 Hong Kong BIMCO Seminar: Using SALEFORM 2012 Wayne Zhuang: [email protected]

6-11 Apr. 2014 Singapore Singapore Maritime Week Thomas Timlen: [email protected]

9-11 Apr. 2014 Montreal BIMCO Masterclass Workshop - Bills of Lading Peter Grube: [email protected]

14 Apr. 2014 London Seatrade Awards Karin Petersen: [email protected]

22-24 Apr. 2014 Odessa International Forum on Seafarers Education, Training and Crewing 2014 Aron Sørensen: [email protected]

23-25 Apr. 2014 Singapore Agency Peter Grube: [email protected]

28 Apr.-2 May 2014 London IMO Legal Committee Christian Hoppe: [email protected]

28 Apr.-2 May 2014 London IMO Editorial and Technical Group ( IMSBC Code) Ai-Cheng Foo-Nielsen: [email protected]

28 Apr. 2014 Dubai Executive Committee Meeting Karin Petersen: [email protected]

29 Apr. 2014 Dubai BIMCO Conference Karin Petersen: [email protected]

30 Apr. 2014 Dubai BIMCO Documentary Committee Meeting Søren Larsen: [email protected]

30 Apr. 2014 Dubai BIMCO Board of Directors Meeting and Annual General Meeting Karin Petersen: [email protected]

13 May-23 May 2014 London Maritime Safety Committee Aron Sørensen: [email protected] Giles Noakes: [email protected]

14-15 May 2014 New York Contact Group on Piracy off the Coast of Somalia Giles Noakes: [email protected]

14 May-17 Sep. 2014 eLearning Dry Cargo Laytime and Demurrage Mette Juul Madsen: [email protected]

19-21 May 2014 Otsu Asian Shipowners Forum AGM Thomas Timlen: [email protected]

19-21 May 2014 Copenhagen IMSF Annual Meeting Peter Sand: [email protected]

21-22 May 2014 Hamburg Motorship Propulsion Conference Lars Robert Pedersen: [email protected]

22-23 May 2014 Hamburg Using SUPPLYTIME Peter Grube: [email protected]

27 May 2014 Bruges 9th International Harbour Masters Conference Anna Wollin Ellevsen: [email protected]

28-29 May 2014 Singapore Sea Asia, Offshore Marine Forum 2014 Thomas Timlen: [email protected]

2-6 Jun. 2014 Athens Posidonia BIMCO stand Graeme Brown: [email protected]

2-6 Jun. 2014 Shanghai BIMCO Asia Shipping School Peter Grube: [email protected]

4-6 Jun. 2014 Shanghai Offshore Wind China Wayne Zhuang: [email protected]

4 Jun.-8 Oct. 2014 eLearning Tanker Chartering, Laytime and Demurrage Mette Juul Madsen: [email protected]

30 Jun.-4 Jul. 2014 Copenhagen BIMCO Summer Shipping School Peter Grube: [email protected]

30 Jun.-4 Jul. 2014 London Sub-Committee on Navigation, Communications and Search and Rescue Aron Sørensen: [email protected]

14-18 Jul. 2014 London Sub-Committee on Implementation of IMO Instruments Aron Sørensen: [email protected]

20 Aug.-5 Nov. 2014 eLearning Time Charter Parties Mette Juul Madsen: [email protected]

8-9 Sep. 2014 Bahrain SHADE (Shared Awareness and Deconfliction) Giles Noakes: [email protected]

8-12 Sep. 2014 London Sub-Committee on Carriage of Cargoes and Containers Ai-Cheng Foo-Nielsen: [email protected]

9-12 Sep. 2014 Hamburg Gmec/SMM BIMCO stand Graeme Brown: [email protected]

15-19 Sep. 2014 London IMO Editorial and Technical Group (IMSBC Code) Ai–Cheng Foo Nielsen: [email protected]

21-23 Sep. 2014 Amsterdam Dry Bulk Europe Peter Sand: [email protected]

22-26 Sep. 2014 London Facilitation Committee (FAL 39) Giles Noakes: [email protected]

24 Sep.-10 Dec. 2014 eLearning Bills of Lading Mette Juul Madsen: [email protected]

6-11 Oct. 2014 Gothenburg FONASBA Søren Larsen: [email protected]

gen-01-14.indd 37 13/02/2014 12:42:29 BY MOHD HAZMI MOHD RUSLI AND RAHMAT MOHAMAD Malaysia’s Trans-Peninsular Pipeline Project: will it take off?

While Thailand’s Isthmus of Kra canal project has been in the planning stages for a long time but not taking off, Malaysia has been quietly thinking of its own trans-peninsular pipeline that will cut across Kedah and Kelantan. Will this project succeed or face the same fate as the Kra Canal?

alaysia’s Trans-Peninsular Pipe- ported through the Malaysian hinterland Challenges facing TPP line Project (TPP) between to the other side of the peninsular. At the Although the TPP is generally viewed as a Kedah on the West Coast and Bachok station in Kelantan, the refined oil viable option, analysts point out that coastal MKelantan on the East Coast seems to will be loaded onto another vessel waiting waters are generally shallow near the Malay- have been revived. First proposed in for shipment to buyers in East Asia. sian Peninsular, making it difficult for large 1994, the project initially experienced tankers to dock. Even worse, monsoon rains some difficulties and came to a halt in This pipeline would eventually ease the con- affect the sea conditions along the Kelantan 2010. If realised, the 310 km pipeline will gestion in the Straits of Malacca and Sin- coast where Bachok is located. move oil from the coastal city of Yan in gapore and the burden of accommodating Kedah to Bachok in Kelantan and out to increasing shipping traffic. Annually, oil Secondly, unlike the terrain in the Middle the South China Sea. tankers and very large crude carriers (VLCC) East which mostly consists of desert low- comprise 26% of the total shipping transits in lands, the northern parts of Peninsular The New Straits Times reported that during the Straits of Malacca and Singapore. Malaysia where the pipelines would cross the Fifth World Chinese Economic Forum are covered with thick jungles in the midst held in Kuala Lumpur in October 2013, Commodities such as crude oil that could of highlands. Therefore, the construc- China had shown an interest in reviving pose a threat to the sensitive marine envi- tion of the pipeline would be more compli- the privately-funded TPP, estimated to cost ronment of the waterways will also no lon- cated. Oil would have to be pumped up the more than USD 7 billion. Chinese President ger be ferried in a large amount via the 2,000 metre high Titiwangsa Mountains, Xi Jinping has yet to confirm how this is to Straits. Furthermore, shipments via the using a part of the transported oil to supply be carried out. TPP will reduce the time to transport oil the necessary power for pumping. compared to the normal voyage of a vessel How the pipeline will work through the Strait of Malacca. Thirdly, the TPP project could result in To revive the TPP, the Kedah State Govern- adverse environmental impacts should ment planned to restart the Sungai Limau Once fully operational, this project is there be a leakage of oil in any part of the Hydrocarbon Hub Project in Yan that was expected to save up to three days of tran- pipeline. This would then affect Malaysian suspended in 2010. Estimated to cost USD sit time and is anticipated to reduce the cost ground-water and worse still, a fire could 15.6 billion, this project is still at the plan- of shipments of crude oil by USD 1.50 per occur along the length of the pipe should ning stage. Will this new interest from China barrel. Ships may also be less exposed to the such leakages occur. Fourthly, the TPP succeed in turning the pipeline into reality? risk of piracy in the waterway, while ship- could also directly and indirectly pose a ping traffic in the Straits of Malacca and threat to the security of the country should The main driving force of this project is Singapore will be reduced by 25%. there be sabotage or terrorist attacks on any the rapid growth in demand for crude oil part of the pipeline. in East Asia, which is expected to dou- Transportation of oil via pipelines is not ble from its current level by the year 2020. unusual in the petroleum industry. The The TPP project may face a number of chal- The Malaysian Federal Government has concept of the TPP is similar to the SUMED lenges. With the ongoing fluctuations in planned to tap into this growing demand Pipeline in Egypt that transports oil from global oil prices, it would possibly be diffi- by building pipelines across the peninsula, the Gulf of Suez to the Mediterranean Sea. cult to attract investors, namely promoters cutting through the Titiwangsa Range. The SUMED pipeline allows shipping com- of the project, shippers and oil companies, panies to save time and costs. To reduce to commit to the project. Vessels from the Middle East will be able dependence on the Hormuz Strait, oil pipe- to unload their oil cargoes at Yan, where lines have also been built to transport oil in While the TPP could reduce the volume of they will be refined and subsequently trans- the Persian Gulf. shipping traffic in the Straits of Malacca

38 BULLETIN 2014 VOLUME 109 #1 GENERAL

gen-01-14.indd 38 13/02/2014 12:42:29 If built, the pipeline would eventually ease shipping congestion in the Straits of Malacca and Singapore.

and Singapore, there are still a number of shipment fees will be imposed should they reasons which point to the fact that there choose to use the TPP. is actually no need to bypass the Straits. Firstly, in the event of a blockade of the Until the cost-benefit of using the TPP Straits of Malacca and Singapore due to is thoroughly evaluated, the economic accidents involving tankers or any other justification of bypassing the Straits of reasons, the Sunda and Lombok-Makassar Malacca and Singapore to ship oil via the Straits routes would be available as alterna- TPP would always be in question. The TPP tive, albeit more expensive, routes. project has experienced many challenges and difficulties owing to the recent global Secondly, although traffic congestion in economic downturn and the instability of the Straits of Malacca and Singapore is global oil price. building up, the existence of state-of the- art navigational safety facilities along the Although China has recently shown an Straits would ensure the safe passage of ves- interest in investing in such a project, sels plying the waterways. Thirdly, recent this huge undertaking has pros and cons records have shown that piracy activities that should be considered carefully by the have dropped significantly in the Straits of Malaysian Government and the shipping Malacca and Singapore. Therefore, there is industry. ll Mohd Hazmi Mohd Rusli no need to transport oil via the pipeline to avoid pirate attacks in the first place.

Pros and cons must be weighed up Editor’s Note: Mohd Hazmi Mohd Rusli is a Senior Lecturer at Universiti Sains Islam Malaysia It is not entirely clear whether or not oil and an Associate Fellow at the Institute of Oceanography and Environment, University Malay- shipment using the TPP would be cheaper sia Terengganu. Rahmat Mohamad is a Professor of international law at the Faculty of Law, than going through the Straits of Malacca Universiti Teknologi Mara and Secretary-General of the New Delhi-based Asian African Legal and Singapore. Some commentators argue Consultative Organization. that voyage time and shipping costs could be shaved if oil companies opt to use the This article was specially written for RSIS Commentaries, published by the S. Rajaratnam School TPP once it is ready. Nevertheless, it should of International Studies RSIS, a graduate school of Singapore’s Nanyang Technological Univer- be borne in mind that plying through the sity and is published here by kind permission of the RSIS Commentaries Editor. Straits of Malacca and Singapore would not incur any transit fee for mariners, while

GENERAL BULLETIN 2014 VOLUME 109 #1 39

gen-01-14.indd 39 13/02/2014 12:42:30 BY MICHAEL GREY Light upon the waters What man-made object has there been down the centuries which provides incontrovertible benevolence toward mankind, without any qualifications whatever? If one had any knowledge of the sea and was asked to respond to such a question, the odds-on answer would surely be “the lighthouse”. Signposts of the sea, these aids to navigation have been around since Roman times at least, and are still useful today, even in our electronics empowered world.

his year sees the 500th anniver- ing men” to suppress these criminals and the King, soliciting his support to estab- sary of the Corporation of Trinity build and light beacons to guide mariners. lish the proposed company of mariners and House, an astonishing longevity Throughout medieval times in , the development of sea skills to compete whenT it is considered that even the most there were local associations of mariners with those exhibited abroad, the sovereign’s colossal organisations tend to rise and and sea people who were concerned with assent was forthcoming. The Corporation fall within a small fraction of this time, ship safety and pilotage along with the char- was charged with pilotage, safe navigation, victims of ineptitude, the great glitches itable provision of alms houses for those and also a charitable function for the relief of history or their technical redundancy. who had retired from seafaring and had of the poor. It is fascinating to see that these fallen on hard times. might three functions are still carried out by the Trinity House, responsible for the aids to be thought to have developed from such an successors of these marine professionals, navigation around the English and Welsh association of mariners in Deptford, on the 500 years on. coasts has lived on, through peace and wars, River Thames. revolution and amazing maritime change, Initially, the Corporation was charged with adapting and adjusting its mission, but Petitioning the King the maintenance of safe navigation in the always retaining its prime focus upon mar- By the 16th century, and early in the reign London River and its treacherous estuary itime safety. of King Henry VIII, when there was a grow- with its shifting sands, which required the ing interest in maritime commerce and sea positioning of buoys and beacons. However, It began its long life in 1514, with the grant- power, there was increasing concern at the the responsibility for these and who was to ing of a charter by Henry VIII, although 300 shortage of competent English mariners to pay for them was sometimes a matter of dis- years earlier, an Archbishop of Canterbury, serve both commerce and the King’s ships. pute and controversy, with private individ- concerned at the depredations of wreck- So when the “Masters, Rulers and Mariners uals and landowners often seeking to make ers setting false lights to lead ships to their of your Navy within your River of Thames money from the provision of these aids. doom, had established a guild of “God-fear- and other places” laid their petition before Over the years and notably from the 17th century onwards, lighthouses were estab- lished, both by Trinity House and private individuals. It was to be the 19th century before the Corporation was able to take over almost all responsibility for the provision and maintenance of lighthouses through- out England and . It is perhaps worth noting that during this time the Hanse- atic League of Baltic ports also undertook the provision of aids to navigation – mainly buoyage of port approaches within its areas of responsibility.

The provision of such seamarks is a story of its own, with astonishing heroics involved by those engineers who built the first of the offshore rock lighthouses and beacons on hazardous shoals. Employing coal fires to The world’s first rock lighthouse was built on the Eddystone. mark their presence after dark and before

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gen-01-14.indd 40 13/02/2014 12:42:32 Modern-day buoyage.

the emergence of effective lenses, oil or to provide Trinity House with a disburse- sistently available as a repository of mari- candlepower, the development of effective ment from the port levy system of “lastage” time expertise for the state and commerce lights was not surprisingly slow. And before normally added to the sum owners had to to draw upon. the arrival of mechanical power, it is worth pay for their ballast would provide funds considering the level of seamanship and from which aids to navigation could be In modern times navigation that was required to accurately maintained by the Corporation. From the middle of the last century, the place offshore buoys from the pitching Corporation, like the shipping industry decks of a sailing cutter or Trinity House Throughout the existence of the Corpora- itself, has been consistently “challenged by “yacht”, as they became known. tion the obligation to provide charity to the elderly and those sick and maimed at sea Trinity House gradually assumed responsi- has remained an important mission. The bility over the licensing of pilots in the 18th Corporation has provided alms houses and century and by the middle of the 19th cen- other forms of welfare, something that is an tury, it had become the largest single pilot- important part of its work even today. It was age authority in the United Kingdom. It was also by no means unusual for Elder Breth- to retain this responsibility until the 1987 ren themselves, who might have become Pilotage Act, which transferred this respon- wealthy through trade and commerce or sibility to Competent Harbour Authorities, success in the Navy, to endow their own leaving the Corporation with the licensing charitable organisations, such as schools of only deep sea pilots, which it carries out and hospitals. to this day. Along with their sister organisations in Paying for lights Scotland and the Republic of Ireland (the The arguments over who should have the three forming the General Lighthouse responsibilities for paying for the provision Authority), the Corporation has been at the of seamarks is as old – and probably pre- forefront of navigational developments for dates – Trinity House itself. What we have much of its long life. The world’s first rock come to refer to as “light dues” are invariably lighthouse, built on the Eddystone and first resented by those called upon to pay them, lit in 1698, was one of its more spectacular with commerce and government demanding initiatives, although its life was short, being that the other party takes the responsibility swept away with its builder Henry Win- for financing aids to navigation. stanley and its crew in a great storm in 1703.

Merchants would traditionally object to any It would be replaced by more substan- calls upon them for this purpose, although tial structures and around the coast, the paradoxically they were the beneficiaries of Corporation encouraged lighthouse engi- anything that led to safer navigation. At the neering, the design of buoys and beacons end of the 16th century, an ingenious plan and through its Elder Brethren, was con- A Trinity House pilot.

GENERAL BULLETIN 2014 VOLUME 109 #1 41

gen-01-14.indd 41 13/02/2014 12:42:39 Trinity House helicopter with The Lizard in the background. Michael Grey

change”. What might be considered rudi- buoys, has been a recent development, as has System afloat has also enabled Trinity mentary “automation”, applicable to buoys been the commissioning of a new state of House to be in a stronger position to pro- and beacons had been made possible by the art tender THV , in 2007. There vide guidance on the actual need for aids to reliable acetylene fuelled lighting machin- have been major efficiency improvements navigation and such matters as the position ery, requiring refuelling at regular intervals, in the depots ashore, with the commission- of offshore windfarms and their possible and the Corporation, with its considerable ing of a new depot and buoy-handling facil- effect on other sea users. The developments fleet of tenders, would be at the forefront ity at Harwich, from where the state of all surrounding electronic navigation – e-Nav- of technical developments that offered sub- the aids to navigation throughout the sys- igation – also see the Corporation closely stantial economies of both cost and effort. tem is monitored through the most up to engaged, as a highly active member of the date telemetry. International Association of Lighthouse The facility of helicopters was taken aboard, Authorities. with landing platforms built on many of the There is important research being under- remote rock lighthouses, thus making their taken, into more efficient systems for pow- Five centuries after it was founded, Trinity relief and maintenance more predictable. ering both buoys and lighthouses, through House is celebrating this notable anniver- Gradually the lighthouses themselves were solar and wind, with the employment of sary in a modest fashion. A comprehensive automated, as remote monitoring equip- LEDs rather than the huge optics of the history of the Corporation has been pub- ment became available, the final lighthouse past, lightweight, low-maintenance buoys lished*, while a number of events, involv- keepers of the North Foreland light leaving and navigational systems such as sequen- ing the Master, HRH The Princess Royal, their station in 1988. tial and synchronised buoys that produce are planned. The extraordinary longevity clearer channel marking. of this organisation, joining the 16th with Throughout the 1990s, with the commercial the 21st century may also perhaps empha- fleet of shipping largely employing satellite The use of the Automated Identification sise the continuing importance of the mari- navigation systems, there was increasing time sector it serves. ll pressure from owners over the cost of light dues, although the lighthouse authorities Note were to note that there were certain vulner- * Light upon the Waters by Andrew Adams abilities to GPS and indeed all systems that and Richard Woodman, ISBN 978-0- could be interrupted or “jammed”. 9575991-0-9 is published by The Corpo- ration of Trinity House, Price GBP 29.99. The Corporation, however, embarked on Details from www.trinityhouse.co.uk/ a number of efficiency reviews, looking th500/books closely at the need for its aids to navigation, developing techniques and technologies that would reduce the amount of mainte- nance required by navigational buoys and thus the demands upon the light tenders. Editor’s Note: Michael Grey is BIMCO’s Preparing for the unexpected, such as the Correspondent in London. He is a former sinking of a ship in a traffic lane, was an Editor of Lloyd’s List and a regular con- important role for the tenders and a new tributor to many maritime publications. Rapid Intervention Vessel, able to get to the site of a wreck at high speed and lay warning

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gen-01-14.indd 42 13/02/2014 13:01:57 INSTANT VALUE 35,000 THE ONLINE INDIVIDUAL VESSEL VALUATIONS VALUATION & EVERY DAY INTELLIGENCE SERVICE

BULLETIN 2014 VOLUME 109 #1 43

gen-01-14.indd 43 13/02/2014 12:42:42 New books Understanding international shipping

An essential source book for anyone trying to understand the structure and nuances of the worldwide shipping industry, Farthing on International Shipping has been greatly expanded and updated in its new fourth edition.

nitially the work of the late Bruce organisations, something that tends to Farthing, one time deputy direc- bewilder outsiders, before explaining the tor general of the UK Chamber of important interfaces of shipping, and many ShippingI (among a long list of mari- of these private bodies, with national and time posts), this World Maritime Uni- international governments. It might be versity/Springer publication is the work deplored by BIMCO members, but there of the WMU’s P.K. Mukherjee and Mark remains a certain amount of national- Brownrigg, just retired as director gen- ism and government involvement and an eral of the UK Chamber. important chapter considers the various constraints on freedom of access and other Material has also been contributed by a dis- restrictions to foreign involvement which tinguished group of experts, so this edition still exist throughout the world. might be thought of as a more collegiate effort than its earlier editions, the last of Similarly, there is an up to date assessment of which was published some 17 years ago. protectionism and its various forms, which needs to be set against the rise of liberalisa- During this interval, the maritime world tion which slowly is opening up access and has changed considerably, something that is reducing trade barriers. For those whose well reflected in the chapters on regulation, particular interest revolve around the liner competition, shipping nationalism and gov- trades, there are two comprehensive chap- ernment involvement. Nevertheless, the ters covering co-operation in liner shipping book conveys much of what is immutable through conferences, pools and consortia remarks for and against the open registers about shipping from one age to the next: its and the development of competition policy and the role of the flag state in maintaining importance to world trade, its foundations which, notably in Europe, has upset the 150 standards and regulatory control. of certain important freedoms and the web year old applecart of liner conference anti- of national and international structures in trust immunities. This too is recounted in Marine safety standards and the effective- which it carries out its everyday tasks. a chronological fashion, showing how these ness of compliance and controls are detailed policies have been developed, the senti- in a large section which explains liabilities, Best possible introduction to shipping ments behind them and their effects. navigational safety and the role of gov- The first three chapters, which introduce ernment and the International Maritime the reader to the concept of freedom in The regulation of shipping Organization. One of the more attractive international shipping, its contribution to It is important to understand how ship- features of this book, packed with facts as world trade and its separate sectors, can be ping is regulated and the roles of national it is, must be its ability to divert the reader read for pure enjoyment and contain the administration and the inter-governmen- into “debates” where the authors almost very best possible introduction to this often tal agencies are well described, with a clear invite arguments over their interpretations misunderstood but vital industry. Alone, it explanation of the responsibilities of flag of maritime issues. This in a section headed could be the ideal basic data for distribut- states, coastal states and port states and how “Maritime safety in the current milieu”, the ing to school sixth formers, perhaps sow- they all fit together around the internation- book sets out what might be regarded as a ing the seeds of interest that could attract ally trading ship. The reader is also intro- “ private sector perspective” on the need more bright young people into this fascinat- duced to what the authors describe as the to keep regulation reasonable, the evils of ing industry. “soft dimension” of human factors and the age-discrimination, the justification for vital contribution of well-trained seafarers. an international, rather than a national The authors then go on to explain some- There is a clear explanation of the nation- or regional regulatory approach and crew thing of the “alphabet soup” of shipping ality and registration of ships, objective quality matters.

44 BULLETIN 2014 VOLUME 109 #1 GENERAL

gen-01-14.indd 44 13/02/2014 13:01:58 There are up to date chapters on maritime encapsulates what might be suggested are force around the shipping industry which security, the protection of the marine envi- the things that give ship operators sleepless deserves to be widely read. ronment, the way in which the maritime nights in 2014, such as over-regulation, over- world has responded to marine pollution capacity, profitability, ethical standards. Farthing on International Shipping by and the justification for limited liabilities. Proshanto K. Mukherjee and Mark Brown- But this book is about freedom, and its rigg is a World Maritime University Study Contentious matters authors conclude that the wider embrace in Maritime Affairs and is published by The book’s concluding chapter sweeps up of free-market principles “is a trend which the WMU and Springer ISBN 978-3-642- many of these more contentious matters and gives hope for the future”. This is a tour de 34597-5 (www.springer.com) ll

Teaching the teacher to teach

All of us will hopefully remember the experience of learning from good, even inspirational, lecturers and instructors. Unfortunately, many of us will also recall the converse, remembering the struggle to stay awake and engaged as the lecturer droned on.

hile it used to be suggested Written with considerable clarity, the book that good teachers “were considers maritime education and training born and not made”, the in the context of STCW, the assessment of errorW of such a statement might appear competency and the various tools that are obvious. Practical teaching skills for available for transmitting knowledge and maritime instructors by Darrell Fisher assessing competence. The use of simula- and Peter Muirhead is, as inferred by tion, the course evaluation and the quali- its title, a highly practical guidebook fications of instructors and assessors are designed to make maritime instructors thoroughly covered. better lecturers. Chapters on course design and the selec- A World Maritime University publication, tion of appropriate learning activities offer its third edition coinciding with the insti- highly practical advice showing how the tution’s 30th birthday, the book is a neces- lecture can best be delivered once the mate- sary update encapsulating the 2010 Manila rial has been selected. There is similar prac- Amendments to the STCW Convention. tical advice on the various delivery systems While it is primarily a handbook designed that are now available, from whiteboards for instructors in maritime training institu- to powerpoint, and methods of getting the tions in developing countries in particular, best out of these. there is a great deal of sensible advice that any lecturer in pretty well any subject can Use of simulators technology head on. The book offers sound take on board. There is an important chapter on the use of advice on how this can be delivered to a sea- simulators, now being used more widely, in faring customer base and its management. Fundamental skills which the role of the instructor is reviewed. The book focuses upon fundamental teach- The ways in which the effectiveness of the The book concludes with some thought- ing and instructor skills and guidance in training can be gauged are explored, while provoking observations on the way in which meeting STCW requirements, but is also a the development of Competency Based changing technologies might impact upon basic manual to assist instructors and lec- Training and its assessment are fully cov- MET institutions, in a fast-changing world. turers in their daily teaching roles. It covers ered. The increasing importance of qual- A range of appendices provide matrices for course design, delivery methods, prepara- ity standards and their evaluation and lectures, course design examples and a list tion and the use of instructional media, the assurance represent an important STCW- of IMO model courses. evaluation of students and courses. It also related section. has some very valuable advice on the new Practical Teaching Skills for Maritime technologies of distance and eLearning and Distance learning Instructors, (third edition) by Professors how these might be usefully developed to a Of increasing relevance today is the devel- Darrell Fisher and Peter Muirhead ISBN maritime industry in which potential cli- opment of distance learning or eLearning in 978-91-977-254-7-7 is a WMU Publication ents might be spread all over the world. which educational methodologies meet new (www.wmu.se) ll

GENERAL BULLETIN 2014 VOLUME 109 #1 45

gen-01-14.indd 45 13/02/2014 13:01:59 BIMCO Chief Shipping Analyst Shipping Chief BIMCO SAND PETER DID YOU KNOW THAT... Macro Economics The full report is presented and discussed at a Members’ Only WebDialog right after publication on the BIMCO website? Fundamental changes ongoing, and a positive ! outlook materialising around the world

Global economy Trade Multipliers and the Economic Growth Generation Crude Steel Production (Mt) 2014 is off to a good start, as global economic growth is already stronger than 2010-2018F 2005-2013 consumption, while exports are the mainstay of economic growth. anticipated three months ago. At the end of January, the IMF upwardly adjusted 5 80% 140 900 its estimates for global economic development in 2013-2015. Amongst the 800 Growing exports out of the EU and trade between the European nations came 4 70% 120 countries receiving noticeable positive adjustments were the US, Japan, Spain, 700 back as a significant growth driver in 2012, but more negatives, primarily pri- 3 60% 100 UK, China and India. At the negative end of the scale, Russia, Italy, ASEAN-5 600 vate consumption, trumped it. Exports remains the primary contributor to the and Brazil are expected to perform less strongly than previously anticipated. 2 50% 80 500 European road back to recovery.

1 40% 60 400 In 2000, 80% of global economic activity took place in the “Advance 300 Moreover, private consumption ceased to be a drag on growth in 2013-Q2 0 30% 40 Economies” (US, Euro Area, Japan, UK, Canada, others), in 2008 the share was of Global GDP Share 200 following five quarters of negative contribution. In 2013-Q3 the impact was 20 down to 70% and today “only” 60% of global GDP is generated there, with 40% -1 20% 100 neutral.

generated in the “Emerging market and developing economies”. -2 10% 0 0 Volume of goods imports / GDP ratio Volume 2005 2006 2007 2008 2009 2010 2011 2012 2013 In Spain, which is one of the European nations most hurt by the financial crisis, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013E 2014F 2015F 2016F 2017F 2018F Japan India China (RH-axis) Growth in the “Advanced economies” generates higher volumes of imported Advanced economies Emerging market and developing economies the 2014 rebound is set to be a strong one. Italy is also returning from the abyss. goods per unit of GDP – and thus more trade – than growth in the “Emerging World multiplier Advanced economies (RH-axis) Source: BIMCO, World Steel Assoc. The IMF expects both nations to grow by 0.6%. market and developing economies”. This is an explanatory factor behind the Source: BIMCO, IMF Asia “new normal”, where the trade/GDP multiplier is lower (for more on this see Note: the years 2008-2010 were extraordinary in the sense of percentage World crude steel production increased 3.5% in 2013, driven forward by Asian Outlook SMO&O 2013-6). This dampening of the impact from economic growth on growth on trade. This gives an incoherent image of the trend. This is why production, where China more or less singlehandedly occupies the limelight Indicators point towards strong US growth in 2014, paced forward by a rise 2009 data is omitted from the trade multiplier graphs. demand for transport is negative. However, the fact remains that fundamental due to its sheer size. Japanese growth of 3.1% and Indian growth of 5.1% is in US house prices. The recovery in house prices, illustrated by an increase in global economic growth is positive, and is generating a larger demand for ship- dwarfed by China, which brings its total production within striking distance the S&P/Case-Shiller index of property prices of 13.7% from November 2012 ping every day, but at a slower pace than before. key conditions to follow are interest rates, unemployment rates and inflation of half the world’s production. No wonder the increasing dependency on to November 2013 (the highest level in nearly 8 years), has been instrumental rates. On 29 January 2014 the FED announced round two of the tapering mea- imported ore influenced the dry bulk market in H2-2013. behind the performance in 2013 that ended the year with the FED starting to In December 2013, the World Trade Organization (WTO) succeeded in closing sures, trimming its monthly bond purchases by another USD 10 billion to USD unwind its considerable monetary expansionary support. The IMF expects US a truly global trade deal involving 159 countries. The agreement is estimated 65 billion. Round two was decided on the back of strong private consumption As Japan seems to continue growing at 1.7% in 2014, the obstacles to GDP growth of 2.8% in 2014 and 3.0% in 2015 [2013: 1.9%]. to inject USD 960 billion into the global economy and create 21 million jobs, and reports of the US economy growing by 3.2% in Q4. “Abenomics” have also become clearer, as a full-blown miracle turn-around 18 million of them in developing nations (Peterson Institute of International might not happen just yet. Several factors come into play in Japan in 2014, all The other side of the coin to higher growth is that interest rates may be pushed Economics). The deal slashes red tape at customs around the world and gives Further tapering is likely to follow if economic health continues to improve; of which hold the potential to affect the recovery: a consumption tax hike, the up and politicians’ appetite for reforms pushed down. improved terms of trade to the poorest countries. steps that will be backtracked if the economy disappoints. energy situation post-Fukushima that has given Japan a massive trade deficit, new reforms to change the labour market, stability in politics, as well as the Higher property prices normally have quite a strong “wealth effect” on con- US The budget agreement was reached in due time to sideline the risk of another Bank of Japan’s monetary policy. sumption growth, even though findings suggest is has slowed in the wake of the On 18 December 2013, the US Central Bank (FED) announced the anticipated government shut-down – at least in the short run. That immediately affected US financial crisis. If forecasts of higher house prices in 2014 come true, this will beginning of reducing the rate of its asset purchases. From USD 85 billion to consumer confidence positively. The index stood at 80.7 at the end of January, China continues to manage its soft landing on a background of high growth. strengthen GDP growth in the US and shipping demand in general. USD 75 billion per month. This is a positive development, as it comes on the just on top of pre-government shutdown level (80.2 in Sept.). As compared to a GDP growth still slides from a high base, while the Manufacturing PMI from back of an improved economic situation in the US. However, it comes with a year ago (index at 58.4), consumers are now in better spirits, and looking more HSBC/Markit has slid back into sub-50 level for the first time in half a year. In the Eurozone the economic recovery is strengthening too. Germany deliver- warning attached from the FED: “that it [the economy] also has much further optimistically on the job market. This is why domestic private demand is one of ing the strongest output since June 2011, with employment rising during the to travel before [economic] conditions can be judged normal”. Amongst the the key drivers behind increased economic activity in the coming years. India is set to build on the recent momentum in export growth and the develop- past three month. This is supported by an optimistic first non-contraction level ment of more structural policies to support investments. This will bring around indication from the “Rest of the Eurozone” (excl. France and Germany). On GDP growth at 5.4% in 2014 and 6.4% in 2015 if the IMF scenario plays out. the more negative side, France struggles to take off, as output has fallen three month in a row now. EU The 2008 crisis ignited a double-dip recession in Europe longer than that of “The upturn in the PMI puts the region [EU] on course for a 0.4-0.5% expan- the 1930s. As we embark on 2014, Europe starts to claw back some of the lost sion of GDP in the first quarter, as a 0.6-0.7% expansion in Germany helps territory. It does so under the shadow of high public and private debt that limits offset a flat-looking picture in France”, Markit concludes. ll

Global seaborne trade is dependent on global growth, thus it is vital if general shipping demand is to go forward that a smooth transition from a sustained recovery to normalized demand become successful. The article was finalised on 7 February 2014. Read about the impact on shipping on the following pages… Source: Wulffmorgenthaler Source:

46 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK MACRO ECONOMICS

gen-01-14.indd 46 14/02/2014 08:25:38 BIMCO Chief Shipping Analyst Shipping Chief BIMCO SAND PETER DID YOU KNOW THAT... Macro Economics The full report is presented and discussed at a Members’ Only WebDialog right after publication on the BIMCO website? Fundamental changes ongoing, and a positive ! outlook materialising around the world

Global economy Trade Multipliers and the Economic Growth Generation Crude Steel Production (Mt) 2014 is off to a good start, as global economic growth is already stronger than 2010-2018F 2005-2013 consumption, while exports are the mainstay of economic growth. anticipated three months ago. At the end of January, the IMF upwardly adjusted 5 80% 140 900 its estimates for global economic development in 2013-2015. Amongst the 800 Growing exports out of the EU and trade between the European nations came 4 70% 120 countries receiving noticeable positive adjustments were the US, Japan, Spain, 700 back as a significant growth driver in 2012, but more negatives, primarily pri- 3 60% 100 UK, China and India. At the negative end of the scale, Russia, Italy, ASEAN-5 600 vate consumption, trumped it. Exports remains the primary contributor to the and Brazil are expected to perform less strongly than previously anticipated. 2 50% 80 500 European road back to recovery.

1 40% 60 400 In 2000, 80% of global economic activity took place in the “Advance 300 Moreover, private consumption ceased to be a drag on growth in 2013-Q2 0 30% 40 Economies” (US, Euro Area, Japan, UK, Canada, others), in 2008 the share was of Global GDP Share 200 following five quarters of negative contribution. In 2013-Q3 the impact was 20 down to 70% and today “only” 60% of global GDP is generated there, with 40% -1 20% 100 neutral. generated in the “Emerging market and developing economies”. -2 10% 0 0 Volume of goods imports / GDP ratio Volume 2005 2006 2007 2008 2009 2010 2011 2012 2013 In Spain, which is one of the European nations most hurt by the financial crisis, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013E 2014F 2015F 2016F 2017F 2018F Japan India China (RH-axis) Growth in the “Advanced economies” generates higher volumes of imported Advanced economies Emerging market and developing economies the 2014 rebound is set to be a strong one. Italy is also returning from the abyss. goods per unit of GDP – and thus more trade – than growth in the “Emerging World multiplier Advanced economies (RH-axis) Source: BIMCO, World Steel Assoc. The IMF expects both nations to grow by 0.6%. market and developing economies”. This is an explanatory factor behind the Source: BIMCO, IMF Asia “new normal”, where the trade/GDP multiplier is lower (for more on this see Note: the years 2008-2010 were extraordinary in the sense of percentage World crude steel production increased 3.5% in 2013, driven forward by Asian Outlook SMO&O 2013-6). This dampening of the impact from economic growth on growth on trade. This gives an incoherent image of the trend. This is why production, where China more or less singlehandedly occupies the limelight Indicators point towards strong US growth in 2014, paced forward by a rise 2009 data is omitted from the trade multiplier graphs. demand for transport is negative. However, the fact remains that fundamental due to its sheer size. Japanese growth of 3.1% and Indian growth of 5.1% is in US house prices. The recovery in house prices, illustrated by an increase in global economic growth is positive, and is generating a larger demand for ship- dwarfed by China, which brings its total production within striking distance the S&P/Case-Shiller index of property prices of 13.7% from November 2012 ping every day, but at a slower pace than before. key conditions to follow are interest rates, unemployment rates and inflation of half the world’s production. No wonder the increasing dependency on to November 2013 (the highest level in nearly 8 years), has been instrumental rates. On 29 January 2014 the FED announced round two of the tapering mea- imported ore influenced the dry bulk market in H2-2013. behind the performance in 2013 that ended the year with the FED starting to In December 2013, the World Trade Organization (WTO) succeeded in closing sures, trimming its monthly bond purchases by another USD 10 billion to USD unwind its considerable monetary expansionary support. The IMF expects US a truly global trade deal involving 159 countries. The agreement is estimated 65 billion. Round two was decided on the back of strong private consumption As Japan seems to continue growing at 1.7% in 2014, the obstacles to GDP growth of 2.8% in 2014 and 3.0% in 2015 [2013: 1.9%]. to inject USD 960 billion into the global economy and create 21 million jobs, and reports of the US economy growing by 3.2% in Q4. “Abenomics” have also become clearer, as a full-blown miracle turn-around 18 million of them in developing nations (Peterson Institute of International might not happen just yet. Several factors come into play in Japan in 2014, all The other side of the coin to higher growth is that interest rates may be pushed Economics). The deal slashes red tape at customs around the world and gives Further tapering is likely to follow if economic health continues to improve; of which hold the potential to affect the recovery: a consumption tax hike, the up and politicians’ appetite for reforms pushed down. improved terms of trade to the poorest countries. steps that will be backtracked if the economy disappoints. energy situation post-Fukushima that has given Japan a massive trade deficit, new reforms to change the labour market, stability in politics, as well as the Higher property prices normally have quite a strong “wealth effect” on con- US The budget agreement was reached in due time to sideline the risk of another Bank of Japan’s monetary policy. sumption growth, even though findings suggest is has slowed in the wake of the On 18 December 2013, the US Central Bank (FED) announced the anticipated government shut-down – at least in the short run. That immediately affected US financial crisis. If forecasts of higher house prices in 2014 come true, this will beginning of reducing the rate of its asset purchases. From USD 85 billion to consumer confidence positively. The index stood at 80.7 at the end of January, China continues to manage its soft landing on a background of high growth. strengthen GDP growth in the US and shipping demand in general. USD 75 billion per month. This is a positive development, as it comes on the just on top of pre-government shutdown level (80.2 in Sept.). As compared to a GDP growth still slides from a high base, while the Manufacturing PMI from back of an improved economic situation in the US. However, it comes with a year ago (index at 58.4), consumers are now in better spirits, and looking more HSBC/Markit has slid back into sub-50 level for the first time in half a year. In the Eurozone the economic recovery is strengthening too. Germany deliver- warning attached from the FED: “that it [the economy] also has much further optimistically on the job market. This is why domestic private demand is one of ing the strongest output since June 2011, with employment rising during the to travel before [economic] conditions can be judged normal”. Amongst the the key drivers behind increased economic activity in the coming years. India is set to build on the recent momentum in export growth and the develop- past three month. This is supported by an optimistic first non-contraction level ment of more structural policies to support investments. This will bring around indication from the “Rest of the Eurozone” (excl. France and Germany). On GDP growth at 5.4% in 2014 and 6.4% in 2015 if the IMF scenario plays out. the more negative side, France struggles to take off, as output has fallen three month in a row now. EU The 2008 crisis ignited a double-dip recession in Europe longer than that of “The upturn in the PMI puts the region [EU] on course for a 0.4-0.5% expan- the 1930s. As we embark on 2014, Europe starts to claw back some of the lost sion of GDP in the first quarter, as a 0.6-0.7% expansion in Germany helps territory. It does so under the shadow of high public and private debt that limits offset a flat-looking picture in France”, Markit concludes. ll

Global seaborne trade is dependent on global growth, thus it is vital if general shipping demand is to go forward that a smooth transition from a sustained recovery to normalized demand become successful. The article was finalised on 7 February 2014. Read about the impact on shipping on the following pages… Source: Wulffmorgenthaler Source:

THE SHIPPING MARKET OVERVIEW AND OUTLOOK MACRO ECONOMICS BULLETIN 2014 VOLUME 109 #1 47

gen-01-14.indd 47 14/02/2014 08:25:38 QUICK FACTS 7 February Dry Bulk Shipping Total fleet size (change since 1 January) DWT million: 727.798 (+0.9%) Rate indices (change since 3 December) BDI: 1091 (-42%) Reality bites as 2014 dawns, but the demand base is stronger than ever BCI: 1588 (-50%) • BPI: 1304 (-23%) BSI: 929 (-38%) • BHSI: 674 (-13%) Latest update on Baltic Indices available at www.bimco.org

Demand The arrival of January also meant that Capesize freight rates once again This is good news for a lot of owners, where their balance sheets now appear As regards the orderbook, the number of new Panamax orders has been Demand Forecast for Selected Commodities touched the ground following three extraordinary months of flying high. in much better shape. extremely slim, in 2013 accounting for just 16% of the capacity ordered. This 2013-2014 800 Q4-2013 represents the strongest quarter in demand ever, and the seasonal is a clear counterbalancing statement by the industry in response to the high 700 weakness of Q1 simply had to affect the level of freight rates negatively. fleet growth seen in that segment in the previous 15 months. Despite new 5 Year Old Secondhand Tonnage Price 600 2011-2014 orders for 197 Capesizes and 80 million DWT in total, the size of the dry bulk 55 fleet today means that the orderbook-to-fleet ratio in the Capesize segment 500 Average Time Charter Rates 2013-2014 50 and total dry bulk fleet lands at just 20.5% and 20.7% respectively. 400 45,000 45 300

40,000 Million tons 40 Dry Bulk Supply Growth 200 35,000 35 100 20% 100 30,000

USD million 0 25,000 30 80 16% Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 20,000 25 60 12% Iron ore Thermal coal Coking coal Coarse grain USD per day 15,000 20 Wheat Soya Steel products Phos rock + sulphur 40 8% 10,000 15 Source: BIMCO, SSY 5,000 20 4% Million DWT Jul. 2013 Jul. 2011 Jul. 2012 Jan. 2013 Jan. 2011 Jan. 2012 Jan. 2014 Jun. 2013 0 Jun. 2011 Jun. 2012 Oct. 2013 Oct. 2012 Oct. 2011 Feb. 2013 Feb. 2011 Feb. 2012 Apr. 2013 Sep. 2013 Sep. 2012 Apr. 2011 Sep. 2011 Apr. 2012 Dec. 2013 Dec. 2012 Dec. 2011 Nov. 2013 Nov. 2012 Nov. 2011 Mar. 2013 Mar. 2011 Mar. 2012 Aug. 2013 Aug. 2012 Aug. 2011 Growth rate p.a. Growth May . 2013 May . 2011 May . 2012 Capesize 180,000 DWT Panamax 76,000 DWT 0 0% In all the other segments volatility is more subdued, and over- and under- Jul. 2013 Handymax 56,000 DWT Handysize 32,000 DWT Jan. 2013 Feb. 2013 Mar. 2013 Apr. 2013May. 2013 Jun. 2013 Aug. 2013 Sep. 2013 Oct. 2013 Nov. 2013 Dec. 2013 Jan. 2014 shooting (up or down) seen to a lesser extent. At the end of January, Handysize -20 -4% Capesize Panamax Supramax Handysize Source: BIMCO, CRSL tonnage is still earning in excess of USD 10,000 per day on a T/C average. This

Source: BIMCO, CRSL -40 -8% is a three-year high. Supply 2011A 2012A 2013A 2014F 2015E 2016E 2017E The demolition side of shipping will be amongst the “ones to watch” in 2014. To be delivered p.a. Demolition Conversions Growth rate (RH axis) Q1 holds little room for upside, with most focus being on weather related dis- China has the biggest mouth in the dry bulk market and the Lunar New Year As the order book keeps building up and eventually brings around more new- Source: BIMCO, CRSL ruptions in e.g. Australia to intrude on normal trading as well as regulatory

during the first half of February is likely to have a softening effect on rates build tonnage to cater for demand, owners might consider taking advantage A is actual. F is forecast. E is estimate which will change if new orders are issues affecting not just Indonesian exports but Columbian coal exports and in a continuation of the recent trend. Adding to additional pressure in the of the strong demolition prices currently available to let go of less efficient placed. The supply growth for 2014-2017 contains existing orders only Indian exports/imports in general, e.g. via export duties. Handymax market is the Indonesian ban on exports of selected unprocessed ships. and is estimated under the assumptions that the scheduled deliveries fall short by 10% due to various reasons and 30% of the remaining vessels on mineral ores. In a move to secure more value from local mineral sources, order are delayed/. As demand in volumes grew by 5.4% in 2013, the fundamental market bal- Indonesia is now targeting processed nickel ore and bauxite. Indonesia is the In 2013, 22.2 million DWT was demolished, mostly in the smaller segments. ance only improved if slow steaming was applied more extensively. BIMCO world’s largest exporter of nickel ore and plays a significant part in global This was 50% below the level of 2012 but considered a strong number, one that believes that was the case, but only marginally. For 2014, an improvement bauxite exports too. is unlikely to be repeated this year. The average age of a scrapped Capesize Outlook in the market balance is clearly achievable. For it to materialise, owners and was 24, whereas the average demolished Handysize vessel was 30 years of age. As Q4-2013 was a massively strong quarter, the seasonal slowdown in Q1-2014 operators need to apply slow steaming to at least the same extent as last year. The only alternative for China, which takes the lion’s share of Indonesian is likely to weigh a bit heavier than normally on freight rates. A drop of 8.8% Only by managing the supply side carefully will higher earnings follow in exports, is the typhoon-stricken Philippines, which is currently deemed unable Going forward, try to consider this as a potential scenario: the current stock in selected commodity volumes represent a clear seasonal direction in Q1, but the wake. to meet demand. However, the lower-grade ore may also prove to be unwanted of dry bulk shipping capacity equals 728 million DWT. All ships built in 1993 if we look a bit further into the remaining three quarters, they all provide a by importers, who stocked up extensively prior to the Indonesian ban. or earlier comprise just 68 million DWT, which is less than 10%. In compari- solid rebound in demand. To sum up, our forecast for February/March: BIMCO believes that the level of son, taking out all ships beyond the average scrapping age in recent years (29 Capesize TC average rates will remain and stay around USD 4,500-10,000 per In 2013, demand for second-hand tonnage was at the highest level numbers- years), comprises just 20 million DWT. History tells us that is unlikely to hap- Chinese iron ore imports especially, but also the dry bulk market in general, is day. Panamax TC average rates will stay in the region of USD 5,000-11,000 wise since the 2008-crisis. According to VesselsValue.com, 578 sales were pen, especially in a rising market. Thus, BIMCO forecasts 14 million DWT trailing off around the Chinese New Year season. Demand will be lower than per day. For the Supramax segment, BIMCO forecasts freight rates in the concluded for a combined sales price of USD 7,386 million. This was 144 (or 1.9% of the current fleet) will be demolished in 2014. in undisrupted months and thermal coal demand begins to ease as the Winter USD 7,000-11,000 per day interval, whereas Handysize rates are expected to (33%) more than in 2012. Handysize tonnage was very popular, with 192 sales season in the northern hemisphere loses its grip. General shipping of nickel stay strong in the region of USD 7,000-9,500 per day. ll (2012: 121) with Supramax tonnage taking second place with 47% more deals The fleet grew by 40 million DWT net in 2013, equal to 5.9%. BIMCO fore- ore and bauxite will be far below normal levels because of the Indonesian sealed. The general trend was contrasted by the Capesize segment, which saw casts that 2014 holds 47 million DWT of newbuild capacity in store, which ban– this in itself represents a change in demand beyond seasonality. 13% fewer deals done in 2013. In the January market, buyers have focused will be offset by 14 million DWT, leaving the fleet to bring supply growth of Similar to the trend forecast in BIMCO Reflections 2014, demand will be their interest on Panamax tonnage – a development that has lifted the year- 4.5% around. Such a growth rate denotes an 11-year low. 2015 is already set centred on the major commodities. That trend has already affected Capesize on-year price by 50%, from USD 18 million to USD 27 million in todays’ for higher growth rates, so 2014 represents a short temporary dampening of rates in the most brutal way, as earnings have now entered into the sub-USD More shipping market analysis on www.bimco.org market. An astonishing comeback for the oversupplied Panamax segment. the high growth of the fleet. 10,000 per day zone; a decline of some 75% since early December.

48 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK DRY BULK SHIPPING

gen-01-14.indd 48 14/02/2014 08:25:39 QUICK FACTS 7 February Dry Bulk Shipping Total fleet size (change since 1 January) DWT million: 727.798 (+0.9%) Rate indices (change since 3 December) BDI: 1091 (-42%) Reality bites as 2014 dawns, but the demand base is stronger than ever BCI: 1588 (-50%) • BPI: 1304 (-23%) BSI: 929 (-38%) • BHSI: 674 (-13%) Latest update on Baltic Indices available at www.bimco.org

Demand The arrival of January also meant that Capesize freight rates once again This is good news for a lot of owners, where their balance sheets now appear As regards the orderbook, the number of new Panamax orders has been Demand Forecast for Selected Commodities touched the ground following three extraordinary months of flying high. in much better shape. extremely slim, in 2013 accounting for just 16% of the capacity ordered. This 2013-2014 800 Q4-2013 represents the strongest quarter in demand ever, and the seasonal is a clear counterbalancing statement by the industry in response to the high 700 weakness of Q1 simply had to affect the level of freight rates negatively. fleet growth seen in that segment in the previous 15 months. Despite new 5 Year Old Secondhand Tonnage Price 600 2011-2014 orders for 197 Capesizes and 80 million DWT in total, the size of the dry bulk 55 fleet today means that the orderbook-to-fleet ratio in the Capesize segment 500 Average Time Charter Rates 2013-2014 50 and total dry bulk fleet lands at just 20.5% and 20.7% respectively. 400 45,000 45 300

40,000 Million tons 40 Dry Bulk Supply Growth 200 35,000 35 100 20% 100 30,000

USD million 0 25,000 30 80 16% Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 20,000 25 60 12% Iron ore Thermal coal Coking coal Coarse grain USD per day 15,000 20 Wheat Soya Steel products Phos rock + sulphur 40 8% 10,000 15 Source: BIMCO, SSY 5,000 20 4% Million DWT Jul. 2013 Jul. 2011 Jul. 2012 Jan. 2013 Jan. 2011 Jan. 2012 Jan. 2014 Jun. 2013 0 Jun. 2011 Jun. 2012 Oct. 2013 Oct. 2012 Oct. 2011 Feb. 2013 Feb. 2011 Feb. 2012 Apr. 2013 Sep. 2013 Sep. 2012 Apr. 2011 Sep. 2011 Apr. 2012 Dec. 2013 Dec. 2012 Dec. 2011 Nov. 2013 Nov. 2012 Nov. 2011 Mar. 2013 Mar. 2011 Mar. 2012 Aug. 2013 Aug. 2012 Aug. 2011 Growth rate p.a. Growth May . 2013 May . 2011 May . 2012 Capesize 180,000 DWT Panamax 76,000 DWT 0 0% In all the other segments volatility is more subdued, and over- and under- Jul. 2013 Handymax 56,000 DWT Handysize 32,000 DWT Jan. 2013 Feb. 2013 Mar. 2013 Apr. 2013May. 2013 Jun. 2013 Aug. 2013 Sep. 2013 Oct. 2013 Nov. 2013 Dec. 2013 Jan. 2014 shooting (up or down) seen to a lesser extent. At the end of January, Handysize -20 -4% Capesize Panamax Supramax Handysize Source: BIMCO, CRSL tonnage is still earning in excess of USD 10,000 per day on a T/C average. This

Source: BIMCO, CRSL -40 -8% is a three-year high. Supply 2011A 2012A 2013A 2014F 2015E 2016E 2017E The demolition side of shipping will be amongst the “ones to watch” in 2014. To be delivered p.a. Demolition Conversions Growth rate (RH axis) Q1 holds little room for upside, with most focus being on weather related dis- China has the biggest mouth in the dry bulk market and the Lunar New Year As the order book keeps building up and eventually brings around more new- Source: BIMCO, CRSL ruptions in e.g. Australia to intrude on normal trading as well as regulatory during the first half of February is likely to have a softening effect on rates build tonnage to cater for demand, owners might consider taking advantage A is actual. F is forecast. E is estimate which will change if new orders are issues affecting not just Indonesian exports but Columbian coal exports and in a continuation of the recent trend. Adding to additional pressure in the of the strong demolition prices currently available to let go of less efficient placed. The supply growth for 2014-2017 contains existing orders only Indian exports/imports in general, e.g. via export duties. Handymax market is the Indonesian ban on exports of selected unprocessed ships. and is estimated under the assumptions that the scheduled deliveries fall short by 10% due to various reasons and 30% of the remaining vessels on mineral ores. In a move to secure more value from local mineral sources, order are delayed/postponed. As demand in volumes grew by 5.4% in 2013, the fundamental market bal- Indonesia is now targeting processed nickel ore and bauxite. Indonesia is the In 2013, 22.2 million DWT was demolished, mostly in the smaller segments. ance only improved if slow steaming was applied more extensively. BIMCO world’s largest exporter of nickel ore and plays a significant part in global This was 50% below the level of 2012 but considered a strong number, one that believes that was the case, but only marginally. For 2014, an improvement bauxite exports too. is unlikely to be repeated this year. The average age of a scrapped Capesize Outlook in the market balance is clearly achievable. For it to materialise, owners and was 24, whereas the average demolished Handysize vessel was 30 years of age. As Q4-2013 was a massively strong quarter, the seasonal slowdown in Q1-2014 operators need to apply slow steaming to at least the same extent as last year. The only alternative for China, which takes the lion’s share of Indonesian is likely to weigh a bit heavier than normally on freight rates. A drop of 8.8% Only by managing the supply side carefully will higher earnings follow in exports, is the typhoon-stricken Philippines, which is currently deemed unable Going forward, try to consider this as a potential scenario: the current stock in selected commodity volumes represent a clear seasonal direction in Q1, but the wake. to meet demand. However, the lower-grade ore may also prove to be unwanted of dry bulk shipping capacity equals 728 million DWT. All ships built in 1993 if we look a bit further into the remaining three quarters, they all provide a by importers, who stocked up extensively prior to the Indonesian ban. or earlier comprise just 68 million DWT, which is less than 10%. In compari- solid rebound in demand. To sum up, our forecast for February/March: BIMCO believes that the level of son, taking out all ships beyond the average scrapping age in recent years (29 Capesize TC average rates will remain and stay around USD 4,500-10,000 per In 2013, demand for second-hand tonnage was at the highest level numbers- years), comprises just 20 million DWT. History tells us that is unlikely to hap- Chinese iron ore imports especially, but also the dry bulk market in general, is day. Panamax TC average rates will stay in the region of USD 5,000-11,000 wise since the 2008-crisis. According to VesselsValue.com, 578 sales were pen, especially in a rising market. Thus, BIMCO forecasts 14 million DWT trailing off around the Chinese New Year season. Demand will be lower than per day. For the Supramax segment, BIMCO forecasts freight rates in the concluded for a combined sales price of USD 7,386 million. This was 144 (or 1.9% of the current fleet) will be demolished in 2014. in undisrupted months and thermal coal demand begins to ease as the Winter USD 7,000-11,000 per day interval, whereas Handysize rates are expected to (33%) more than in 2012. Handysize tonnage was very popular, with 192 sales season in the northern hemisphere loses its grip. General shipping of nickel stay strong in the region of USD 7,000-9,500 per day. ll (2012: 121) with Supramax tonnage taking second place with 47% more deals The fleet grew by 40 million DWT net in 2013, equal to 5.9%. BIMCO fore- ore and bauxite will be far below normal levels because of the Indonesian sealed. The general trend was contrasted by the Capesize segment, which saw casts that 2014 holds 47 million DWT of newbuild capacity in store, which ban– this in itself represents a change in demand beyond seasonality. 13% fewer deals done in 2013. In the January market, buyers have focused will be offset by 14 million DWT, leaving the fleet to bring supply growth of Similar to the trend forecast in BIMCO Reflections 2014, demand will be their interest on Panamax tonnage – a development that has lifted the year- 4.5% around. Such a growth rate denotes an 11-year low. 2015 is already set centred on the major commodities. That trend has already affected Capesize on-year price tag by 50%, from USD 18 million to USD 27 million in todays’ for higher growth rates, so 2014 represents a short temporary dampening of rates in the most brutal way, as earnings have now entered into the sub-USD More shipping market analysis on www.bimco.org market. An astonishing comeback for the oversupplied Panamax segment. the high growth of the fleet. 10,000 per day zone; a decline of some 75% since early December.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK DRY BULK SHIPPING BULLETIN 2014 VOLUME 109 #1 49

gen-01-14.indd 49 14/02/2014 08:25:39 QUICK FACTS 7 February Tanker Shipping Fleet sizes (change since 1 January) Crude (DWT million): 374.14 (+0.2%) Product (DWT million): 128.83 (+0.4%) Rate indices (change since 3 December) A cocktail of slow steaming, low fleet growth, long hauls and BDTI: 853 (+25%) • BCTI: 606 (+3%) demand shocks is creating a positive situation for many owners Latest update on Baltic Indices available at www.bimco.org Note: CRSL has revised the structure of the tanker fleets to accommodate the changed trends in supply and demand that the market has undergone over the last decade. This has caused a data break in August 2013. Therefore the future data cannot be directly compared to those of the past.

Demand A Winter season that turned the market upside down is soon coming In the product tanker market the December upswing was less impres- success story too. As demolition picked up in the second half of 2013, Who will come out on top? Will MR or LR be the winner? Maybe both, to an end. All eyes were on product tankers, thinking “would this be sive then the crude oil tanker market, with freight rates in the USD year-on-year fleet growth arrived at just 1.9% at the end of 2013 for the maybe neither… The jury is still out on this one, with sound arguments the beginning of something beautiful in terms of higher earnings?” No 12,000-18,000 per day region. The demand for heating oil in the north- total VLCC fleet. In H2-2013, 14 VLCCs were sold for demolition, while which could take it either way. one really paid much attention to what was already in the making in the eastern part of the US – where stocks were low – supported the markets just nine units were delivered. crude oil tanker sector before the fire that started amongst the VLCCs in January too, as the temperatures dropped sharply. According to EIA, Going forward, we expect the focus to be on charterers’ preference for spread like a wildfire to Suezmaxes and finally included Aframaxes too, heating oil is to some extent being substituted by natural gas, taking out Building on the positive trend, the pace of newbuild deliveries has been modern tonnage, with the unwritten bar set at 15 years as maximum age. with earnings achieving USD 70,000-80,000 per day. Whilst the VLCC some of the positive knock-on effect to shipping from increased heating slow in January. Total oil tanker fleet growth has been limited to just However, this is not likely to result in strong demolition activity amongst market was mostly driven forward by increased Asian/Chinese demand, demand. 0.2%. elderly tonnage. There are still charterers who hire equally qualified but the strength in the Suezmax and Aframax sector originated from North older tonnage, so you could say it is more of a two-tier market rather than Sea/Mediterranean/Black Sea. Asian demand for West African oil helped Looking a bit further, fleet growth is now picking up in both the crude oil an elimination race. buoy the market too, as it more than offset the lack of US imports from From 194 to 273 MRs on Order in Two Months and oil product tanker segments as compared to 2013. Both segments are the same region. 40 deemed to face a lower level of demolitions, while the product tanker seg- In terms of capacity, ships above the age of 15 years amount to 11.9% 35 ment is also going to see an increased amount of tonnage being delivered and 12.6% of the overall crude oil and product tanker fleet respectively. 30 throughout the year. Moreover, the idea of bringing the market back to balance in a fast- Earnings in the Tanker Segments 25 forward mode by removing these ships seems unlikely. If we focus on 2012-2014 the VLCC fleet only, an age limit of 15 years would single out 60 units 90,000 20 Product Tanker Supply Growth as “over-aged” (9%). This would bring the fleet size back to the level at 80,000 15 10 10% Number of units Summer 2011. For MR product tankers, there are 124 out of 1,064 above 70,000 10 8 8% the age of 15 (11%). 60,000 5 6 6% 0 50,000 The multi-million dollar questions is then – how can we bring back 2014– 2015– 2016– 2017– 4 4% Jul. 2014 Jul. 2015 Jul. 2016 40,000 Jul. 2017 Jan. 2014 Jan. 2015 Jan. 2016 Jan. 2017 Jun. 2014 Jun. 2015 Jun. 2016 Jun. 2017 Oct. 2014 Oct. 2015 Oct. 2016 Oct. 2017 Feb. 2014 Feb. 2015 Feb. 2016 Feb. 2017 Apr. 2014 Sep. 2014 Apr. 2015 Sep. 2015 Apr. 2016 Sep. 2016 Apr. 2017 Sep. 2017 Dec. 2014 Dec. 2015 Dec. 2016 Dec. 2017 Nov. 2014 Nov. 2015 Nov. 2016 Nov. 2017 Mar. 2014 Mar. 2015 Mar. 2016 Mar. 2017 Aug. 2014 Aug. 2015 Aug. 2016 Aug. 2017 May . 2014 May . 2015 May . 2016 May . 2017 consistently healthy rates in the freight market? By increasing demoli- USD per day 30,000 Orderbook as per February 2014 Orderbook as per December 2013 2 2% tion activity? Maybe, but slow steaming holds the key. If the VLCC fleet 20,000 Source: BIMCO, CRSL Million DWT 0 0% would continue to run at an average speed of 13 knots instead of 16 knots, 10,000 rate p.a. Growth increased demolition activity would most certainly make a difference, -2 -2% 0 because the speed effect is actually having a bigger impact on the supply Supply -4 -4% side than demolition. The trouble is that speed reduction is not perma- Jul. 2013 Oct. 2012Nov. 2012Dec. 2012Jan. 2013Feb. 2013Mar. 2013Apr. 2013May. 2013Jun. 2013 Aug. 2013Sep. 2013Oct. 2013Nov. 2013Dec. 2013Jan. 2014Feb. 2014 Several months ago, many owners expressed the view that an orderbook -6 -6% nent – demolition is. Handy MR LR2 - Clean VLCC Aframax Suezmax of around 200 MR units was still manageable for the market to absorb 2011A 2012A 2013A 2014F 2015E 2016E 2017E Source: BIMCO, CRSL while remaining in the chase for higher earnings. At the end of January, To be delivered p.a. Demolition Growth rate (RH axis) For February/March, BIMCO expects earnings for the VLCC segment the MR order book stood at 273 units, as more than 80 new orders Source: BIMCO, CRSL to settle in the region of USD 10,000-25,000 per day. Suezmax crude oil have emerged in the market since the last BIMCO SMOO from early A is actual. F is forecast. E is estimate which will change if new orders are carriers are also seen down from the recent peak to reach USD 12,000- The best of it all is that the party is still ongoing, with no sign of hang- December 2013. placed. The supply growth for 2014-2017 contains existing orders only 22,500 per day, with the Aframax crude segment to follow suit at USD overs yet at the end of January. Certainly some Q4 action is guaranteed and is estimated under the assumptions that the scheduled deliveries fall 10,000-20,000 per day. short by 10% due to various reasons and 25% of the remaining vessels on in the crude tanker sector, but Q4-2013 made us smile more than usual. BIMCO has previously stated that a massive new inflow of new orders order are delayed/postponed. Overcapacity is severe, if you look at how poorly the fleet is utilised, but may jeopardise the product tanker market on its course towards an In the product tanker segment, BIMCO expects earnings on benchmark as we have seen in dry bulk, windows of opportunity may occur even in improved fundamental balance, as fleet growth has come down signifi- Note: CRSL has revised the structure of the tanker fleets to accommodate routes for LR1s and LR2s from AG to Japan to stabilise at USD 5,000- those markets if and when the pace of new ship deliveries slows down. cantly during 2010-2013. the changed trends in supply and demand that the market has undergone 10,000 per day. The Winter season is soon over, affecting Handysize rates In Q4-2012 the VLCC and Suezmax fleets were both growing at 6%, over the last decade. This has caused a data break in August 2013. towards a level of USD 10,000-15,000 per day and MR average rates at whereas in Q4-2013, the VLCC fleet grew only by 2% and Suezmaxes With the fleet once again growing more quickly, it needs a very strong Therefore the future data cannot be directly compared to those of the USD 8,000-13,000 per day. ll past. by little more than 4%. Aframax crude oil tankers, which have been out demand side to provide the needed employment, with supply manage- of fashion for so long now, experienced negative fleet growth for the last ment in a very important supporting role. 10 months of 2013. The combination of slow steaming, low fleet growth, Outlook long hauls and demand shocks have tightened the markets, giving all Finally, we can detect a note of optimism in the crude tanker segment, The structural changes in the product tanker market still paint a pretty the aces to owners and operators, with charterers for once left with few which has been all too rare over the past couple of years. In addition to picture, with refinery expansions going on in the Middle East and Far More shipping market analysis on www.bimco.org options to secure their cargo programme requirements. a strong freight market, the demolition market has contributed to the East.

50 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK TANKER SHIPPING

gen-01-14.indd 50 14/02/2014 08:25:39 QUICK FACTS 7 February Tanker Shipping Fleet sizes (change since 1 January) Crude (DWT million): 374.14 (+0.2%) Product (DWT million): 128.83 (+0.4%) Rate indices (change since 3 December) A cocktail of slow steaming, low fleet growth, long hauls and BDTI: 853 (+25%) • BCTI: 606 (+3%) demand shocks is creating a positive situation for many owners Latest update on Baltic Indices available at www.bimco.org Note: CRSL has revised the structure of the tanker fleets to accommodate the changed trends in supply and demand that the market has undergone over the last decade. This has caused a data break in August 2013. Therefore the future data cannot be directly compared to those of the past.

Demand A Winter season that turned the market upside down is soon coming In the product tanker market the December upswing was less impres- success story too. As demolition picked up in the second half of 2013, Who will come out on top? Will MR or LR be the winner? Maybe both, to an end. All eyes were on product tankers, thinking “would this be sive then the crude oil tanker market, with freight rates in the USD year-on-year fleet growth arrived at just 1.9% at the end of 2013 for the maybe neither… The jury is still out on this one, with sound arguments the beginning of something beautiful in terms of higher earnings?” No 12,000-18,000 per day region. The demand for heating oil in the north- total VLCC fleet. In H2-2013, 14 VLCCs were sold for demolition, while which could take it either way. one really paid much attention to what was already in the making in the eastern part of the US – where stocks were low – supported the markets just nine units were delivered. crude oil tanker sector before the fire that started amongst the VLCCs in January too, as the temperatures dropped sharply. According to EIA, Going forward, we expect the focus to be on charterers’ preference for spread like a wildfire to Suezmaxes and finally included Aframaxes too, heating oil is to some extent being substituted by natural gas, taking out Building on the positive trend, the pace of newbuild deliveries has been modern tonnage, with the unwritten bar set at 15 years as maximum age. with earnings achieving USD 70,000-80,000 per day. Whilst the VLCC some of the positive knock-on effect to shipping from increased heating slow in January. Total oil tanker fleet growth has been limited to just However, this is not likely to result in strong demolition activity amongst market was mostly driven forward by increased Asian/Chinese demand, demand. 0.2%. elderly tonnage. There are still charterers who hire equally qualified but the strength in the Suezmax and Aframax sector originated from North older tonnage, so you could say it is more of a two-tier market rather than Sea/Mediterranean/Black Sea. Asian demand for West African oil helped Looking a bit further, fleet growth is now picking up in both the crude oil an elimination race. buoy the market too, as it more than offset the lack of US imports from From 194 to 273 MRs on Order in Two Months and oil product tanker segments as compared to 2013. Both segments are the same region. 40 deemed to face a lower level of demolitions, while the product tanker seg- In terms of capacity, ships above the age of 15 years amount to 11.9% 35 ment is also going to see an increased amount of tonnage being delivered and 12.6% of the overall crude oil and product tanker fleet respectively. 30 throughout the year. Moreover, the idea of bringing the market back to balance in a fast- Earnings in the Tanker Segments 25 forward mode by removing these ships seems unlikely. If we focus on 2012-2014 the VLCC fleet only, an age limit of 15 years would single out 60 units 90,000 20 Product Tanker Supply Growth as “over-aged” (9%). This would bring the fleet size back to the level at 80,000 15 10 10% Number of units Summer 2011. For MR product tankers, there are 124 out of 1,064 above 70,000 10 8 8% the age of 15 (11%). 60,000 5 6 6% 0 50,000 The multi-million dollar questions is then – how can we bring back 2014– 2015– 2016– 2017– 4 4% Jul. 2014 Jul. 2015 Jul. 2016 40,000 Jul. 2017 Jan. 2014 Jan. 2015 Jan. 2016 Jan. 2017 Jun. 2014 Jun. 2015 Jun. 2016 Jun. 2017 Oct. 2014 Oct. 2015 Oct. 2016 Oct. 2017 Feb. 2014 Feb. 2015 Feb. 2016 Feb. 2017 Apr. 2014 Sep. 2014 Apr. 2015 Sep. 2015 Apr. 2016 Sep. 2016 Apr. 2017 Sep. 2017 Dec. 2014 Dec. 2015 Dec. 2016 Dec. 2017 Nov. 2014 Nov. 2015 Nov. 2016 Nov. 2017 Mar. 2014 Mar. 2015 Mar. 2016 Mar. 2017 Aug. 2014 Aug. 2015 Aug. 2016 Aug. 2017 May . 2014 May . 2015 May . 2016 May . 2017 consistently healthy rates in the freight market? By increasing demoli- USD per day 30,000 Orderbook as per February 2014 Orderbook as per December 2013 2 2% tion activity? Maybe, but slow steaming holds the key. If the VLCC fleet 20,000 Source: BIMCO, CRSL Million DWT 0 0% would continue to run at an average speed of 13 knots instead of 16 knots, 10,000 rate p.a. Growth increased demolition activity would most certainly make a difference, -2 -2% 0 because the speed effect is actually having a bigger impact on the supply Supply -4 -4% side than demolition. The trouble is that speed reduction is not perma- Jul. 2013 Oct. 2012Nov. 2012Dec. 2012Jan. 2013Feb. 2013Mar. 2013Apr. 2013May. 2013Jun. 2013 Aug. 2013Sep. 2013Oct. 2013Nov. 2013Dec. 2013Jan. 2014Feb. 2014 Several months ago, many owners expressed the view that an orderbook -6 -6% nent – demolition is. Handy MR LR2 - Clean VLCC Aframax Suezmax of around 200 MR units was still manageable for the market to absorb 2011A 2012A 2013A 2014F 2015E 2016E 2017E Source: BIMCO, CRSL while remaining in the chase for higher earnings. At the end of January, To be delivered p.a. Demolition Growth rate (RH axis) For February/March, BIMCO expects earnings for the VLCC segment the MR order book stood at 273 units, as more than 80 new orders Source: BIMCO, CRSL to settle in the region of USD 10,000-25,000 per day. Suezmax crude oil have emerged in the market since the last BIMCO SMOO from early A is actual. F is forecast. E is estimate which will change if new orders are carriers are also seen down from the recent peak to reach USD 12,000- The best of it all is that the party is still ongoing, with no sign of hang- December 2013. placed. The supply growth for 2014-2017 contains existing orders only 22,500 per day, with the Aframax crude segment to follow suit at USD overs yet at the end of January. Certainly some Q4 action is guaranteed and is estimated under the assumptions that the scheduled deliveries fall 10,000-20,000 per day. short by 10% due to various reasons and 25% of the remaining vessels on in the crude tanker sector, but Q4-2013 made us smile more than usual. BIMCO has previously stated that a massive new inflow of new orders order are delayed/postponed. Overcapacity is severe, if you look at how poorly the fleet is utilised, but may jeopardise the product tanker market on its course towards an In the product tanker segment, BIMCO expects earnings on benchmark as we have seen in dry bulk, windows of opportunity may occur even in improved fundamental balance, as fleet growth has come down signifi- Note: CRSL has revised the structure of the tanker fleets to accommodate routes for LR1s and LR2s from AG to Japan to stabilise at USD 5,000- those markets if and when the pace of new ship deliveries slows down. cantly during 2010-2013. the changed trends in supply and demand that the market has undergone 10,000 per day. The Winter season is soon over, affecting Handysize rates In Q4-2012 the VLCC and Suezmax fleets were both growing at 6%, over the last decade. This has caused a data break in August 2013. towards a level of USD 10,000-15,000 per day and MR average rates at whereas in Q4-2013, the VLCC fleet grew only by 2% and Suezmaxes With the fleet once again growing more quickly, it needs a very strong Therefore the future data cannot be directly compared to those of the USD 8,000-13,000 per day. ll past. by little more than 4%. Aframax crude oil tankers, which have been out demand side to provide the needed employment, with supply manage- of fashion for so long now, experienced negative fleet growth for the last ment in a very important supporting role. 10 months of 2013. The combination of slow steaming, low fleet growth, Outlook long hauls and demand shocks have tightened the markets, giving all Finally, we can detect a note of optimism in the crude tanker segment, The structural changes in the product tanker market still paint a pretty the aces to owners and operators, with charterers for once left with few which has been all too rare over the past couple of years. In addition to picture, with refinery expansions going on in the Middle East and Far More shipping market analysis on www.bimco.org options to secure their cargo programme requirements. a strong freight market, the demolition market has contributed to the East.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK TANKER SHIPPING BULLETIN 2014 VOLUME 109 #1 51

gen-01-14.indd 51 14/02/2014 08:25:40 Container Shipping QUICK FACTS 7 February Total fleet size (change since 1 January) The increased demand from “Advanced economies” TEU million: 17,222.59 (+0.5%) should increase the utilisation of containerships Rate Index (change since 29 November) CCFI: 1164.88 (+9%) • SCFI: 1164.70 (+17%)

Demand On a global scale, containerised export data from CTS, shows that activity In spite of US exports being a significant contributor to US GDP growth in the This race for the bigger ship sizes is also apparent in secondhand values, where Fleet growth in December was negative, as tonnage may have been delayed a bit improved in May following a weak start to 2013. Since then, the pace has picked 4th quarter of 2013, loaded container traffic out of the US East Coast ports did the prices for tonnage seems to deviate with size. Larger tonnage appears to be back in December, pushing delivery and thus also the year of building into 2014. up, and November and December saw 5-7% growth rates from same months of not fare well in 2013. The year ended more than 3% lower than last year. Looking holding up or even increasing in value, whereas the smaller ships are experienc- December saw only four ships delivered, whereas a “flood” of 16 ships of an aver- last year. As total imports into Europe have been growing even more strongly, forward, higher economic growth in the US in 2014 should lead to more cargo ing sliding prices as reality bites. age capacity of 7,771 TEU has entered the active fleet in the first three weeks of it does explain why traceable freight rates from Shanghai to Europe went up going through the Atlantic and Gulf Coast container terminals, building further January. sharply in October and December. In the meantime, freight rates on US bound on the rising trend seen throughout 2013. To benefit from this, most terminals By mid-January, the idle fleet stood at 693,000 TEU according to Alphaliner, up boxes have been very steady, with only slight volatility until the recent upswing have invested quite strongly in the future by scaling up container handling activi- 9% from mid-November (635,000 TEU). This is below the average from recent Despite a year that saw new contracts for more the 1.8 million TEU, the order- in January. ties to meet the requirements of larger ships calling. years and will probably stay below par throughout the Chinese New Year in the book for containerships looks to be amongst the healthiest in the industry. Two first two weeks of February. Operators appear to have the upper hand in the full years are in place, but 2016 and 2017 look very slim and ready to absorb any As in the past years, demand has grown quickest on the intra-Asia trades. This Whereas European imports fell in December 2013 as compared to 2012, imports markets right now, judging by recent success in achieving higher freight rates renewed ordering spree. trend continues, despite the lowering of the IMF’s GDP-growth expectations for of loaded containers on the US West Coast were on a par. For the year as a whole, through negotiation. Emerging and developing economies. January has been slow in terms of cargo the USWC saw growth of 2%, beating annual growth in 2012 by 0.1%-points. Outlook and chartering activity, but set to return by mid-February. BIMCO expects 2014 to be a year of similar fleet growth to last year (around 6%), In order to assess the overall health of the container shipping industry, it is vital which is also expected for 2015. The industry’s ability to land the supply growth to keep one’s eyes open towards developments in the bunker fuel market. As we Size Distribution of Demolished Tonnage The US economy is the key driver for global growth in container shipping. In 2012-2013 at a “new normal” level – one that matches demand growth better – seems strong. have seen in the past many times, striking e.g. a contract of affreightment with 200,000 the Macro Economic section, it was mentioned that the US economy was going 43% 1.6 million TEU is scheduled for delivery, but BIMCO estimate the cancellations, a firm revenue stream without making sure you have hedged/fixed your bunker through a positive development. To look at bit deeper into that, traffic devel- 180,000 delays, postponements etc. still affect the “planned” arrival for the new ships. fuel costs at the same time can be extremely costly as well as an unnecessary risk opment in US ports is very interesting. The inbound loaded traffic on the US 160,000 2014 is setting out to be a year where the pace of ULCS deliveries picks up. to expose yourself to. Atlantic coast remained almost unchanged this December compared to last year. 140,000 120,000 Unfortunately, ports in the US Gulf were not so lucky. Compared to December 32% Bunker prices have been down on annual average 7% from 2012 to 2013. This 29% 30% 100,000 21% last year, the US Gulf Coast ports saw a drop in inbound loaded traffic of more 19% Container Supply Growth is something that has surely benefitted profit/loss statements across the indus- 80,000 than 5%. 1,500 12% try. On the other hand, the CCFI Composite (that includes not only spot freight 60,000 13% 10% rates but also long-term contractual rates) out of China dropped by 7% overall. 40,000 1,250 Overall, 2013 turned out to be a good year for the eastern ports of America. The 6% 4% Specifically to Europe, the composite index dropped by -11% and on the US West 20,000 8% increase in traffic to the Atlantic Coast ended a bit higher than 1% up on 2012, 3% 1,000 Coast, a marginal improvement was recorded. 0 whereas the traffic to the Gulf Coast grew by almost 6%, an overall increase of 0-999 1000-1999 2000-2999 3000-3999 4000-4999 750 6% 2012 2013 1.7% for eastern ports. 500 4% Going forward, the demand side is set for growth, with improving macroeco- Source: BIMCO, CRSL

‘000 TEU nomics in primarily the US but also in Europe. That, in combination with ongo- 250 2%

Growth rate p.a. Growth ing management of the supply side, should bring about improved freight rates US East Coast, Inbound Loaded Containers 2011-2013 Supply 0 0% on a global scale. A lot of cascading is expected too, as the “overhaul” continues 700,000 7% Panamax vessels are particularly feeling the heat in the demolition market, as -250 -2% on the main trading lanes, which will be supplemented by a similar trend on the 600,000 6% they are commercially seen as special purpose ships – maybe without a special secondary trades. 500,000 5% -500 -4% purpose once the Panama Canal expansion opens up and the beam limit in the 2011A 2012A 2013A 2014F 2015E 2016E 2017E 400,000 4% Panama Canal extends from 32 to 49 metres in 2015. The fact remains that all To be delivered p.a. Demolition Growth rate (RH axis) Once the Chinese New Year celebrations are over in mid-February, a steadier 300,000 3% “Panamax” container ships have an uncertain future. However, as long as the old period is foreseen in terms of activity. Reactivations will then start again, as 200,000 2% Source: BIMCO, CRSL TEUs locks and the new locks are working in parallel and the future pricing of transits, demand picks up. 100,000 1% as decided by the Panama Canal Authority (ACP), is still unknown, there may be A is actual. F is forecast. E is estimate which will change if new orders are 0 0% placed. The supply growth for 2014-2017 contains existing orders only more room for “Panamax” business in future than meets the eye today. On asset prices we continue to see a downward pressure on smaller units, where- -1% and is estimated under the assumptions that the scheduled deliveries fall -2% short by 10% due to various reasons and 10% of the remaining vessels on as the run towards improved economies of scale can result in higher values for -3% Average demolition age for 3,000-5000 TEU was 21 years in 2013, meaning that order are delayed/postponed. larger units. ll

April May June July March August the blowtorch was kissing steel one year earlier than in 2012. For the smaller January February October September November December 2011 2012 2013 sizes, the average scrapping age was 24. Acc. Y-o-Y growth 2012 (RH-axis) Acc. Y-o-Y growth 2013 (RH-axis) Source: BIMCO, Representative Ports of US East and Gulf Coast This publication has been prepared by BIMCO for information purposes only. It has been prepared independently, and based solely on pub- licly available information. Whilst all reasonable care has been taken to ensure that its contents are not untrue or misleading, no representa- tion is made as to its accuracy or completeness and no liability whatsoever is accepted for any loss arising from reliance on it.

52 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK CONTAINER SHIPPING

gen-01-14.indd 52 14/02/2014 08:25:40 Container Shipping QUICK FACTS 7 February Total fleet size (change since 1 January) The increased demand from “Advanced economies” TEU million: 17,222.59 (+0.5%) should increase the utilisation of containerships Rate Index (change since 29 November) CCFI: 1164.88 (+9%) • SCFI: 1164.70 (+17%)

Demand On a global scale, containerised export data from CTS, shows that activity In spite of US exports being a significant contributor to US GDP growth in the This race for the bigger ship sizes is also apparent in secondhand values, where Fleet growth in December was negative, as tonnage may have been delayed a bit improved in May following a weak start to 2013. Since then, the pace has picked 4th quarter of 2013, loaded container traffic out of the US East Coast ports did the prices for tonnage seems to deviate with size. Larger tonnage appears to be back in December, pushing delivery and thus also the year of building into 2014. up, and November and December saw 5-7% growth rates from same months of not fare well in 2013. The year ended more than 3% lower than last year. Looking holding up or even increasing in value, whereas the smaller ships are experienc- December saw only four ships delivered, whereas a “flood” of 16 ships of an aver- last year. As total imports into Europe have been growing even more strongly, forward, higher economic growth in the US in 2014 should lead to more cargo ing sliding prices as reality bites. age capacity of 7,771 TEU has entered the active fleet in the first three weeks of it does explain why traceable freight rates from Shanghai to Europe went up going through the Atlantic and Gulf Coast container terminals, building further January. sharply in October and December. In the meantime, freight rates on US bound on the rising trend seen throughout 2013. To benefit from this, most terminals By mid-January, the idle fleet stood at 693,000 TEU according to Alphaliner, up boxes have been very steady, with only slight volatility until the recent upswing have invested quite strongly in the future by scaling up container handling activi- 9% from mid-November (635,000 TEU). This is below the average from recent Despite a year that saw new contracts for more the 1.8 million TEU, the order- in January. ties to meet the requirements of larger ships calling. years and will probably stay below par throughout the Chinese New Year in the book for containerships looks to be amongst the healthiest in the industry. Two first two weeks of February. Operators appear to have the upper hand in the full years are in place, but 2016 and 2017 look very slim and ready to absorb any As in the past years, demand has grown quickest on the intra-Asia trades. This Whereas European imports fell in December 2013 as compared to 2012, imports markets right now, judging by recent success in achieving higher freight rates renewed ordering spree. trend continues, despite the lowering of the IMF’s GDP-growth expectations for of loaded containers on the US West Coast were on a par. For the year as a whole, through negotiation. Emerging and developing economies. January has been slow in terms of cargo the USWC saw growth of 2%, beating annual growth in 2012 by 0.1%-points. Outlook and chartering activity, but set to return by mid-February. BIMCO expects 2014 to be a year of similar fleet growth to last year (around 6%), In order to assess the overall health of the container shipping industry, it is vital which is also expected for 2015. The industry’s ability to land the supply growth to keep one’s eyes open towards developments in the bunker fuel market. As we Size Distribution of Demolished Tonnage The US economy is the key driver for global growth in container shipping. In 2012-2013 at a “new normal” level – one that matches demand growth better – seems strong. have seen in the past many times, striking e.g. a contract of affreightment with 200,000 the Macro Economic section, it was mentioned that the US economy was going 43% 1.6 million TEU is scheduled for delivery, but BIMCO estimate the cancellations, a firm revenue stream without making sure you have hedged/fixed your bunker through a positive development. To look at bit deeper into that, traffic devel- 180,000 delays, postponements etc. still affect the “planned” arrival for the new ships. fuel costs at the same time can be extremely costly as well as an unnecessary risk opment in US ports is very interesting. The inbound loaded traffic on the US 160,000 2014 is setting out to be a year where the pace of ULCS deliveries picks up. to expose yourself to. Atlantic coast remained almost unchanged this December compared to last year. 140,000 120,000 Unfortunately, ports in the US Gulf were not so lucky. Compared to December 32% Bunker prices have been down on annual average 7% from 2012 to 2013. This 29% 30% 100,000 21% last year, the US Gulf Coast ports saw a drop in inbound loaded traffic of more 19% Container Supply Growth is something that has surely benefitted profit/loss statements across the indus- 80,000 than 5%. 1,500 12% try. On the other hand, the CCFI Composite (that includes not only spot freight 60,000 13% 10% rates but also long-term contractual rates) out of China dropped by 7% overall. 40,000 1,250 Overall, 2013 turned out to be a good year for the eastern ports of America. The 6% 4% Specifically to Europe, the composite index dropped by -11% and on the US West 20,000 8% increase in traffic to the Atlantic Coast ended a bit higher than 1% up on 2012, 3% 1,000 Coast, a marginal improvement was recorded. 0 whereas the traffic to the Gulf Coast grew by almost 6%, an overall increase of 0-999 1000-1999 2000-2999 3000-3999 4000-4999 750 6% 2012 2013 1.7% for eastern ports. 500 4% Going forward, the demand side is set for growth, with improving macroeco- Source: BIMCO, CRSL

‘000 TEU nomics in primarily the US but also in Europe. That, in combination with ongo- 250 2%

Growth rate p.a. Growth ing management of the supply side, should bring about improved freight rates US East Coast, Inbound Loaded Containers 2011-2013 Supply 0 0% on a global scale. A lot of cascading is expected too, as the “overhaul” continues 700,000 7% Panamax vessels are particularly feeling the heat in the demolition market, as -250 -2% on the main trading lanes, which will be supplemented by a similar trend on the 600,000 6% they are commercially seen as special purpose ships – maybe without a special secondary trades. 500,000 5% -500 -4% purpose once the Panama Canal expansion opens up and the beam limit in the 2011A 2012A 2013A 2014F 2015E 2016E 2017E 400,000 4% Panama Canal extends from 32 to 49 metres in 2015. The fact remains that all To be delivered p.a. Demolition Growth rate (RH axis) Once the Chinese New Year celebrations are over in mid-February, a steadier 300,000 3% “Panamax” container ships have an uncertain future. However, as long as the old period is foreseen in terms of activity. Reactivations will then start again, as 200,000 2% Source: BIMCO, CRSL TEUs locks and the new locks are working in parallel and the future pricing of transits, demand picks up. 100,000 1% as decided by the Panama Canal Authority (ACP), is still unknown, there may be A is actual. F is forecast. E is estimate which will change if new orders are 0 0% placed. The supply growth for 2014-2017 contains existing orders only more room for “Panamax” business in future than meets the eye today. On asset prices we continue to see a downward pressure on smaller units, where- -1% and is estimated under the assumptions that the scheduled deliveries fall -2% short by 10% due to various reasons and 10% of the remaining vessels on as the run towards improved economies of scale can result in higher values for -3% Average demolition age for 3,000-5000 TEU was 21 years in 2013, meaning that order are delayed/postponed. larger units. ll

April May June July March August the blowtorch was kissing steel one year earlier than in 2012. For the smaller January February October September November December 2011 2012 2013 sizes, the average scrapping age was 24. Acc. Y-o-Y growth 2012 (RH-axis) Acc. Y-o-Y growth 2013 (RH-axis) Source: BIMCO, Representative Ports of US East and Gulf Coast This publication has been prepared by BIMCO for information purposes only. It has been prepared independently, and based solely on pub- licly available information. Whilst all reasonable care has been taken to ensure that its contents are not untrue or misleading, no representa- tion is made as to its accuracy or completeness and no liability whatsoever is accepted for any loss arising from reliance on it.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK CONTAINER SHIPPING BULLETIN 2014 VOLUME 109 #1 53

gen-01-14.indd 53 14/02/2014 08:25:41 BY SØREN WOLMAR Chemical tanker market outlook – a market at a crossroads Persistently higher market conditions again eluded ship owners in 2013. Although the demand for chemical tankers did increase, it was far from enough to create the boom times that owners had hoped for.

owever, it was enough to move the two largest chemical tanker Chemical tanker freight rates 2008-2013 operators, Stolt-Nielsen and Chemical Tanker Freight Rates 2008 - 2013 5,000 mtons Simple Chemicals Odfjell,H into black figures as they showed Source: Quincannon Associates, Inc.

a modest profit in the third quarter $110.00 of 2013 for the first time in more than four years. $100.00

$90.00 The supply of chemical tankers has levelled off for now, as relatively few new vessels were $80.00

delivered from shipyards in 2013. Under such $70.00 circumstances, even a modest amount of additional cargo volume could have altered $60.00

the supply/demand curve in owner’s favour, $50.00 but that did not happen in 2013. $40.00

During the last couple of years, cargo vol- $30.00 umes and freight rates have picked up in the second half of the year, particularly on the Pacific trade routes, but in each case, the Houston to Rotterdam Houston to Asia Rotterdam to Asia ground gained by ship owners was lost dur- ing the first half of the following year. The market has behaved somewhat similarly in 2013, although things levelled off in Decem- ble digit increases. In general, the contracts ceding a high and profitable freight market. ber. At this point in time, indications are covering sophisticated chemicals and small However, the end result could very well be that history will repeat itself and the market parcel sizes obtained the largest increases, the same. If too many ships are contracted will decline again in the first half of 2014. which is a result of the composition of the too soon, it may either prolong the still rel- chemical tanker fleet as discussed below. atively low and unprofitable market or re- At the end of 2013, average spot market create an overtonnage situation too quickly. freight rates were some 12% higher than Interest from the financial sector a year earlier. In some areas such as the What is unique from a historical perspec- The availability of so much speculative Pacific, the increase was as much as 24% tive is the interest from equity funds and capital so soon after financial institutions, and these rates are now higher than was the other financial institutions in investing in mostly banks, have lost large amounts of case prior to the 2008 crash. However, own- chemical tankers, both newbuildings and money on chemical tankers, is surpris- ers’ operating expenses, including bunkers, existing vessels. Historically, ship owners ing. However, the feeling is that ship build- have also been subject to strong increases. tend to be able to raise capital and contract ing prices will never be lower than they are Some 80% of the world’s seaborne chemi- ships only when the market is high. This has today and once cargo volumes increase cals are carried under long term contracts often resulted in an oversupply of vessels in step with the general world economy, of affreightment. When those were renego- delivered after the market again declined; such vessels will present a strong opportu- tiated for 2014, the trend was mixed with not a particularly successful model. But this nity for capital gains. Risk-willing capital results from modest discounts to up to dou- is the first time investment interest is pre- has been present in other parts of the ship-

54 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK

gen-01-14.indd 54 13/02/2014 12:42:47 ping industry for some time. However, the chemical tanker market has, until recently, been below the radar for such investors. The fact that they are now turning their interest this way could demonstrate a lack of knowl- edge of the complexities of trading chemical tankers compared to other ships.

A niche market An alternative to trading such vessels in the market would be to charter them to own- The tanker Stolt Invention. ers already in the business. The chemical tanker trade is a niche market, with a rel- atively small number of owners, and those cal feed stocks and downstream products owners are unlikely to behave like owners from the US very competitive on a world- in other shipping trades. In a larger mar- wide basis and will increase chemical cargo ket, where vessels represent easily tradable volumes. Huge chemical plant expansions assets such as the bulk carrier or product are under way in the US to take advan- tanker sectors, owners charter ships from tage of this development. This production each other without strategic considerations. will compete with the Middle East’s pro- That may not be the case in the chemical duction and have an impact on the ton/ tanker trade. Quick capital gains through mile fleet utilisation concept, as the voyage asset plays during the building period are from the US to the main market, China, is also less likely in such a small and special- twice as long as the voyage from the Ara- ised market. bian Gulf to China.

The chemical tanker market is generally in When demand for chemicals increases as balance and sudden increases in cargo vol- a result of improved worldwide economic ume have resulted in short periods of strong conditions and the voyages are longer, there rate increases. A closer look at the trade will will be a real foundation for a high chemical reveal that the market is divided into three tanker market. Such a situation could possi- segments: sophisticated vessels with stain- bly occur in 2015 or 2016. Søren Wolmar less steel tanks, medium size coated ves- sels and large simple coated vessels, mostly Regarding the second point, the CPP mar- of 45,000/50,000 DWT. The sophisticated ket, the situation is far from clear. There and prolong a relatively low market. At worst, stainless steel vessels are presently in short are far too many product carriers on order. if the increase in demand does not happen or supply, the medium size coated vessels In 2013 alone, new orders were placed for the CPP market continues to be low during are in balance and the large simple vessels almost 400 vessels. It is therefore unlikely this time frame, those vessels would send are long in supply. In addition, there is a that the CPP market will increase in the chemical freight rates down to the loss pro- huge tonnage reserve of MR product tank- next couple of years. ducing levels of 2009 through 2011. ers with chemical class. These vessels are presently trading in the clean petroleum Small changes have Timing has always been everything in the product market, but could, with some mod- major consequences shipping business. In a small niche market ifications, enter the chemical trade. The existing fleet of chemical tankers such as the chemical tanker trade, even the between 19,000 DWT and 50,000 DWT smallest changes to the supply and demand Two things needed consists of about 1,320 vessels. Those are equation can have huge consequences. ll Lifting the chemical tanker market up to the vessels relevant for the deep sea chem- a sustained level of profitability for own- ical tanker trade. About 96 of these are ers will require two things to happen; first, more than 20 years old. On the other hand, chemical cargo volumes have to increase there are about 150 vessels on order with and second, the CPP market has to increase. the yards. Many of these orders are options, Editor’s Note: Søren Wolmar is a ship The latter will remove incentives for MRs which may or may not be declared. broker and partner with Quincannon to venture into chemicals, thereby adding Associates, Inc. a New York ship bro- additional tonnage supply. If an additional wave of speculative orders ker firm specializing in the chartering of is placed with the yards, those vessels are Chemical, Gas and Product Tankers. There is no question that the abundance likely to be delivered in 2015/16. At best, of US shale gas and oil will make chemi- they would offset any increase in demand

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2014 VOLUME 109 #1 55

gen-01-14.indd 55 13/02/2014 12:42:49 The devil in the detail of time charter damages calculation This commentary on current shipping matters is supplied by Moore Stephens, the leading accountant and shipping industry adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, with 634 offices of independent member firms in over 100 countries.

he legal basis for calculating of off-hire to be deducted is frequently the Charter hire per day 60,000.00 damages for the early termina- subject of dispute. The assessment of off- Less: Off-hire at 7 days pa tion of a time charter is to mul- hire flows from a number of technical issues (7/365=1.92%) (1,150.68) tiplyT the “loss” or difference between such as whether the next survey would arise 58,849.32 the charter rate and the available mar- during the term of the charter, the age and Less: Brokerage at 5% (2,942.47) ket rate for the remainder of the charter type of the vessel and where it was built. 55,906.85 at the date of breach, by the number of These issues are usually resolved either by days remaining on the charter. reference to the vessel’s operating history or Available market to expert evidence from a shipbroker. hire per day 25,000.00 A variant to this approach arises when there Less: Off-hire at is no available market, when the actual (and Because the off-hire deduction relates to the 7 days forecast) trading results of the vessel are ship itself, the same deduction percentage pa (7/365=1.92%) (479.45) instead taken into account. is applied to both the charter rate and the 24,520.55 available market rate. Less: brokerage Calculating the loss at 3.75% (919.52) When it comes to calculating damages, Brokerage needs to be deducted from both 23,601.03 (23,601.03) however, the devil is in the detail. The the charter hire and the available market heart of the damages claim is to calcu- hire to reflect the post-brokerage amounts Net hire or loss per day USD 32,305.82 late the “loss” or net hire shortfall, which receivable by the owner. The brokerage/ is the difference between the charter hire commission percentages are set out in and the available market hire. But before the charter parties. Usually, although not Before it was recognised that interest and that can be done, both these hire figures always, the brokerage is the same for both the “time value of money” had to be taken have to be adjusted for off-hire and then the repudiated charter and the available into account, the total damages would have for brokerage. market charter. The appropriate brokerage been calculated by taking the daily net hire percentages are then deducted from their of USD 32,305.82 and multiplying it by the Off-hire needs to be taken into account for respective post off-hire charter rates. number of days from the date of the breach the periods when a vessel is unable to trade to the earliest termination date of the char- and when hire is not payable. This is usu- A logical sequence ter. Determining these start and finish ally for both planned and unplanned main- The calculation of net hire or loss follows dates can involve complex issues requir- tenance. Either may arise at specific points a logical sequence which is best illustrated ing careful legal interpretation of the facts. in time, but predicting when may be diffi- in a hypothetical example. The early ter- But, if the relevant number of days was in cult for the former and impossible for the minated charter for MV Capesize was for a fact 1,000 then, historically, the total dam- latter. The usual practice in damages calcu- daily rate of USD 60,000, which also stipu- ages would be USD 32,305.82 multiplied by lations is to make the commercially absurd lated brokerage commissions of 5%. 1,000 days, making total damages of USD assumption that off-hire will arise evenly, 32,305,820. This simplistic approach is no on a daily basis, over the period of the char- The available market rate was USD 25,000 longer acceptable. ter - for example, seven days off-hire per per day and expert broker evidence put the annum, which represents a daily deduction brokerage commission at the more usual If the damages claim proceeds to arbitra- of 1.92% (7/365). This pro rata approach is 3.75%. Off-hire was eventually agreed tion, the hearing may be held a long time fair to both parties. between the parties at the rate of seven days after the date of breach, during which time per annum. The calculation of net hire lost the owner’s losses remain unpaid. Tribu- In contrast, determining the actual amount per day would therefore be: nals recognise that interest should be paid

56 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK

gen-01-14.indd 56 13/02/2014 12:42:49 Figure 1

on these overdue amounts up to the date of the hearing or the making of the award.

More recently, attention has turned to how to deal with future net hire payable arising after arbitration up to the earliest termina- tion date of the charter. It is recognised that awarding damages for these future instal- ments in a lump sum “today” requires credit to be given to the charterer for the acceler- ated receipt of this income. In the Kildare case (Zodiac Maritime Agencies Limited and Fortescue Metals Group Limited, Neutral Citation Number 2010 EWHC 903, Comm.)

the judge arrived at an overall discount for accelerated receipt of income of 3%. This rate comprised 1.5% for a three-year yield in US Treasury Bonds and a further 1.5%, with the judge noting, “A further discount immediately prior to the earliest termina- the use of discount factors employing the must be made to reflect what I have earlier tion date, will be for an ‘odd period’ of less following formula: categorised as more catastrophic contingen- than 15 days. cies such as total loss, bankruptcy and so on.” DF = 1/(1+i)^n It should be emphasised that the Kildare In order to calculate interest on past net DF = Discount Factor, i = Interest Rate discount rate of 3% was applicable to the hire instalments accurately, a simple (expressed as a decimal) and n = Number particular circumstances concerned. The “bank account” model can be prepared of periods to be discounted (the first 15-day appropriate discount rate in other circum- on a spreadsheet which shows each 15-day instalment would mean that n would be stances has been the subject of much debate net hire instalment, on each of the dates 15/365). and will not necessarily be the same. when the instalment was due, and calcu- lating interest on each instalment to the The above formula is recommended The practical consequence of giving inter- next quarterly compounding period. The because the standard discounted cash flow est on past unpaid instalments and giv- final balance on this notional bank account formulas in Excel and financial calcula- ing credit for the accelerated receipt of hire model represents all the past instalments tors cannot usually cope with compound- instalments which are not yet due has been plus the compound interest thereon. The ing periods other than in whole numbers dealt with in recent arbitrations by calculat- interest rate itself is given by the tribunal in of years. A 15-day instalment period means ing two separate amounts either side of the each case but has been of the order of 5% 24.333 instalments in each year. Each future arbitration, as illustrated in Figure 1. compounded quarterly or US LIBOR plus a net hire instalment is multiplied by its cor- margin of 2.5%. responding discount factor. These “dis- Past net hire instalments are rolled up counted” amounts are then totalled to with interest (positive interest “blue+” cash Discounting future net hire instalments arrive at the present value of all future net flows) into a capital sum to the date of the is achieved by applying Discounted Cash hire instalments at the chosen discount rate. hearing. Similarly, future net hire instal- Flow techniques to remove the inherent This figure when added to the total of the ments are “discounted” (negative interest interest in future cash flows. The princi- compounded past instalments equals the red “cash-“ flows) to remove the inherent ple underlying these techniques is that one total damages. interest in receiving future net hire instal- dollar today is worth more than a dollar in ments early. The totals arrived at by respec- a year’s time because of the interest which Inevitably, the complex process of finalis- tively adding and removing interest either could be earned during the year. For exam- ing a time charter damages claim means side of the arbitration are added together to ple if one could earn 10% in a bank deposit that the model will need to be amended for calculate the total damages. account, then USD 100 in one year’s time is changes in assumptions. It will save consid- worth USD 90.91 today. erable time if all the key assumptions, such The first step is to calculate the cash flows as off-hire, interest and discount rates are set on which the interest or discount will oper- It should be noted that, with time charter out in a separate “assumptions grid” with ate. For example, the standard NYPE char- damages, because the instalments under the all calculation formulae linked to the rel- ter party provides for hire to be paid in charter party are payable in advance, the first evant cells in the grid. It is also quite likely advance every 15 days. Accordingly, in instalment is not discounted because it is that the tribunal will make its award specific the MV Capesize example, the individual receivable ‘now’ and not in fifteen days’ time. to a date which is not the same as that which cash flows will be USD 32,305.82 per day has been assumed in the original claim. The x 15 days = USD 484,587.30 for each cash Giving credit for accelerated receipt of use of a spreadsheet to handle each aspect of flow. Other than by co-incidence, the dam- income is achieved by calculating the the damages calculation and to afford the ages period will not be exactly divisible by after-discount present value of the future flexibility to swiftly incorporate subsequent 15 days. Accordingly, the final instalment, net hire instalments. This is achieved by changes is therefore essential. ll

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2014 VOLUME 109 #1 57

gen-01-14.indd 57 14/02/2014 08:32:20 Moore Stephens says 2015 should see return of healthy shipping industry

International accountant and shipping adviser Moore Stephens believes that the shipping industry’s fortunes should be noticeably improved by 2015 if it maintains the recovery which got under way last year. But it warns that the prospects for recovery may still be fragile if the industry fails to meet a number of challenges, including tighter regulation and increased operating costs.

oore Stephens shipping part- invested in shipping than for some time, tal regulation is self-perpetuating, witness ner Richard Greiner says although not necessarily by dentists. Sup- the news that IMO is to debate plans for “New Year resolutions are ply and demand levels should come closer ship owners to compile fuel-consumption Minvariably a case of in one year and into alignment. Consequently, freight rates data to support steps to create carbon diox- out the other. Generally speaking, it is are likely to rise and, with them, vessel val- ide reduction regulations.” wise not to make resolutions which are ues. Increased levels of demolition will be too ambitious; American troubadour required to offset new tonnage. “It is to be hoped, however, that the industry Woody Guthrie had the right idea when can sustain the upturn which began in 2013. he settled for, ‘Wash teeth, if any’. But China is already offering subsidies to ship- If it can, we may see a return to rude health the shipping industry can afford to be a ping companies to scrap vessels before their by 2015 although, as John Maynard Keynes little more bullish than previously in its operational expiry date and to replace them warned, ‘The market can stay irrational for aspirations for 2014.” with new ships which are eco-friendly and longer than you can stay solvent’.” ll which fly the Chinese flag. So everybody is “Shipping is in a different space to that happy – owners, shipyards, environmen- which it occupied a year ago. Confidence talists (except those worried about the per- rose to a three-year high over the course of ceived evils of irresponsible recycling) and 2013. Good things are predicted for freight politicians alike.” Editor’s Note: Moore Stephens LLP is rates in 2014, more companies are starting noted for a number of industry special- to consider new investment, and economic Indicators somewhat fragile isations and is widely acknowledged and political issues with the potential to Greiner warns, however, that all the posi- as a leading shipping and insurance hurt shipping are deemed less severe than tive indicators remain somewhat fragile. adviser. The company is a member twelve months previously.” Furthermore, he says, “Operating costs are firm of Moore Stephens International expected to go up in 2014. Shipping cannot Limited, one of the world’s leading More shipping money operate without fuel and skilled manpower. accounting and consulting associations, “Over the next twelve months, we can with 634 offices of independent mem- expect to see more shipping money raised Meanwhile, increased regulation of crew ber firms in over 100 countries. in the public and private equity markets. welfare, fuel quality and ballast water man- We may see more non-shipping money agement are big-ticket items. Environmen-

58 BULLETIN 2014 VOLUME 109 #1 THE SHIPPING MARKET OVERVIEW AND OUTLOOK

gen-01-14.indd 58 13/02/2014 12:42:50 Oil-Future-Based Prices

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gen-01-14.indd 59 13/02/2014 12:42:50 Ongoing Chinese shipping issues

BIMCO welcomes China’s clarification As the new policy created economic rip- and the second will be released when the of new VAT policy ples internationally, BIMCO intervened by newbuilding is completed. In other words, By the end of December 2013, the Chinese sending an official letter to the Chinese reg- a premium of RMB 750 per GRT (ca. USD regulatory authorities had issued a new cir- ulatory authorities on behalf of the interna- 124 per GRT) will be provided to Chinese cular (Caishui 2013 No. 106) exempting tional shipping industry. Thanks to other ship owners who send their Chinese flagged international shipping from their recently major contributors such as FMC from the vessel(s) to be recycled locally, and the rest implemented VAT law, which of course was US and ESCA, the Chinese ultimately of 750 RMB per GRT will be released when very much welcomed by the international agreed to make the positive changes which their newbuilding(s) (Chinese flagged) is/ shipping community. are now in effect. are carried out in China. This part is only applicable if the ship owner has scrapped a As per the circular, the “net basis method” Long-awaited China ship recycling similar or bigger sized vessel over the same is restored, whilst international shipping subsidy in place time period at a domestic recycling yard. companies are eligible for zero rate VAT. Last December, the Chinese government All foreign shipping companies are allowed issued a long-expected ship recycling sub- The immediate beneficiary of the above to collect their ocean freight either through sidy plan which granted 1,500 Yuan (ca. USD subsidies will be the leading state-owned their wholly-owned subsidiaries or via third 247) per gross ton to Chinese shipping com- shipping conglomerates. According to party agents. In addition, the deduction of panies to replace obsolete ships. This subsidy some sources, there are roughly 3,600 ships international freight is also permitted from policy is widely understood as a compro- flagged with five star flags (both domes- their taxable income. Most importantly, mise between the Chinese shipping indus- tic and international) which represents 6% Circular 106 has a retroactive effect back try and the Chinese shipbuilding industry, of the overall Chinese-controlled tonnage. to 1 August 2013 (when the VAT law came which the state needs to look after. This sub- In addition, about 500 elderly ships in the into force) and this timely adjustment will sidy plan applies to all single-hulled tankers Chinese market are eligible for this subsidy. ensure foreign shipping companies and or scrap-worthy ships from 2013 to 2015 in Lastly, COSCO and China Shipping Group their Chinese peers a level-playing field. China with the following conditions: are said to be the biggest winners from this • All ship ownership certificates, registry subsidy policy. COSCO is likely to get RMB The debate began on 1 August 2013, when certificates as well as the survey certifi- 700 million whilst China Shipping is to get the Chinese “new” tax policy came into cate must be obtained and remain valid RMB 500 million. force throughout the nation in accordance prior to 31 December 2012; with Tax Circular Caishui No.37, which • Valid license must be obtained for Ripple effect on P3 Alliance in China triggered a wide range of reaction from domestic coastal transportation or Highly volatile freight rates have been a sig- the international shipping sector. The new international shipping; nificantly driver for liners to adapt, includ- tax system updated much of the old Busi- • Single-hulled tanker no less than 600 ing methods to share existing resources and ness Tax (BT) and replaced it with a Value DWT, and other type ships no less than how best to restructure. The P3 Alliance Added Tax (VAT) on goods and services, 1,000 DWT; (Maersk Line, Mediterranean Shipping Co. including transportation and logistics ser- • All ships to be scrapped 1-10 years and CMA CGM) is one of the recent out- vices whereby VAT of 6% is applicable to ahead of their compulsory demolition comes. customers for all charges related to domes- deadline and also in accordance with tic shipping, logistics and freight forward- domestic shipping regulation; At first, the China Shipowners’ Association ing and related services in China. In other • All ships must be scrapped at Chinese (CSOA) voiced their “expressed worries” words, a 6% VAT plus a 0.8% VAT surcharge scrapyards approved by the ministry of about the P3 Alliance by suggesting that its will be charged on ocean freight collected transportation. massive scale could create unfair competi- from customers in China by the agencies of This subsidy has two phases. The first part tion in the container shipping market. How- foreign shipping companies. of the subsidy will be given after scrapping ever, shortly after an in-house meeting with

60 BULLETIN 2014 VOLUME 109 #1 ROUND-UP

gen-01-14.indd 60 13/02/2014 12:42:51 Ongoing Chinese shipping issues

China, the EU and US regulators in Wash- yards will, meanwhile, decrease dramati- Shanghai wins laurels for container ington, CSOA changed their tune slightly. cally from 150 today to just 19 in 2018. throughput in 2013 Recently, CSOA indicated that they would Shanghai has retained its title as the world’s support the Alliance provided it complied According to the China Association of the busiest container port in 2013, with a total with market rules. In other words, if P3 is National Shipbuilding Industry (CANSI), throughput of 33.6 million TEU, up 3.4% merely trying to reduce operational costs the surplus shipbuilding capacity in China from 32.5 million TEU in 2012. The port without interfering with competition in the will take at least five years to be digested, city has been the world’s largest container marketplace, CSOA will not oppose it. pointing to a gloomy outlook in 2014. And port since 2010, when volumes surpassed the irrational expansion of shipbuilding those of Singapore, its closest rival. Last However, the China Shippers’ Association capacity and production lines has severely October, Shanghai opened a two-way traf- (CSA) still holds a negative attitude. CSA hurt profitability in the sector. fic lane in the main channel of Yangshan has raised its concerns with the State Devel- Deepwater Port. Shanghai is also accelerat- opment and Reform Commission, the Min- China currently has in excess of 1,600 ship- ing the implementation of shipping-related istry of Transportation and the Ministry of building enterprises, which boast an annual policies under the new pilot free trade zone Commerce and requested them to block the industrial output of some RMB 800 bil- and contemplating the launch of the trading Alliance in accordance to China’s anti-trust lion (USD 130.6 billion) and a workforce of of freight index derivatives. law. CSA insists that its sheer size would give around 1.5 million people, according to the the P3 Alliance the capability of dictating the National Development and Reform Com- Baltic Exchange takes Chinaa factor direction of the freight market, and therefore mission (NDRC). Some experts point out into account they have urged the regulators to think long that even though China gained more orders The Baltic Exchange has launched three and hard before giving their approval. than Japan and South Korea in 2013, new new Capesize routes focused on the Chi- ship prices kept touching new lows during nese market, which are designed to catch up Chinese shipbuilding overcapacity the past two years, and there were no signs with the changing dry bulk market reality, A recent report issued by DVB Bank warned of recovery whatsoever. in particular, China’s demand for iron ore that 25% of China’s nominal shipbuilding and coal. The C14 route is a round voyage capacity was expected to disappear over Third Chinese shipbreaker aligned from Qinqdao via Brazil, with redelivery the next 24 months. Small privately-owned with Hong Kong Convention in China-Japan. The C15 route is 150,000 yards are expected to bear the brunt, with Class NK issued a Statement of Compli- tonnes of coal shipped from Richard’s Bay almost 75% of capacity to disappear. ance to Jiangsu Changrong Steel, who to Quangzhou. The C16 route has delivery became the fourth ship recycling facility in North China-South Japan range, for a trip The report expects to see a further 10% of the world certified in accordance with the via Australia or Indonesia or US West Coast capacity facing tremendous pressure, with Hong Kong Convention. This new facility or South Africa or Brazil, redelivery UK- survival dependent on market conditions is located at Yangtze River of Jiangsu Prov- Continent-Mediterranean within the Skaw- and government policies. Traditionally, ince. Class NK auditors concluded that Passero range. ll (ZW) small Chinese shipyards count more on Changrong was compliant with safe and bulk carriers, which are at risk. The small environmentally sound facility require- private yards are trying to move into niche ments as well as the Ship Recycling Facility markets for gas carriers and offshore supply Plan (SRFP) set by the Hong Kong Con- vessels. By 2018, 30 state-owned yards will vention. The other four certified ship- Editor’s Note: This report has been pro- have increased their share of total capac- breakers are China’s Jiangmen Zhongxin duced in co-operation with Seatrade ity to 52% from 39%, according to figures Shipbreaking & Steel, Dalian Shipbuilding Asia. from DVB Shipping Research and Clark- Industry Marine Service and Japan’s Miy- sons. The number of small privately owned aji Salvage.

ROUND-UP BULLETIN 2014 VOLUME 109 #1 61

gen-01-14.indd 61 13/02/2014 12:42:52 No lack of challenges in Asia at the start of 2014

Daunting challenges abound but they cannot smother a sense of guarded optimism in Asia as the New Year began. The issues being addressed range from market conditions to safety of navigation and in between, taxes, tolls, pipelines and fuel are all on the radar.

A bump in the night Market forces economies in Asia. However, overall freight On the operational side, concerns raised by Turning to the market, in Bangkok, the rates in the market continue to suffer from Indonesia, Malaysia and Singapore regard- Asian Shipowners’ Forum (ASF)’s Ship- the pressure of cascading larger capacity ing the consequences that can result from ping Economics Review Committee (SERC) and employment of previously idle capac- a lack of adherence to COLREGS amongst reviewed the prospects near year-end. ity from third party owners. Under these vessels transiting the Straits of Malacca and circumstances, the SERC discussed the Singapore became apparent in the darkness As the discussion turned to the world importance of the players in the market at 20:24 hrs. on 28 December 2013 when a economy, the committee members noted independently studying possible measures 205,000 cbm LNG tanker collided with a that the US economy is on a steady track to for surviving the situation, such as some 10,114 TEU container ship in the Singapore recovery due to the continuation of quan- possible cost-cutting measures adopted in Straits. Fortunately there were no injuries titative easing and the so-called shale gas deep-sea trades including, where legally or environmental damage. While we await revolution. However, there is the deli- permissible, the sharing of vessel space and the findings of the investigation, it is safe to cate issue of what will happen after taper- assets, and slow steaming. say that adherence to COLREGS could have ing. In addition to having a direct impact helped to prevent the incident. on the US economy, tapering would trig- The SERC then focused on anti-trust ger a withdrawal of money from emerging immunity, and recent developments in a On the bright side, the three Littoral States countries and a subsequent slowdown in number of jurisdictions were reported. have agreed to publish a “Safe Passage” pam- their economies, which will affect the US The meeting reconfirmed the ASF’s long- phlet for ships transiting the Straits. The economy negatively. standing policy that the anti-trust immu- pamphlet will be a timely reminder of the nity system for all types of cooperative need to adhere to COLREGS and in addi- The SERC, turning its attention to Asia, liner shipping agreements was absolutely tion, it covers various unique navigational noted that the economies in the Asian indispensable for the shipping industry characteristics of navigation in this area. countries have remained stable compared and the whole trading industry. The official launch of the pamphlet, which to the US and Europe. Although China is no is the outcome of work conducted by a cor- longer achieving the double-digit growth it Tolls and taxes respondence group headed by Singapore and enjoyed previously, it continues to main- Two remaining issues of significance were BIMCO in the Co-operative Mechanism tain a high level of growth in the range of also addressed by the SERC. Regarding process, is scheduled for May 2014. 7-8%. India and the ASEAN countries are increases in the Panama Canal tolls, the also performing at 5-6%. The SERC con- committee agreed that the ASF, in col- A new pipeline? cluded that while the global economy still laboration with international shipping Another development that could influence faces uncertain factors, there is a steady organisations and respective ASF mem- traffic in the Straits is discussion of a pipe- trend toward recovery. The situation can ber associations, through their own gov- line across Malaysia known as the TRANS be described as a continuing process of trial ernments, would urge the Panama Canal Peninsular Pipeline Project. Should this and error in pursuit of stable growth. Authority to listen sincerely to users’ voices plan reach fruition, some reduction in the and establish a new user-friendly toll struc- Strait’s traffic would result. A related arti- Turning to intra-Asia trade, the SERC noted ture and rates. Turning to the Philippines cle appearing in this Bulletin describes the that the market continued to grow steadily Common Carrier Tax (CCT), it was noted project in more detail. due to the continuous development of major that some shipping bodies have made

62 BULLETIN 2014 VOLUME 109 #1 ROUND-UP

gen-01-14.indd 62 13/02/2014 12:42:53 Image by Craig Mayhew and Robert Simmon, NASA GSFC

efforts seeking the abolishment of the CCT, which imposes a 3% tax (CCT) on only for- eign carriers’ freight revenue generated from outbound services from The Philip- pines. It was agreed that SERC members should request respective ship owners’ asso- ciations to urge their own governments to lobby The Philippine Government towards the abolishment of the CCT.

The view from Singapore One of many bunker barges operating in the vicinity of The SERC’s guarded optimism was echoed the Singapore Straits. (Photo: Thomas Timlen) in a speech made by Singapore’s Minister for Transport, Mr. Lui Tuck Yew, at a Singapore an increase of 3.2% from 2012. Singapore Enterprise Pte. Ltd. and Lian Hoe Leong & Maritime Foundation gathering in January. also remained the world’s top bunkering Brothers Pte. Ltd. will no longer be allowed port with more than 42 million tonnes in to operate as bunker suppliers in the Port Recalling that 2013 was another challeng- total bunker sales in 2013. of Singapore. ing year for the industry, Lui noted that the global economy is slowly showing signs of Bunker quality Investigations against the companies that recovery, largely driven by growth in Asia regulation enforcement used the Bunker Delivery Notes of the and other emerging markets, which has led Regarding bunker sales, Singapore again two companies are ongoing to determine many in the shipping world to adopt a cau- took decisive steps to ensure compliance whether they have also flouted the Mari- tious outlook for 2014. He also acknowl- with operating requirements. The Maritime time and Port Authority of Singapore (Port) edged that shipping companies will still and Port Authority of Singapore (MPA) Regulations for operating as bunker suppli- need to continue repositioning themselves to cancelled the bunker supplier licences of ers without any bunkering licences issued stay competitive, and closely manage costs, Excel Petroleum Enterprise Pte. Ltd. and by the MPA. excess tonnage, manpower constraints and Lian Hoe Leong & Brothers Pte. Ltd. with higher environmental standards. effect from 15 January 2014 for contraven- All bunker suppliers operating in the Port ing the terms and conditions of the bunker- of Singapore are required to be licensed by Despite the challenges, however, the Min- ing licences. MPA. The MPA has taken steps to assist ister reported that Singapore has remained bunker buyers in making informed deci- resilient and registered good growth. Esti- Both companies were found to have sions as they select licensed bunker sup- mates show that Singapore’s container breached Clause 3 of the terms and con- pliers for bunkering. Bunker buyers are throughput for 2013 grew by 2.9% to reach ditions of the Bunkering Licence (Bunker strongly encouraged to ensure that the another record high of 32.6 million TEUs. Supplier) by allowing other companies to physical bunker supplier is listed on the list Singapore maintained its position as one use their Bunker Delivery Notes to sup- of accredited bunker suppliers. These lists of the world’s busiest port by vessel arrival ply bunkers. With the cancellation of their are available to BIMCO members via the tonnage with 2.33 billion gross tons (GT), bunker supplier licences, Excel Petroleum BIMCO Website. (TT) ll

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gen-01-14.indd 63 13/02/2014 12:42:59 Ongoing EU shipping issues

EU MRV legislation proposal – is understood that the Greek Presidency is on 10 January. More precisely, the EU will latest developments in no hurry to close the issue during their not pursue new nuclear-related sanctions The Commission’s proposal for a Regula- Presidency in the first half of 2014. and suspend the following sanctions: tion on the monitoring, reporting and veri- • The prohibition on the import, pur- fication (MRV) of carbon dioxide emissions Reportedly, the majority of member states chase or transport of Iranian petro-

from maritime transport has been the sub- in Council are against the inclusion of NOx chemical products. The suspension will ject of fierce debate in the European Parlia- and against lowering the threshold to 400 also cover the provision of all related ment (EP) over the last few months. GT. The Commission is of the same view. services such as financing, financial Member states are also keeping a close eye assistance, insurance and reinsurance, The members of the EP generally supported on the ongoing discussions in the Interna- including for third states. the concept of the Commission’s proposal, tional Maritime Organization (IMO) on • The prohibition on trade in gold and

but were divided on widening the scope possible international rules for a CO2 MRV precious metals with the government of

to cover NOx emissions and to lower the scheme. Compatibility of the EU MRV and Iran, its public bodies and the Central threshold from 5,000 GT to 400 GT. Other the IMO scheme is generally considered Bank of Iran, or persons and entities topics of debate included the key issue of the highly desirable, if not essential. acting on their behalf. The suspension monitoring of transport data and the emis- will also cover related services such as sions monitoring method. BIMCO has been STCW recognition transportation. very much against collecting this opera- Following the meeting of 22 November • The prohibition on the provision of tional data, as such data is only related to 2013 of the Committee on Safe Seas and the insurance and transport in relation to past commercial utilisation of ships and prevention of pollution (COSS) the Com- Iranian crude oil. This suspension will thus serves no purpose for assessing ship’s mission concluded, following inspections allow the provision of transportation future performance capacity and may, in carried out by EMSA, that maritime train- and insurance services to third states addition, be commercially sensitive. ing facilities in Cuba continue to meet the importing Iranian oil. requirements set out in the STCW conven- On 30 January the Parliament’s Environ- tion and therefore its seafarers continue to Furthermore, the EU will facilitate finan- ment Committee (ENVI) which is lead- meet the standards required to work on cial transfers for non-sanctioned trade, ing on this issue, finalised its position. The board ships flagged in EU member states. including for humanitarian purposes, such majority of the Committee voted in favour Hence, recognition was extended. as food and medicines, by increasing ten-

of inclusion of NOx and extending the scope fold all the EU authorisation thresholds. to 400 GT. On the positive side, MEPs voted The case of The Philippines is still pending. in favour of a reduction of transport moni- Member states are scheduled to discuss the The new provisions are directly applicable toring data in order to avoid that shipping subject at the next COSS meeting in Febru- in all EU member states and can be accessed companies having to publish business- ary. It is understood that the last inspections via the following link: http://eur-lex.europa. sensitive cargo data. The rapporteur, Mr. carried out by EMSA have not produced eu/LexUriServ/LexUriServ.do?uri=OJ:L:201 Skylakakis (Greek, Liberal Party), was man- sufficient proof of progress to recommend 4:015:0018:0021:EN:PDF dated to enter into negotiations with the renewal of recognition of The Philippines’ Council. The vote in the EP plenary meet- system due to huge differences pertaining EU clean air package proposal ing is provisionally scheduled for 14 April. in standards among schools. Reportedly, no On 18 December 2013, the European Com- decision has been tabled for adoption as yet. mission adopted a clean air package, aiming The legislative process is under considerable at ensuring full compliance with existing time pressure because of the Parliaments Sanctions on Iran partially suspended air quality legislation by 2020 and making elections in May 2014. If no agreement in On 21 January 2014, EU member states further significant reductions by 2030. first reading is reached between the EP decided to suspend for at least six months a and the Council (member states) before number of EU sanctions applicable to Iran, Although not specific to shipping, the Clean May 2014, work may have to begin again following an international agreement with Air package contains elements that might from scratch under the next legislature. It Tehran on its nuclear programme, reached impact on the maritime transport indus-

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gen-01-14.indd 64 13/02/2014 12:43:01 try. Through the revision of the National Emission Ceilings Directive (NECD), the The exhaust plume of a cargo ship sailing on the sea Commission is attempting to incentivize

reduction of NOx and SOx emissions, as well as the emission of particulate matters from shipping. The Directive had hitherto estab- lished a national ceiling for emissions at national level.

Under the revised Directive, member states will be allowed to use reductions of shipping emissions that occur in the member states’ territorial seas, exclusive economic zones or in pollution control zones to offset emis- sions of emissions from land-based sources. Under the conditions defined in Article 5 of the proposed legislative text, this may take place where the emissions for 2025 cannot Diagram: Cornell University College of Engineering be limited in accordance with the national emission reduction commitments applica- ble from 2030. regional co-operation framework for the working optimally everywhere in the EU With the accompanying Communica- identification, monitoring and combat of and that the Commission’s proposal pro- tion, the Commission refers to the fact such species. Ballast water is identified as vides the correct legal basis to address some that, considering the international charac- an important pathway, which may require of the problems. ter of shipping and Europe’s dependence on priority action. However, the Commission it, preference must always be given to pol- proposal explicitly refers to the IMO Ballast This remarkable step on the part of port icy development at the international level Water Convention and does not propose – users should be seen against the back-

(IMO), such as the designation of NOx at this moment in time – any action that ground of earlier failed attempts to lib-

Emission Control Areas (NECAs) and SOx would go over and beyond the provisions eralise port services, including cargo Emission Control Areas (SECAs) already of the BWC. Member states would have to handling, when port workers marched on agreed by the IMO. With Article 12 of the report periodically on progress made with Brussels in protest. Port users had already proposed legislative text, the Commission the implementation of the Convention. The been disappointed by the fact that the new stresses the need for co-ordination with position of the EP is not defined as yet. Commission proposal did not include cargo international organisation (such as IMO) handling. A further weakening of the pro- including through the exchange of techni- EU ports policy – posal would allegedly reduce it to an empty cal and scientific information for improv- latest developments shell. (MLU) ll ing emission reductions. On 21 January the European port user com- munity (ship owners, freight forwarders, EU developments on brokers, cargo owners) issued a joint open invasive alien species letter asking members of the EP not to vote Editor’s Note: This report has been On 13 December 2013, the Council had an for amendments that would weaken any produced in co-operation with the orientation debate on the Commission pro- further the Commission proposal to liber- European Community Shipowners’ posal for a Regulation on the prevention alise market access to port services and to Associations (ECSA). and management of invasive alien species. increase financial transparency of ports. This horizontal proposal seeks to set up a The port users argued that ports are not

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gen-01-14.indd 65 13/02/2014 12:43:04 Ongoing US shipping issues

BIMCO President visits that particular vessel. However, the US This is a highly unsatisfactory situation Washington DC Environmental Protection Agency (EPA) for ship owners and it creates a number of Even though a snow storm hampered prog- has stated that while it will take a USCG concerns: ress during BIMCO President John Den- extension into account, it will “not be • Ship owners may be subject to citizen holm’s visit to Washington DC 21-22 legally bound” by it. This results in a situa- suits. January 2014, a string of fruitful meetings tion where a ship is compliant with the pro- • EPA can change this policy at any time still took place. BIMCO was well received visions of the USCG regulations but would presumably without prior notice or and met with the US Coast Guard (USCG), not be compliant with the EPA Vessel Gen- providing the ability of the regulated The Cotton Club (Group of diplomats cov- eral Permit (VGP). community to comment or otherwise ering shipping policy), Department of Jus- impact EPA’s decision to modify or can- tice and staff in Congress. On 27 December 2013, the EPA Assistant cel this policy. Administrator for Enforcement and Com- • At least two terms (noted above) negate A number of issues were touched upon, pliance Assurance issued an enforcement application of this policy to certain sit- such as piracy, the availability of low sul- policy letter addressing the conundrum uations. At the very least, EPA needs

phur fuels in 2020, future NOx rules and summarized above. The memorandum to define what is meant by these terms many more. But the hot issues right now in indicates that EPA will “consider” a USCG e.g. “grossly excessive ballast water dis- the US impacting shipping are greenhouse granted extension when (1) a vessel has charges” and “those that present an gas (GHG) monitoring/reporting and espe- applied for and received an extension from imminent and substantial endanger- cially ballast water regulation. This report the USCG (2) the vessel is not in compli- ment”. will therefore focus on these key issues. ance with its ballast water discharge limits • This policy does not become effec- per the 2013 VGP, and (3) the vessel is other- tive until after such time that a ship is USCG extensions on wise in compliance with all other provisions non-compliant with the EPA VGP Bal- ballast water implementation of the 2013 VGP. last water discharge requirements (2nd Over 200 applications for extension of the bullet in policy letter) and thus a ship is ballast water implementation schedule have The memorandum further enumerates at the mercy of EPA as to whether they been received by the USCG. It is antici- considerations that EPA enforcement per- will adjudge the specific case to be one pated that most of these applications have sonnel should take into account (conducts of low enforcement priority. been submitted by ships which have bal- complete BWE 200 nm from any shore). • This policy is not effective if the ship is last water treatment system implementa- Otherwise, the vessel must meet USCG reg- non-compliant with any other provi- tion dates in 2014. The USCG has advised ulations including BWM plan, recordkeep- sions of the 2013 VGP whether related that these applications are being reviewed ing and reporting provisions, and comply to ballast water discharges or not. Argu- and decisions will be issued “shortly”. We with all other ballast water management ably, even a failure to “dot an i” or “cross understand that a few extensions have requirements under relevant USCG and a t” in any of the required recordkeep- already been granted; most of them extend- EPA regulations. The EPA will then “con- ing or reports would negate application ing the ship’s implementation date to 1 Jan- sider” these violations of the EPA VGP a of this policy, even though they were uary 2016. The extensions are, perhaps, not “low enforcement priority”. However, this unrelated to ballast water discharges. as promising a tool to handle the US situa- policy will not apply to “grossly excessive • In spite of this policy letter, a ship with a tion as had been thought. ballast water discharges” (whatever that perfectly good USCG extension is tech- term means) or discharges which present an nically non-compliant with the pro- Note that USCG can give extensions to the “imminent and substantial endangerment” visions of the VGP (the policy letter BWT implementation date where a good (whatever that means) or other violations of simply suggests that EPA would con- faith effort has been made to acquire a US the Clean Water Act. EPA also reserves the sider it a low enforcement priority). type approved system suitable for use on right to change this policy at any time. • Many, if not all, P&I Club policies may

66 BULLETIN 2014 VOLUME 109 #1 ROUND-UP

gen-01-14.indd 66 13/02/2014 12:43:05 not cover instances where a ship has high level among key agencies to solve this US monitoring and reporting knowingly violated laws/regulations (as issue. We also learned during the Presiden- of GHG emissions would be the case here) thus insurance tial visit that many members of the House Deliberations on a global system to moni- cover may be in jeopardy for any fines/ of Representatives would like to solve this tor and collect GHG and ship efficiency data penalties assessed for non-compliance issue more fundamentally but the Sen- from ships have been ongoing at IMO MEPC of the EPA VGP as well as legal fees to ate, and especially members from Califor- for some time. A proposal from the US to defend any action against the vessel. nia, is currently blocking that opportunity, establish a three phase approach is especially • Significant negative commercial impli- but work is ongoing at the Hill to find a real at the centre of the debate, which entails a cations may result from this non- long term solution also workable for the first stage of collecting data to calculate indi- compliance situation where charterer shipping industry. vidual ship’s operational efficiency. vetting inspections and cargo owners/ shippers incorporate non-compliance The BIMCO Secretariat will continue the Most industry organisations are rejecting events into vessel evaluations. dialogue with key agencies to support them this idea, as regulatory application of oper- • Assuming the maritime industry deems in finding a workable solution for shipping. ational efficiency grossly conflicts with the this EPA “solution” relating to enforce- ability to make commercial decision in the ment policy inadequate to provide the US rules and the new IMO Resolution future. Actually this data relates to past necessary certainty and protection US ballast water rules and the new commercial utilisation of ships and thus from legal liability, a number of options International Maritime Organization serves no useful purpose for assessing ship’s (all with inherent risks) are available as (IMO) Resolution on implementation of future performance capacity and may, in noted below. the Ballast Water Convention addition, be commercially sensitive. The IMO Assembly finalised a Resolution The industry coalition is examining possi- which essentially reschedules the imple- A submission to MEPC 66 (April 2014) from ble alternatives to determine if agreement mentation schedule of the Ballast Water the US and a few other countries maintains can be reached on industry actions noted in Management Convention. It has been that the operational efficiency of individual the list of options below: questioned whether this Resolution would ships is a suitable and appropriate measure • The ship may apply for an individual impact the implementation schedule in the that can be used for mandatory application. permit; United States. • The ship may enter into a consent It is the view of the BIMCO Secretariat decree with EPA; The USCG and EPA have informed us that that this is highly inappropriate, and a sub- • Industry may petition EPA to reopen the resolution will not change the imple- mission commenting on this fact and sug- the EPA VGP to properly address this mentation dates and definitions of “exist- gesting a workable way forward is under issue; ing” and “new” vessel under both the USCG consideration with industry partners. • Industry may seek legislative solution to regulations and the EPA’s vessel general per- (MLU) ll resolve the conflict; mit (VGP). It is important to recall that the • Industry may solicit assistance from US definitions and implementation sched- Congress and/or the White House ules are based on the first dry-docking (not Council on Environmental Quality to necessarily the first renewal survey) after 1 urge more appropriate solution. January 2014 (for mid-range ballast water capacities) and 1 January 2016 (for the low Editor’s Note: This report has been pro- During the recent US visit, the BIMCO and high ballast water capacities), while the duced in co-operation with the Cham- President highlighted the concerns that definition of “new” vessel under both sets ber of Shipping of America (CSA). BIMCO has regarding the above. We of requirements is defined as a vessel con- understand that a dialogue is ongoing at structed on or after 1 December 2013.

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gen-01-14.indd 67 13/02/2014 12:43:06 POOLCON B adopted by Documentary Committee Agency-based standard pooling agreement for dry and liquid bulk cargoes carried on a tramp basis

ooling agreements, as a means the importance of avoiding creating restric- be on hire and periods such as breakdown, of achieving efficiencies for ship tions on trade has been at the forefront of maintenance or repairs when no notional owners with the benefits being the Working Group’s consideration of the hire accrues. Ppassed on to their customers, are a fea- issues. Full account has therefore been taken ture of tramp markets. of EC Guidelines on horizontal cooperation Pool Managers undertake marketing and agreements (2011/C11/01), together with fixing arrangements but all contracts In October 2012, BIMCO published POOL- similar regulatory implications in jurisdic- (including individual charters pursuant to a CON (now renamed POOLCON A) as the tions around the world. However, the issues contract of affreightment) for employment first of two specialist documents setting are often complex and users are urged to are concluded by Pool Managers “on behalf out the basis for contractual arrangements make appropriate inquiries to ensure that of and acting as agents for” Participants. between owners participating in a pool their contractual arrangements are consis- However, Additional Tonnage chartered in and the pool managers. Under POOLCON tent with local competition legislation. or chartered out to meet or supplement pool A, the pool is constituted as a self-stand- commitments, is fixed in the Pool Manag- ing entity where owners time charter their Explanatory Notes ers’ own name. vessel(s) to the pool and the pool contracts The following notes are intended to pro- in its own name with third parties. vide guidance on the provisions set out in As agents, Pool Managers should not be POOLCON B. Defined terms are identified exposed to charterers’ claims. However, to However, this is not the only model. Own- in the contract by use of capital letters and, guard against the possible risk of a “misdi- ers’ commercial needs, together with in order to assist readers, the same approach rected arrow”, Participants are required to administrative and practical consider- is taken in this summary. name Pool Managers as co-assured on their ations, have resulted in the widespread use insurance policies, if possible without liabil- of agency-based arrangements where pool Key Features ity for calls in the event of owners’ failure to managers act on behalf of participants with POOLCON B is designed for use by tramp make payments due. participants as principal in any contract for pools operating tonnage in dry and liquid the use of a vessel or carriage of goods. bulk trades under contracts of affreight- Introduction ment, spot and time charters with third POOLCON B follows BIMCO’s traditional In response to this need, work was put in parties. It governs the relationship between style. Part I contains a box layout for vari- hand to develop a second document to owners (Participants) entering a Vessel (or able information to be inserted by the par- address the special requirements of agency- vessels) into the pool and the Pool Manag- ties; Part II sets out terms and conditions; based arrangements. The outcome, POOL- ers and regulates administrative and pro- four supporting annexes are for Pool spe- CON B, was adopted at the Documentary cedural matters covering pool operations cific arrangements; and a fifth annex, an Committee’s meeting in Copenhagen in together with the allocation of respective Accession Agreement, is designed to facil- November 2013. BIMCO is grateful to the party liabilities and obligations. itate procedures for bringing New Partici- following members for their work in the pants into the Pool. development process: The regime for operating pool vessels is set out in an annexed “Reference Charter” Part I • Mr. Francis Sarre (Chairman) which is not a charter party but an under- Particular attention is drawn to Box 5 Ref- CMB (Owner) lying document covering the technical and erence Charter which should be attached to • Mr. Stathes Kulukundis R&K (Owner) commercial relationship between Partic- Annex B. As noted elsewhere, this is not a • Mr. Georg Scheel Nordisk ipants and Pool Managers for trading the time charter but an underlying document (Club Member) Vessel(s). As an agency agreement, there is setting out and apportioning operational • and special adviser no time charter relationship between Par- and technical responsibility between Par- • Ms. Marjorie Holmes (Reed Smith) ticipants and Pool Managers. Nevertheless, ticipant and Pool Managers for trading the (Lawyer). in order to calculate Participants’ entitle- Vessel. The Reference Charter is likely to be ment to any share of pool profits, the Ref- based on a standard document such as BAL- Competition law is often modelled on the erence Charter must set out the basis for TIME, GENTIME, NYPE 46, NYPE 96 or European regime. As with POOLCON A, determining when the vessel is deemed to SHELLTIME 4 amended to reflect POOL-

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gen-01-14.indd 68 13/02/2014 12:43:07 The CMB Juliette. (Photo: CMB)

CON B provisions for payment of Pool prof- sel or for carriage of goods and will include a claim against another Participant or the its, delivery and redelivery of the vessel for a contract of affreightment, spot charter or Pool Managers. In the event of such action, Pool services and other general or trade spe- time charter. the Participant whose dispute affects cific provisions as appropriate. another pool member (or the Pool Manag- Clause 2 (Pool Agreement) ers), must indemnify the innocent party for Inside Cover Note The Pool Agreement is made between each all costs and losses and provide security to Attention is drawn to the complexity of Participant and between the Participants lift or discharge any arrest of property. competition law and variations between and the Pool Mangers. Vessels are under the jurisdictions. Whether a pool is consistent commercial management of, and are traded Clause 5 with local legislation will depend on a range by, Pool Managers in accordance with the (Objective of the Pool Agreement) of factors including market share, market Reference Charter (annex B). All third party This is a mission statement explaining the concentration, market structure and turn- Transportation Contracts are entered into commercial efficiencies to be gained from over together with other regulatory pro- by the Pool Managers “on behalf of and act- using the Pool Agreement and the ultimate visions in the country of destination and, ing as agents” for individual Participants benefits to consumers. It reflects European possibly, origin. who are, therefore, principals in the trans- Commission Guidelines on the application action with counterparty charterers. In the of competition legislation. The Working Group is of the opinion that event of, for example, differences between POOLCON B, as a generic agreement, will periods of deemed off-hire under the Ref- Clause 6 not restrict competition on price and mar- erence Charter and off-hire or time lost for (Contracting on behalf of the Pool) ket share and is therefore unlikely to expose voyage delays under a Transportation Con- This clause, which should be read together users to the risk of action for anti-competi- tract, the terms of the Reference Charter with clause 9, Pool Managers’ Authority, tive behaviour. Nevertheless, use of POOL- prevail for calculating a Participant’s enti- sets out Pool Managers’ mandate to enter CON B does not in itself confer compliance tlement to Pool earnings. Transportation Contracts on behalf of Par- and users are urged to take appropriate ticipants. Pool Managers may also enter advice to ensure that a planned venture is Clause 3 (No Partnership) Contracts of Affreightment in their own consistent with relevant competition laws. Construction of the Pool Agreement as a name but as agents for performance by indi- partnership between Participants and the vidual Participants who will be named prin- Part II Pool Managers or any of them, is expressly cipals in Transportation Contracts issued Clause 1 (Definitions) excluded. Participants’ obligations are owed pursuant to the Contract of Affreightment. Terms used throughout the Pool Agreement only to the Pool Managers save in relation Pool Managers may, in their own name, are set out. Words and phrases are defined to the specific provisions set out in clause 4 charter in and charter out Additional Ton- for ease of reference for the purposes of the (Indemnity, Liability and Security), clause nage (vessels owned and operated by own- contract but are not legal definitions. 25 (Confidentiality) and clause 28 (Dispute ers outside the pooling arrangements). Resolution). The term “Participants” means Own- Clause 7 (Pool Vessels) ers entering vessels into the Pool. Atten- Clause 4 Sub-clause (a) states that technical manage- tion is drawn to the distinction between a (Indemnity, Liability and Security) ment of a vessel, including insurance and “Reference Charter” which, as explained, Each Participant is liable only for its own manning, is the sole responsibility of the forms the basis of the trading arrangements performance; there is no joint and sev- Participant in accordance with the Refer- between a Participant and Pool Managers as eral liability with any other Participant. ence Charter. operators; and a “Transportation Contract” This provision therefore protects a Partici- which is any contract for the use of a Ves- pant from action by a third party to secure Sub-clause (b) provides that, where neces-

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gen-01-14.indd 69 13/02/2014 12:43:08 sary, Pool Managers may charter-in ves- This sets out the scope of the Pool Commit- Participant (although the Participant under sels (Additional Tonnage) to supplement tee’s authority. It includes making arrange- consideration for expulsion cannot vote on resources to fulfil commitments or for ments for Participants’ Meetings (see clause the issue). improved efficiency. 12), approving new and Substitute Vessels from Participants, approving Transporta- Under sub-clause (g), proposed changes Clause 8 (Pool Management) tion Contracts for periods in excess of the to the Pool Agreement require Participant A comprehensive list of duties to be under- Pool Managers’ authority, agreeing to Pool unanimity and the Pool Managers’ con- taken by Pool Managers is set out. It includes Managers’ use of currency and hedging sent. The need for agreement by each and vessel operating, administering contracts, instruments for periods of not more than every Participant will protect the interests accounting, maintaining financial records, twelve (12) months and such other func- of those unable to attend, or be represented marketing and all other functions in sup- tions as may be delegated by the Partici- at, a meeting to determine a proposal. port of the Pool’s commercial activities. It pants’ Meeting. is expressly provided that the Pool Manager Clause 13 (Calculation of Pool Gross Reve- shall not discriminate between Participants. Clause 12 (Participants’ Meeting) nue, Pool Net Revenue and Pool Expenses) An ordinary meeting, with not less than This clause gives further meaning to the The Pool Manager can sue and be sued 21 days’ notice, must be held at least once definitions in clause 1 to address the calcu- in relation to any dispute under the Pool a year. An extraordinary meeting may be lation of income receivable while the deter- Agreement. Nevertheless, liability to Par- called by an agreed proportion of Partici- mination of Pool Points is set out at clause ticipants for loss or damage is expressly pants giving 14 days’ notice. A meeting will 16 and in annex D. The two concepts have excluded unless (as with ship managers’ be required in the event of the Pool Manag- been dealt with separately to avoid a single, liability under SHIPMAN) shown to have ers giving notice of termination (see clause but complex, provision. resulted from Pool Managers’ negligence, 20). A Participant may be represented by a gross negligence or wilful default. proxy with full voting rights. Sub-clause (a) identifies elements compris- ing Pool Gross Revenue. This includes each Clause 9 (Pool Managers’ Authority) The Participants’ Meeting is the Pool’s Vessel’s monthly actual and estimated voy- The maximum period for which Pool Man- ultimate decision-making forum. Voting age income and charter hire from Transpor- agers are authorised to enter into Transpor- requirements ensure that decisions balance tation Contracts, income from Additional tation Contracts is limited by agreement individual interests and cannot be unduly Tonnage, receipts from ancillary activities between the parties. Under sub-clause (a), influenced or blocked by a larger or smaller and insurance money together with any in default of a stated time, the maximum Participant able to exercise a veto over a indemnities or damages received arising is six (6) months or (for example under a particular course of action. from the Pool’s operations. Contract of Affreightment) by reference to the equivalent number of voyages provided Under sub-clause (d), accounting and bud- Sub-clause (b) deals with Pool Expenses such voyages are scheduled to be performed gets, together with other matters not subject covering all aspects of voyage and related within a stated time or, in the absence of to an enhanced majority, are to be resolved costs, liabilities and expenses under the Ref- agreement, twelve (12) months. In accor- by ordinary majority. This is determined erence Charter which are for the account of dance with sub-clause (b), Pool Managers’ by reference to the number of Pool Vessels the Pool and not the Participant, costs of authority to charter-in Additional Tonnage owned or controlled by a Participant, with chartering-in Additional Tonnage, outgo- can also be limited by agreement or, in the each vessel giving one vote. ings connected with Pool operations, Pool absence of a stated period, to a maximum of Managers’ remuneration and Pool Manag- six (6) months. A two thirds majority, again on the basis of ers’ insurance premia (see clause 19(b) and numbers of vessels, is required under sub- (c)). Liabilities or damages payable are Pool Under sub-clause (c), Pool Managers are clause (e) for matters relating to Pool Points, Expenses unless (as in SHIPMAN) arising authorised to sign Accession Agreements Transportation Contracts in excess of the solely from the negligence, gross negligence (Annex E) to bring new Participants into Pool Committee’s authority and other listed or wilful misconduct of the Pool Managers the Pool following approval at a Partici- activities in support of, or ancillary to, the who, in such event, will themselves be liable. pants’ meeting (see clause 12(f)(iii)). Pool’s objectives. In order to reduce the likelihood of stalemate, or decisions being If expenses exceed income, Participants Clause 10 (Pool Committee) held up by a minority, a proposal to wind- will be required to cover the shortfall in The Pool Committee supervises and mon- up the Pool or appoint new Pool Managers accordance with sub-clause (d) of clause 15 itors the Pool Managers. Membership is is also subject to a two thirds majority. (Distributions). drawn from among the Participants. Deci- sions are made by ordinary majority of those A unanimous decision of those present or Clause 14 (Pool Managers’ Accounts) present at a meeting. A Member may be rep- represented at a Participants’ Meeting is Pool Managers are required to keep true resented by a proxy with full voting rights. required under sub-clause (f) to approve and correct accounts by reference to the certain joint venture agreements, admis- International Financial Reporting Stan- Clause 11 (Pool Committee Authority) sion of new Participants and expulsion of a dards (IFRS) or other agreed arrangements,

70 BULLETIN 2014 VOLUME 109 #1 SHIPPING LAW

gen-01-14.indd 70 13/02/2014 12:43:08 Mineral Hope at Pointe Noire. (Photo: CMB)

exercise budget monitoring and controls sideration when assessing points for a vessel Sub-clause (b) sets out the notice require- and meet audit standards. The provision joining the Pool. Under sub-clause (b), the ments for a withdrawing Participant and also outlines procedures for reimbursing Participants’ Meeting will confirm the num- arrangements for individual vessels to be Participants’ recoverable Pool Expenses. ber of points, taking account of any recom- taken out of the Pool. If the value of out- mendations made by the Pool Managers. standing Transportation Contracts is below Clause 15 (Distributions) the market rate, the withdrawing Partici- The system for paying profits to Partici- Sub-clause (c) requires Pool Managers pant will be required to make a financial pants is central to the objectives of a pooling to review voyage results and vessel per- contribution pro rata to the number of ves- arrangement. Under an agency agreement formances on 1st January and 1st July to sels being withdrawn. No compensation where vessels are not on time charter to the ensure that allocated points continue to is payable to the withdrawing Participant pool, Participants’ remuneration cannot fairly reflect each vessel’s relative earn- where the value of outstanding Transporta- properly be described as “hire”. Payments ing capacity. Illustrative factors likely to tion contracts exceeds the market rate. Dis- due have, therefore, been termed “Distri- affect the position, and which should be puted valuations are to be determined by butions”. Distributions are determined on a kept under review, are set out and include a reference to chartering brokers. monthly basis (in accordance with the rev- change of trading pattern, changes in bun- enue and expenditure calculations in clause ker costs, introduction of new regulations Nevertheless, if one or more vessels due to 13) based on each vessel’s allocated Pool and vessel modifications. Pool Managers’ be withdrawn is or are determined by Pool Points and deemed periods on hire under recommendations for amending individ- Managers to be essential to the perfor- the principles in the Reference Charter. The ual Pool Points or the Pool Points Formula mance of existing contractual obligations, formula for calculating payments due is set are referred to the next Participants’ Meet- sub-clause (c) provides that the Participant out in sub-clause (a). ing. If necessary, and in accordance with must supply a Substitute Vessel or pay com- sub-clause (d), revisions can be conducted pensation to cover the cost of chartering-in Provisions for the distribution of payments, at shorter intervals. suitable tonnage. limiting or holding back payments in the event of insufficient funds and Participants’ Clause 17 (Withdrawal) Special provisions apply in the event of a obligations to make a contribution if a cal- This clause seeks to balance owners’ needs constructive or total loss (sub-clause (f)). culation results in a negative sum, are set to be able to move in and out of trades and out at sub-clause (b). Sub-clause (d) covers activities with Pool Managers’ needs for The clause also sets out procedures for rede- Participants’ obligations to contribute to certainty of supply to fulfil their commit- livery of vessels and repayment of Working Working Capital and operational losses. ments under Transportation Contracts. It Capital. distinguishes between withdrawal of a Ves- Clause 16 (Pool Points) sel and withdrawal of a Participant. Clause 18 (Non-compete) Every pool will have its own individual This clause might be viewed as imposing characteristics according to trading activi- Under sub-clause (a), a Pool Vessel may be a restriction on owners’ freedom to trade. ties and/or the type and mix of tonnage. In withdrawn if sold or to a time or However, without it, a Participant would be order to avoid the inclusion of a potentially demise charter for longer than a pre-agreed free to compete against the Pool, possibly complex formula within the text, a flexi- period. Notice of withdrawal is required with the benefit of price or other sensitive ble approach has been followed. A cross ref- but, in defined circumstances, provision of information. This would be inconsistent erence to annex D (Pool Points Formula) a Substitute Vessel will fulfil a Participant’s with restrictions on exchanges of informa- suggests factors likely to be taken into con- outstanding obligations. tion between competitors.

SHIPPING LAW BULLETIN 2014 VOLUME 109 #1 71

gen-01-14.indd 71 13/02/2014 12:43:13 An even better idea...

The clause has therefore been inserted to winding-up the Pool by a two thirds major- a member may assign or transfer rights address this conflict. However, in order to ity vote at a Participants’ Meeting or where, under the Pool Agreement, other than clarify the intended scope, the statement following Pool Managers’ resignation assignment to an affiliate or financiers. “not entitled to operate in the same trades” (clause 20), there is no agreement to make a should be interpreted in line with the indus- new appointment. Clause 27 (Notices) try’s understanding that this means the This is the standard BIMCO provision. same geographic trades, commodities and Sub-clause (b) details arrangements for with- type(s) of vessel. drawing vessels from the Pool and releasing Clause 28 (Dispute Resolution Clause) Participants from their contractual obliga- The provision incorporates the Singapore Clause 19 (Insurance Policies) tions during the winding-up period. forum together with other amendments Sub-clause (a), based on the insurance made to the London and New York options, provisions in SHIPMAN 2009, sets out Clause 22 (Default) introduced in the updated 2013 version Participants’ responsibility for hull and This sets out the events and circumstances of the BIMCO Standard Clause. How- machinery cover, protection and indem- which may result in a Participant’s expul- ever, as disputes under pooling agreements nity risks and war risks. Optional insur- sion if so resolved at a Participant’s Meeting. might involve multiple parties, additional ances may also be agreed and, although Nevertheless, expulsion is without preju- wording in each named forum provides a An all-new version of IDEA based on Microsoft Word 2010 not specifically identified in the text, dice to the Pool Managers’ right to claim mechanism for appointing arbitrators in depending on trading requirements par- damages in accordance with clause 23. circumstances where there are more than ties might decide to agree to add maritime two parties in the dispute. The modifica- kidnap and ransom (K&R) cover. Clause 23 (Rights on Termination tions mean that the clause is no longer the and Withdrawal) standard version and “BIMCO” has there- Transportation Contracts are arranged by It is expressly provided that a Participant’s fore been removed from the heading. Pool Managers as agents for Participants withdrawal whether voluntarily, by expul- who are, therefore, principals in the trans- sion or in the event of total loss, does not Clause 29 (Severability) action. Nevertheless, in order to protect Pool affect any rights or obligations incurred This is a standard clause. It seeks to avoid New features: Managers against a third party claimant’s up to the effective date of withdrawal or a situation where the entire agreement is “misdirected arrow”, sub-clause (b) requires beyond in the case of rights and obligations held to be invalid because a particular pro- Participants to name Pool Managers as joint that survive termination of the Agreement. vision is deemed by an arbitrator or other z “Cut and Paste” text into contracts assureds with full cover. However, the benefit competent authority to be illegal, invalid of joint assured status in many cases imposes Clause 24 (Hardship and Force Majeure) or unenforceable. and charter parties from other liability on the joint assured for a defaulting Parties are encouraged, under sub-clause Participant’s premium payments or calls. (a), to try to reach an amicable solution if Annexes sources on your computer Participants are therefore required, if obtain- the Agreement does not work as intended Annexes A to D should be completed with able at no extra cost, to procure cover with- or expected. details of all Pool Participants, the under- out such obligation and for Pool Managers to lying Reference Charter, Pool Vessels and z “Recent Documents” feature be released from all liabilities on the Partic- Sub-clause (b), sets out mutual exclusions their Allocated Pool Points and the Pool ipant’s withdrawal from, or on the winding from liability as between Participants and Points Formula. The Accession Agreement up of, the Pool. Pool Managers under the Pool Agreement. in Annex E sets out wording to facilitate the z Add additional documents to Exclusions from liability between Partici- administrative mechanism for bringing a Sub-clause (c) requires Pool Managers to pants and third parties will be determined New Participant into the Pool. completed contracts take out professional liability insurance, in accordance with the relevant Transpor- charterers’ liability insurance for Addi- tation Contract. Copyright and availability tional Tonnage and FD&D cover. Copyright in the POOLCON B is held by z Recommended updates to out-of- Clause 25 (Confidentiality) BIMCO who are also the publishers. Sample Clause 20 Competition legislation restricts the copies of POOLCON B may be downloaded date standard clauses (Termination by the Pool Managers) exchange of market or price sensitive infor- free of charge from the BIMCO website at Pool Managers may give six (6) months’ mation between competitors. It is, there- www.bimco.org notice to terminate their role. A Participants’ fore, important that Participants observe z “Autofill” boxes in Part I of BIMCO Meeting, convened in accordance with and comply with this clause and its prohibi- To use POOLCON B we recommend BIM- clause 12, must decide whether to appoint tion on disclosure, other than in accordance CO’s web-based charter party editing sys- contracts replacement managers. In the absence of a with legal process, or outside exploitation tem, IDEA•2, which provides access to a two thirds majority in support of a proposal, of information gained within the Pool or secure Microsoft Word version of the con- it will be necessary to proceed to the wind- use in other trades of information gained tract that can be filled in and edited online ing-up arrangements in clause 21. within the Pool. and then exchanged by e-mail. For details of how to sign up to use IDEA•2 please click on Clause 21 (Winding up of Pool) Clause 26 (Assignment) the Products tab on the BIMCO homepage at Sub-clause (a) provides a mechanism for This requires all Participants to agree before www.bimco.org or contact [email protected]. ll For more information, visit www.bimco.org or contact [email protected]

72 BULLETIN 2014 VOLUME 109 #1 SHIPPING LAW

gen-01-14.indd 72 13/02/2014 12:43:14 An even better idea...

An all-new version of IDEA based on Microsoft Word 2010

New features:

z “Cut and Paste” text into contracts and charter parties from other sources on your computer

z “Recent Documents” feature

z Add additional documents to completed contracts

z Recommended updates to out-of- date standard clauses

z “Autofill” boxes in Part I of BIMCO contracts

For more information, visit www.bimco.org or contact [email protected]

gen-01-14.indd 73 13/02/2014 12:43:14 BY LUCIENNE CARASSO BULOW

Anniversaries galore!

In 2013, we celebrated many anniversaries; anniversaries of great developments in New York’s history and culture, anniversaries of important maritime organization and anniversaries of Charter Parties on which we still trade ships and cargoes.

ne hundred years ago, in 1913, Several centenaries leum products. As such, it issued numerous Grand Central Terminal was We celebrate this year the 100th anniver- forms of contracts including Bills of Lading inaugurated. In addition, New sary of several familiar Charter Parties. and Charter Parties. For the grain trade, the YorkersO were first introduced to modern The New York Produce Exchange, issued a New York Produce Exchange issued a Grain art at a seminal art show at the Armory. “Government Form time charter party” in Charter Party in 1897. 1913. This Time Charter Party is the pro- Aside from ASBA, which is celebrating its genitor of the familiar NYPE Time Char- Other Charter Parties, such as the Balti- 80th anniversary, and the Society of Mar- ter Party which is now utilized as an ASBA more Form C Berth Terms Charter Party, itime Arbitrators which is celebrating its Charter Party. the progenitor of the NORGRAIN, was also 50th, several Charter Parties are also cele- adopted in 1913. The Welsh Coal Char- brating important anniversaries this year. The New York Produce Exchange, founded ter Party, the progenitor of the Amwelsh in 1867, was located at 2 Broadway on Bowl- Coal Charter Party, was issued in 1914 and On 7 January 1914, the first steamship ing Green in lower Manhattan. It was a adapted to American use in January 1953 passed through the Panama Canal. In long-standing exchange for trade in var- as the Americanized Welsh Coal Charter anticipation of its imminent opening, ship- ious commodities, ranging from grain, (Amwelsh). It became an approved ASBA ping organizations were hard at work issu- coal, lumber, flour, butter, hogs to vegetable form in 1979. ing various new forms of Charter Parties. oil, crude oil, naphtha and refined petro- Some half-centuries This year also marks the 50th anniversary of several other Charter Parties as well: the 2014 update for NYPE Time Charter NIPPONVOY, published by the Japan Ship- ASBA, working together with BIMCO and the Singapore Maritime ping Exchange, was issued in May of 1963 Foundation (SMF), is in the process of preparing a significant update to and the SHELLTIME 3 Charter Party in the widely used NYPE Time Charter. June of 1963. The ESSOVOY 63 was devel- oped for chartering of vessels for full car- The NYPE form was last updated in 1993 and lacks many of the clauses that goes of oil and petroleum products and commonly form part of modern time charter parties – often being added as was eventually revised into the EXXON- riders. VOY 69. The latter became the progen- itor of the ASBATANKVOY which was To make sure this important standard form remains relevant and up to date, the issued by ASBA in 1977. Over the years, the joint ASBA/BIMCO/SMF Sub-Committee has been working hard over the past ASBATANKVOY became very popular and 18 months to review the existing wording and add commonly used additional was widely used in the chemical, vegoil and provisions. The sub-committee is taking care to maintain the overall look and parcel tanker trade. feel of the NYPE by locking into place the many clauses that remain unchanged. Issues that were not even contemplated back in 1993, such as ISPS, pollution, Five years ago, in 2008, the ASBACHEM- hull fouling and sanctions, will now form an integral part of the agreement. VOY, which is very similar to the ASBATANKVOY, was developed by ASBA, During 2014 the sub-committee will release a provisional draft of the new NYPE specifically for the chemical and parcel as part of a wide consultation with the industry. The sub-committee will stage a tanker trades. number of “roadshows” in the US, Europe and Asia to explain the background and thinking behind the revision. NYPE “2014” is due for completion and pub- Other anniversaries lication in November 2014. ll We also celebrate the 40th anniversary of some other forms of Charter Parties such as the Bulk Sugar Charter – U.S.A. which was

74 BULLETIN 2014 VOLUME 109 #1 SHIPPING LAW

gen-01-14.indd 74 14/02/2014 08:48:49 issued in April 1962 and revised in 1973. Finally, the North American Grain Char- terparty (NORGRAIN) was first intro- Editor’s Note: Lucienne Carasso Bulow is a maritime arbitrator and mediator and a claims con- duced on 3 December 1973. Its creation was sultant. She is President of Interactive Maritime Services, the Marine Division of Interactive the result of negotiations between NAEGA International Inc. in New York. She currently serves as Commissioner of Pilots of the State of (the North American Export Grain Asso- New York. ciation), BIMCO (The Baltic and Interna- tional Maritime Conference), the Chamber Mrs. Bulow worked for over thirty-five years for two major International Commodity Trading of Shipping of the U.K., FONASBA (The companies, Bunge Corporation and Continental Grain Company in various positions. She was in Federation of National Associations of charge of maritime and commercial claims and arbitrations. She previously worked for a ship bro- Shipbrokers and Agents) and ASBA. kerage and agency firm.

NORGRAIN, which was first introduced on She has been a member of the Society of Maritime Arbitrators, Inc. (SMA) since 1980 and was 3 December 1973, was designed to replace its President from 1997 to 2001. She currently serves on its Board of Governors. the outdated Baltimore Berth Grain Char- ter Party Steamer Form “C”, which had Although primarily a maritime arbitrator, Mrs. Bulow is also a member of the Neutrals Panel of been adopted in 1913. It was also designed the International Centre for Dispute Resolution of the American Arbitration Association and of to supplant the many private forms which the ICC Arbitration Panel. She holds a Ph.D. from Yale University. had been created by individual grain houses and represented a more suitable “modern- ized” contract for use by the trade. ll

Offshore Salvage Oil  Gas Projects Marine Operations  Services Jawar Al Khaleej ADMA-OPCO Project Marine Spread in diversi­ed contracts J V SVITZER Salvage

www.jawaralkhaleej.com

SHIPPING LAW BULLETIN 2014 VOLUME 109 #1 75

gen-01-14.indd 75 13/02/2014 12:43:15 The Ladytramp

Demurrage – Delay – Loading of cargo delayed following fire destroying conveyor belt system at loading terminal – Whether delay caused by “mechanical breakdown” – Whether charterers entitled to rely on force majeure clause. ED&F Man Sugar Ltd. v Unicargo Transportgesellschaft mbH (The “Ladytramp”) – Court of Appeal (Patten, Tomlinson and Christopher Clarke LJJ) [2013] EWCA Civ 1449 – 19 November 2013

eaders may recall the summary inner roads of the port awaiting berthing ule the loading or discharging of vessels in of the High Court decision which instructions. Loading commenced on 18 the light of the fire amounted to “govern- appeared in BIMCO Bulletin No. July 2010 and was completed at 13.00 on 20 ment interference”. R1/2013. Although the initial appeal by July 2010 at which time the vessel sailed for the charterers against the arbitration was the discharging port in the Black Sea. The arbitrators rejected the charterers’ sub- dismissed By the High Court, an appeal missions and awarded the owners demur- by the charterers was nevertheless con- The owners contended that time began to rage in the sum of USD 397,912.77 plus sidered by the Court of Appeal as sum- count at 14.00 on 21 June 2010 and that, interest and costs. They held, first, that marized below. allowing for rain periods and permissible since the charterers were entitled to nomi- laytime, laytime expired at 23.53 on 25 June nate any safe berth in the port of Parana- On 9 June 2010 the vessel Ladytramp was 2010, and that thereafter the vessel was on gua, in order for them to rely upon clause chartered on the Sugar Charter Party 1999 demurrage continuously up to 13.00 on 20 28 to exclude from laytime the time lost as form for the carriage of bulk sugar from July 2010. a result of their inability to use the relevant “1-2 safe berth(s), 1 safe port (intention San- terminal, that terminal would have had to tos) but not south of Paranagua to the Black The charterers disputed the claim, relying have been named in clause 4 of the char- Sea (intention Odessa)”. On the date of the on clause 28 of the charter party, which pro- ter party so that the charterers were unable fixture the charterers declared Paranagua vided: (from a legal standpoint) to nominate an as the loading port. alternative berth. The fact that the relevant “In the event that whilst at or off the load- terminal and berth was unusable through- On 14 June 2010 the parties became aware ing place … the loading…of the vessel is out the relevant period did not mean that that a fire had occurred at the terminal prevented or delayed by … mechanical the charterers were unable to perform their where the vessel was scheduled to load the breakdowns at mechanical loading plants, obligation to nominate any “safe berth” cargo. The fire had destroyed the conveyor government interferences … time so lost at the port for the loading of the contrac- belt system linking the terminal to the shall not count as laytime.” tual cargo. The charterers could have dis- warehouse. charged their obligation to nominate a safe The charterers said that they were enti- berth by nominating an alternative berth. The vessel arrived at Paranagua on 20 June tled to rely on clause 28 because the load- 2010 and tendered notice of readiness. In ing of the vessel was prevented or delayed by The arbitrators held, secondly, that the the absence of an available berth the ves- “mechanical breakdown”, and also by “gov- inoperability of the conveyor belt was sel remained off the port until 14 July 2010 ernment interferences” in the sense that the result of physical damage due to the when she weighed anchor and entered the decisions by the port authority to re-sched- fire rather than “mechanical breakdown”

76 BULLETIN 2014 VOLUME 109 #1 JUDGMENT

gen-01-14.indd 76 13/02/2014 12:43:15 within clause 28. Thirdly, the arbitrators pearl [2004] 2 Lloyd’s Rep. 305 compelled ical problem, as distinct from a wider or held that any refusal by the port authority the conclusion that there was a “mechani- external cause. Destruction of machinery of Paranagua to permit vessels to load at cal breakdown” of the conveyor belt system, by fire did not, without more, amount to a the terminal was not “government interfer- simply on the footing that as a result of the mechanical breakdown for the purpose of ence” within the meaning of clause 28. fire the machinery no longer functioned as clause 28. The arbitrators had found that a conveyor belt system. there was complete destruction of the con- The charterers appealed to the High Court, veyor belt system. By no stretch of the imag- submitting that the tribunal erred in rela- Held, that the charterers’ submission would ination could the arbitrators’ finding be tion to all three reasons. be rejected. It overlooked that the clause regarded as one of mechanical breakdown. under consideration in The Afrapearl (and The judge held that the arbitrators’ first rea- in the earlier decision of Robert Goff J in The appeal would be dismissed. ll son for concluding that the charterers were Olbena SA v Psara Maritime Inc. (The Tha- unable to rely upon clause 28 was flawed. nassis A) 22 March 1982, unreported), was Even if the charterers were under an obli- concerned simply with “breakdown of gation to nominate an alternative berth machinery or equipment in or about the (which in fact they were not: see the Van- plant of the charterer, supplier, shipper or couver Strikes Case, Reardon Smith Line consignee of the cargo”. The clause under Ltd. v Ministry of Agriculture, Fisheries and consideration in the present case was con- Food [1963] 1 Lloyd’s Rep. 12; [1963] AC cerned with “mechanical breakdown at 691) it would not follow that there could be mechanical loading plants”. Unlike The no prevention of or delay in loading while Afrapearl and The Thanassis A, it was not that was being done or that charterers were enough that the mechanical loading plant necessarily precluded from reliance upon simply no longer functioned, or malfunc- clause 28. However, the judge upheld the tioned (irrespective of the cause of the mal- Editor’s Note: The above is a summary arbitrators’ second and third reasons and function). The nature of the malfunction of a London judgment which appeared accordingly dismissed the appeal: see (2012) had to be mechanical in the sense that it in Lloyd’s Maritime Law Newsletter No. 859 LMLN 1. was the mechanism of the mechanical load- 888 of 13 December 2013, and which ing plant which ceased to function, or mal- is reproduced by kind permission of the The charterers appealed to the Court of functioned, and caused the prevention of or publishers, Informa Law. Appeal solely on the “mechanical break- delay to loading and the consequent loss of down” point. They submitted that The Afra- time. That connoted an inherent mechan-

JUDGMENT BULLETIN 2014 VOLUME 109 #1 77

gen-01-14.indd 77 13/02/2014 12:43:15 Incompetent versus negligent stevedoring

Charter party – Cargo damaged during discharge – Whether implied term that stevedores appointed by charterers would be competent – Whether stevedores incompetent – Whether charterers responsible for any such incompetence – Sugar Charter Party 1999

he vessel was chartered on an The cargo receivers brought a claim against a position to “select” stevedores – and so amended Sugar Charter Party the vessel in the sum of USD 105,861.71. could not be held responsible for the selec- 1999 form, clause 14 of which The owners subsequently settled the claim tion of stevedores whose activities turned provided:T for USD 84,689.50. out to be unsatisfactory. Even if the charter party did contain an implied term requir- “Stevedores FIOST The owners brought arbitration proceed- ing the charterers to ensure that stevedores Stevedores for loading, stowing, trimming ings against the charterers claiming dam- appointed were competent, the charterers and discharging to be employed by Charter- ages in respect of the USD 84,689.50 paid could not be held responsible for the con- ers or Shippers or Receivers at their expense to the cargo receivers, together with sur- sequences of any incompetence since they and under Master’s control. Stevedores shall veyors’ and correspondents’ fees. The own- had not been informed of the unsatisfac- be considered as Owners servants, and the ers’ case was that the damage which led to tory nature of the stevedoring operation; Charterers/Shippers/Receivers are not to be the claim by cargo interests was attributable nor had they been informed of the claim responsible for any negligence of whatso- entirely to the incompetence of the steve- and consulted with regard to how it should ever nature, default or error in judgement dores. The owners said that the charterers be dealt with. of the stevedores employed. Master to notify were in breach of a well-established implied Charterers if Stevedores do not adhere to obligation to appoint stevedores who were Held, that the during the discharging pro- his instructions and Charterers to use their competent. cess the Master had sent no less than 20 best efforts to rectify the situation.” [The letters of protest to the receivers, the steve- words in regular type were added to the The charterers denied that they were under doring company, the local agents and the printed form.] any implied obligation to appoint compe- owners’ P&I Club. The earlier letters had tent stevedores but even if they were the referred to the fact that some of the steve- The vessel loaded a cargo of approximately damage caused to the cargo was attributable dores were intentionally damaging bags 14,000 mt of bagged white sugar in Brazil. not to incompetence but to negligence – for on the trucks into which the bags were dis- At the discharge port, discharging was car- which the owners were responsible under charged, and to cargo falling overboard as a ried out by gangs of stevedores employed the terms of the charter party. Moreover, result of “bad handling”. by the port authority. They used the ship’s even if any term was to be implied as to the cranes to discharge the bags of sugar competence of the stevedores it was inappli- One letter referred to the fact that the sec- directly on to the receivers’ trucks on the cable in the circumstances existing at the ond officer had tried to stop a stevedore quay alongside the ship. Out of 280,000 bags discharge port because it was the receivers who had removed bags from a truck and put shipped, 274,687 were discharged in sound who had engaged the stevedores. them into his car. Subsequent letters com- condition. 226 were said to have fallen into plained of “torn, damaged sugar bags and the sea and 2,583 had suffered damage as a Since the port authority had a monopoly spillage inside the holds, deck and shore result of tearing. The result was that there over stevedoring operations, neither they cause of forcedly pulling out by the steve- was a shortage of 1,553 bags. (the charterers) nor the receivers were in dores and discharged directly to the truck

78 BULLETIN 2014 VOLUME 109 #1 LONDON ARBITRATION

gen-01-14.indd 78 13/02/2014 12:43:15 and inside the truck also the stevedores incompetent as opposed to merely negli- The next question was whether the evidence made damage to the bags”. gent, then the implied term would be avail- supported a finding that the stevedores were able to the owners to excuse them for the incompetent or merely negligent. In the tri- There were references to “lot of sugar bags liability which they would otherwise have bunal’s experience, it was rare to find a Mas- dropped from slings to the sea”. The letters faced under clause 14. ter issuing one protest after another during repeatedly used phrases such as “inefficient the course of a discharge. The message of discharging”, “negligent and careless han- Since it was open to the parties to make the letters of protest was very clear and the dling”, “inefficient and incompetent dis- whatever provision they saw fit to deal with evidence which they provided remained charge”, and on more than one occasion the liabilities resulting from the discharge of uncontroverted, whether by the receivers, Master observed that “contrary to the cor- cargo, the parties could have made it clear the agents, or the stevedores themselves. rect practice of discharging the cargo from that the owners were assuming responsi- corner of the holds bags have been stowed bility for all claims for loss of or damage It was not uncommon for the recipients of on slings in corners and then dragged along to cargo arising out of the loading or dis- such letters to endorse them with remarks the deck all the way through until lifted”. charging of the cargo. However, they did denying the allegations put forward but not do so, preferring instead to deal with there was no such denial in the present case. Surveyors instructed on behalf of the such matters simply by reference to clause There was not even any reservation of rights receivers’ insurers reported that the dam- 14 of the Sugar Charter Party printed form or remarks such as “For receipt only”, such age suffered was due to a number of factors, – with the amendment regarding notice. as was often seen in similar circumstances. including the poor quality of the slings, In so doing, the charterers had to be taken There was a note of genuine conviction which led to bags falling into the sea and to have understood what was a well-estab- about the letters of protest, and therefore onto the quay; the pressure of sling ropes lished principle that a term was to be they carried considerable weight. which effectively “strangled” bags leading implied requiring any stevedores appointed to leakage from the stitching; bags getting to be competent. Furthermore, the matters of which the caught on obstructions or being dragged Master complained were not occasional in slings across the holds, and lack of nets It might well be correct, as the charterers issues that arose in the ordinary course of between the ship and quayside. had suggested, that the owners must have a competently-handled discharging oper- been aware of the fact that state-owned port ation. Normally, competent stevedores On any view, the contemporaneous evi- authorities had a monopoly on stevedoring did not use slings that cut into bags. They dence painted a picture of a highly unsatis- activities at their ports, so that “selection” did not drag bags around within the holds factory stevedoring operation. of competent stevedores was impossible in with the inevitable consequence that they the circumstances of the present case. How- suffered damage. In the tribunal’s view a term had to be ever, no evidence had been put forward on implied into clause 14 of the charter party the basis of which any finding to that effect Whilst an occasional bag might fall into the requiring the charterers to appoint only ste- could have been made. sea or onto the quayside however compe- vedores who were competent. The reason- tently a discharging operation was carried ing which justified the implication of such But even if the owners were aware that it out, the frequency with which those inci- a term in the equivalent provision in The would have been impossible for the charter- dents appeared to have happened in the Sinoe [1972] 1 Lloyd’s Rep. 201 was equally ers to have ensured that only competent ste- present case could not be regarded as con- valid in the present case. vedores were engaged at the discharge port, sistent with competent stevedoring activi- the tribunal would still have been obliged to ties. Similarly, intentional damage to cargo Furthermore, the words “of whatsoever conclude that on a true construction of the (and, even more so, theft of cargo) was com- nature” in clause 14 clearly applied only to charter party it was the charterers and not pletely incompatible with competent steve- the preceding word “negligence”, so that the the owners who had assumed the risk that it doring operations. intention of the parties had to be taken to might be impossible to ensure that only ste- be that if the facts of the particular case led vedores who were competent were engaged Nor was the Master alone in his criticisms to the conclusion that the stevedores were to carry out the discharge. of the stevedores. Whilst the charterers had

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gen-01-14.indd 79 13/02/2014 12:43:15 UPCOMING COURSES criticised the comments made by the sur- losses arising from the fact that they had vide them with a defence to the claim for veyors instructed on behalf of the owners as appointed incompetent stevedores by say- breach of the obligation to appoint compe- being obviously self-serving, the same could ing that they were negligent. tent stevedores. The requirement of notifi- not be said of the surveyors instructed on cation contained in the additional sentence behalf of the receivers’ insurers. Their com- Thus, even competent stevedores might to clause 14 could not be regarded as a condi- BIMCO COURSES, SEMINARS & WORKSHOPS ments were essentially consistent with those be guilty of negligence from time to time. tion precedent to any liability that the char- of the owners’ surveyors. If they were, a charterer under the Sugar terers might face for breach of the implied 12-14 March 2014 ROTTERDAM Cargo Claims Charter Party 1999 would be protected by term. But even if there was a breach of that “Incompetence” involved a conclusion that clause 14. The same might be true of incom- requirement (because the Master had failed 1 April 2014 SHANGHAI Using SALEFORM 2012 there was a consistent course of conduct petent stevedores, if their negligence was to ensure that the charterers were aware of falling below what would be regarded as not to be regarded as part of their incompe- the fact that the stevedores were not follow- 3 April 2014 HONG KONG Using SALEFORM 2012 satisfactory in all the circumstances (The tence. But if it could be shown that the ste- ing his instructions), there were no legal Clipper Sao Luis [2000] 1 Lloyd’s Rep. 645 vedores were incompetent and that it was consequences of that breach. If the receivers 9-11 April 2014 MONTREAL Masterclass Workshop - Bills of Lading considered). Ultimately, the distinction such incompetence that caused damage, a – who were responsible for the appointment between negligence and incompetence had claim might lie. (if not the selection) of the stevedores and 23-25 April 2014 SINGAPORE Masterclass Workshop - Agency to be as much a matter of impression on the who were certainly aware of their unsatis- evidence of the particular case as a mat- In the present case it was more than likely factory performance – were unable to take 22-23 May 2014 HAMBURG Using SUPPLYTIME ter of logical principle. It involved taking that even if the stevedores were in fact com- steps to improve their performance in order 2-6 June 2014 SHANGHAI BIMCO Asia Shipping School account of all relevant circumstances. Thus, petent, there would have been a degree of to protect their own cargo, then the only an overall loss of less than 1% of a partic- “inevitable” loss or damage. If that was cor- assumption that could be made was that 30 June - 4 July 2014 COPENHAGEN BIMCO Summer Shipping School ularly sensitive cargo such as bagged white rect, then such a degree of loss or damage the charterers would have not been able to sugar would not in itself be regarded as evi- would have had to have been treated as the do any more. They could only have com- 1-3 October 2014 GENEVA Masterclass Workshop - Voyage Chartering dence of incompetence. consequence of negligence rather than any plained to the receivers – and if the receiv- incompetence. That would have meant that ers were unable or unwilling on their own 23-24 October 2014 ABERDEEN Using SUPPLYTIME However, the converse was not true and an apportionment had to be made between initiative to do anything to improve the per- that the mere fact that no more than 1% the degree of loss which had to be attrib- formance of the stevedores, then it hardly 29-31 October 2014 HONG KONG Masterclass Workshop - Time Chartering of a cargo was damaged was not to be uted to incompetence and the degree of seemed likely that they could or would have regarded as an indication that the steve- loss which was attributable simply to neg- done so just because the charterers had pro- 19-21 November 2014 GENOA Trading and Carrying Goods dores handling it were not incompetent. ligence. tested to them. Incompetence of stevedores might result in 3-5 December 2014 ANTWERP Masterclass Workshop - Bills of Lading an overall degree of loss of less than 1%. It However, in the present case there was no Accordingly, the charterers had failed to might equally well lead to a far greater per- evidence of the degree of loss that might be make good their case that if the stevedores centage of loss. The degree of loss or dam- expected as an unavoidable consequence were incompetent (and there was therefore BIMCO eLEARNING DIPLOMA PROGRAMME age to a particular cargo told one very little of the discharge of such a sensitive cargo at a breach of the implied term) they could about the competence or incompetence of such a port at the relevant time. That being nevertheless not be held responsible for any the stevedores responsible for its discharge. so, it was clearly inappropriate to attempt such incompetence given the particular sit- 12 Feb. - 30 Apr. 2014 MODULE 2 Bills of Lading any apportionment on a broad brush basis uation at the discharge port at the time. If there was a distinction in principle to be by reference to the tribunal’s own experi- 19 Mar. - 4 Jun. 2014 MODULE 3 Time Charter Parties drawn between negligence and incompe- ence to reflect the fact that even if the steve- The tribunal was satisfied that the own- tence it could only be on the basis that “neg- dores were indeed competent, there would ers had acted reasonably in concluding the 2 Apr. - 26 Jun. 2014 MODULE 1 Introduction to Shipping ligence” was a term associated with a failure still have been a degree of loss. settlement with the cargo receivers, and 14 May - 17 Sep. 2014 MODULE 4 Dry Cargo Laytime and Demurrage from time to time to carry out a particu- accordingly the owners were entitled to the ll lar task to the standard which was objec- Viewed objectively, the evidence suggested damages claimed. 4 Jun. - 8 Oct. 2014 MODULE 5 Tanker Chartering, Laytime and Demurrage tively to be expected. “Incompetence”, on that all concerned regarded the discharge the other hand, was a term which would in the present case as thoroughly unsatis- 20 Aug. - 5 Nov. 2014 MODULE 3 Time Charter Parties be appropriate only to a course of conduct factory throughout. That raised a presump- which revealed a continuing failure to live tion of incompetence and the charterers Editor’s Note: The above is a summary 24 Sep. - 10 Dec. 2014 MODULE 2 Bills of Lading up to the expected standard. had adduced no evidence to rebut that pre- of a London Arbitration Award (No. sumption. Applying an objective test there 18/013) which appeared in Lloyd’s Mar- 8 Oct. - 2014 - 28 Jan. 2015 MODULE 4 Dry Cargo Laytime and Demurrage A distinction between the two clearly had was little doubt that the stevedores were itime Law Newsletter No. 889 of 31 to be drawn in the context of a clause such incompetent. December 2013 and which is repro- 12 Nov. 2014 - 25 Feb. 2015 MODULE 5 Tanker Chartering, Laytime and Demurrage as clause 14 in the present case since if the duced by the kind permission of the two were to be equated, charterers under Even if the charterers were unaware at the publishers, Informa Law. the Sugar Charter Party 1999 printed time (i.e. during the course of the discharge) form could simply avoid any liability for of the letters of protest, that could not pro-

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80 BULLETIN 2014 VOLUME 109 #1 LONDON ARBITRATION

gen-01-14.indd 80 13/02/2014 12:43:16 UPCOMING COURSES

BIMCO COURSES, SEMINARS & WORKSHOPS

12-14 March 2014 ROTTERDAM Cargo Claims

1 April 2014 SHANGHAI Using SALEFORM 2012

3 April 2014 HONG KONG Using SALEFORM 2012

9-11 April 2014 MONTREAL Masterclass Workshop - Bills of Lading

23-25 April 2014 SINGAPORE Masterclass Workshop - Agency

22-23 May 2014 HAMBURG Using SUPPLYTIME

2-6 June 2014 SHANGHAI BIMCO Asia Shipping School

30 June - 4 July 2014 COPENHAGEN BIMCO Summer Shipping School

1-3 October 2014 GENEVA Masterclass Workshop - Voyage Chartering

23-24 October 2014 ABERDEEN Using SUPPLYTIME

29-31 October 2014 HONG KONG Masterclass Workshop - Time Chartering

19-21 November 2014 GENOA Trading and Carrying Goods

3-5 December 2014 ANTWERP Masterclass Workshop - Bills of Lading

BIMCO eLEARNING DIPLOMA PROGRAMME

12 Feb. - 30 Apr. 2014 MODULE 2 Bills of Lading

19 Mar. - 4 Jun. 2014 MODULE 3 Time Charter Parties

2 Apr. - 26 Jun. 2014 MODULE 1 Introduction to Shipping

14 May - 17 Sep. 2014 MODULE 4 Dry Cargo Laytime and Demurrage

4 Jun. - 8 Oct. 2014 MODULE 5 Tanker Chartering, Laytime and Demurrage

20 Aug. - 5 Nov. 2014 MODULE 3 Time Charter Parties

24 Sep. - 10 Dec. 2014 MODULE 2 Bills of Lading

8 Oct. - 2014 - 28 Jan. 2015 MODULE 4 Dry Cargo Laytime and Demurrage

12 Nov. 2014 - 25 Feb. 2015 MODULE 5 Tanker Chartering, Laytime and Demurrage

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gen-01-14.indd 81 13/02/2014 12:43:16 Shelltime (1984) – ST additional clause 48 – Majors’ approvals – Impossible condition – Charterer’s wrongful cancellation – Owner’s damages

An interesting issue arose in a recent arbitration award. In a typical tanker time charter there is a clause dealing with majors’ approval of the performing vessel. The arbitrators were called upon to decide the meaning and scope of the word “approval”. What does an owner have to do to secure an approval from a major to comply with the charter party clause?

hile this obviously will by the oil company listed above. However, inspections have actually taken place, only depend on the specific word- Charterers also recognize that oil company then Charterers have the option to cancel the ing in the charter, oftentimes approvals are subject to the vessel’s trading Charter Party by giving redelivery notice lat- theW clause will have wording similar to pattern, Charterers early notification of dis- est by 1700 hours London the first day after that set forth below which was contained charge ports and oil company vetting inspec- expiry of 45 (forty five) days or negative in a charter between Falcon Carrier, as tors availability. If during the Charter any of results of inspection at the third discharge owner of the Falcon Carrier and ST Ship- the approvals will be withdrawn or expired, port has arrived whichever later.” ping and Transport dated 15 May 2008. Owners shall take necessary steps to rectify the faults and/or maintain acceptance. The clause does not specify what an The charter was comprised of the 1984 “approval” is, and what steps an owner has Shelltime 4 form and more than 100 addi- Should Owners fail to maintain at least 3 to take to obtain an approval. tional rider clauses. The additional rider (three) approvals out of Conoco/Chevtex/ clause most relevant to the principal issue Exxonmobil/BPAmoco/Shell/Statoil, Char- Background in the arbitration was Clause 48, entitled terers to notify Owners and Owners to have By way of background, the development of “Approvals.” The clause provides as follows: 45 (forty five) days after notification or 3 approval clauses in charters began after the (three) discharge ports, whichever occurs Exxon Valdez casualty in the late 1990s. “The vessel shall hold at least 3 (three) out later, to rectify same. If after such time ves- of the following oil majors: Conoco/Chevtex/ sel still fails to maintain at least 3 (three) As a result of the Exxon Valdez pollution Exxonmobil/BPAmoco/Shell/Statoil. oil companies approvals and that Charter- incident, the oil majors formed the Oil ers have made sufficiently early notifications Company International Marine Forum Owners further warrant that they will exer- of discharge ports and that oil company vet- (OCIMF) and charged it with the responsi- cise due diligence to maintain vessel approved ting inspectors have been available and that bility of generating a vessel computer data-

82 BULLETIN 2014 VOLUME 109 #1 NEW YORK ARBITRATION

gen-01-14.indd 82 13/02/2014 12:43:16 base for the pre-screening of tank vessels of the charter party, and re-delivery of the Charterer contended that the proper way to prior to their employment by member com- vessel on 3 March 2009 at Pennsauken on 3 read Clause 48 is that the owner must show panies for loading and discharge operations March 2009. They were: that the vessel was actually approved by a at their terminals. OCIMF is an association major for specific voyage(s). The arbitrators of oil companies having an interest in the • BP at Sines, Portugal dated 25 May 2008 rejected this argument: marine transportation and terminalling of • Chevron at NYC dated 20 June 2008 petroleum products and is especially con- • Shell at Quintero Chile, dated 5 Sep- Clause 48 provides owner with the time and cerned with the prevention of pollution and tember 2008 opportunity to have additional SIRE inspec- the safe conduct of these operations. • BP at San Vincente, Chile dated 5 tions performed before the vessel can be re- December 2008 delivered [by charterer for breach by owner] Shortly thereafter, the OCIMF stan- It does not mention an actual acceptance of dardised the vessel inspection programme, Charterer considered these inspection the vessel for a voyage by an oil major. Since creating Ship Inspection Reports (SIRE), reports to be insufficient to satisfy owner’s it is ST Shipping that controls the vessel’s which included a standard Vessel Inspec- obligations under Clause 48. On 7 Febru- employment and the actual tendering of tion Questionnaire (VIQ). OCIMF trains ary 2009, charterer issued its second notice the vessel to a particular oil major, ST Ship- and certifies SIRE inspectors who carry out of cancellation (an earlier one had been ping’s construction of Clause 48’s provision vessel inspections, make findings and elec- withdrawn) and the vessel was prematurely of time for additional SIRE inspections pro- tronically post their findings. Subsequently, redelivered at Pennsauken on 3 March vides no protection for owner, since owner vessel owners/operators have 14 days to 2009. Due to market conditions, owner’s would have no way to compel ST Shipping submit their comments to each and every efforts to mitigate damages, while reason- to offer the vessel to any oil major for a voy- negative finding. The report and its com- able, were not sufficient to cover the differ- age and no way of knowing that the vessel ments then become available to members of ence between the charter rate and the then had been rejected by an oil major that had OCIMF on its website. market rate. Therefore the owner claimed previously approved it. the lost hire less the mitigation earnings. Prior to the pollution incidents involv- Charterer denied any liability asserting that With this standard in mind, we turn to the ing the vessels Erica (sank off the coast the vessel did not have the required approv- questions whether the Falcon Carrier had of France in 1999) and Prestige (sank off als (There were other minor disputes not the three oil major approvals in February the coast of Spain in 2002), the oil majors related to the Clause 48 issues.) 2009 when ST Shipping gave notice of can- inspected tankers and recorded the results cellation and early re-delivery. on the OCIMF SIRE database and also Both sides agreed that the oil majors no lon- issued pre-fixture blanket approval let- ger issue approvals but differed strongly as The vessel did have approvals from BP and ters generally effective for six to twelve to how Clause 48 should be read. Shell in February 2009. The SIRE inspec- months. However, post-Erica and Prestige, tions had been successful and each of the the oil majors have refused to grant pre- The arbitrators stated that there were two companies indicated that additional inspec- fixture blanket approvals and now merely ways to look at the clause. tion would not be needed until a future acknowledge on the SIRE database that the time. At that point, owner had done all in vessel had been inspected. “Given the fact that Clause 48, which was ST its power to obtain the approval, and it was Shipping’s form, created a condition that was likely that the vessel would be accepted at The parties acknowledged that the post- impossible to meet, a strong argument could least for some voyages by those companies. SIRE inspection vetting review by the oil be made that the clause should be considered majors is very subjective and varies greatly null and void. However, since a vessel’s abil- The fact that BP was awaiting a CAP from one oil major to another as well as ity to be accepted to carry the cargo contem- Report or a TSMA from the owner did within the same company. The vetting risk plated by the charterer is of great importance not mean that the vessel was not gener- assessment of oil majors is based on a num- to the charterer, an effort should be made ally approved, as is evident from the fact ber of factors that vary from company to to find some reasonable meaning to the Oil that BP subsequently employed the ves- company. The generally applicable vetting Major approval requirement of Clause 48.” sel. Similarly, the fact that Shell wanted standards take into consideration a num- to arrange an inspection of owner’s office ber of factors that are not within the ves- Owner argued that a vessel should be before approving the vessel for an environ- sel owner’s control or OCIMF’s standards, deemed to meet the Clause 48 requirements mentally sensitive voyage did not negate its such as geographic scope, vessel’s age, spe- of a specific major approval when it has general approval of the vessel. cific cargo to be lifted, etc. passed the SIRE inspection and there are no open comments and the major has no fur- While there is no record of any other cur- Owner arranged four SIRE inspections of ther questions. Owner asserted that it had rent SIRE inspection that would indicate the vessel in the interval between the lifting the necessary three approvals required by approval of the vessel by a third oil major of subjects on 15 May 2008, at the inception the charter. in February 2009, the record indicates

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gen-01-14.indd 83 13/02/2014 12:43:17 that some oil majors may employ the ves- vessel at better rates was hampered by its sel based on recent SIRE reports that are failure to have major’s approvals. posted on the OCIMF website. In connec- tion with a ST Shipping sub-charter party The Panel rejected these arguments. dated 23 January 2009, ST Shipping stated that the vessel was not unacceptable to Exx- It has been stated that mitigation efforts onMobil/Shell/BP/StatoilHydro. should not be viewed with the benefit of hindsight and, likewise, there is a mul- While ST Shipping attempts to denigrate titude of court and arbitration decisions the significance of this admission by again holding that damages need not be proven Patrick V. Martin arguing that it could only rely on informa- with precision, but that a reasonable tion provided by owner, the owner had not approximation is sufficient (The Pergamos, made any representation with respect to SMA 3578 [1999]). ExxonMobil or Statoil at that time. Since ST Shipping was marketing the vessel, it was in In the Tbilisi arbitration (SMA 3935 [2006]), Shipping and Transport, Pte. Ltd., time the best position to know which oil majors the panel decided that while the claimant charterer, and Glencore, Ltd., as guarantor, would find the vessel acceptable. Having has the burden of proving it exercised rea- respondents, under a time charter party, represented to one of its customers that the sonable efforts to mitigate it damages, it dated 15 May 2008, on the Shelltime 4 1984 vessel was acceptable to ExxonMobil and need not prove its mitigation was the best Form, as amended. Statoil in January and February 2009, ST and most effect, only that it was reasonable. Shipping cannot be heard to assert in this Thereafter, it is the defendant’s burden to Before proceeding that the vessel was not accept- show that the mitigation efforts were palpa- Manfred W. Arnold, Jack Berg able to those oil majors. bly unreasonable. The Tbilisi panel went on and the Hon. John S. Martin, Chairman. to state that it was unable to conclude that Thus, the Panel finds that in February the mitigation was so unreasonable as to Appearances 2009, the vessel had the requisite Clause 48 warrant a reduction of the claim. Falcon Carrier Shipping, Ltd. approvals. Cichanowicz, Callan, Keane, ST Shipping’s expert provided a recom- Vengrow & Textor LLP Conclusion on liability mended trading pattern which the Falcon James M. Textor, Esq. As the discussion above indicates, the Panel Carrier should have followed to achieve finds that ST Shipping breached the charter maximum results in her mitigation efforts. ST Shipping and Transport, Pte. Ltd. by its cancellation and early re-delivery of The triangulation matrix suggested (Exhibit Glencore, Ltd., as Guarantor the vessel at a time when the vessel possessed 24 to his report) is nothing new; this con- Clyde & Co. US LLP the necessary three oil major approvals and cept gave rise to the development of OBOs John M. Woods, Esq. was in full compliance with Clause 48. (ore-bulk-oil carriers), which, by their dif- William M. Cooney, Esq. ferent cargo-carrying capabilities, would be Damages able to minimize non-revenue-producing (Society of Maritime Arbitrators (SMA) The owner based its claim on the differ- ballast legs and maximise the laden voyages Award No. 4217, dated 20 September 2013) ence in what the vessel would have earned to produce optimum revenues. However, from 9 March 2009, to 26 April 2010, under the prevailing poor market condi- under the Charter and what it did, in fact, tions combined with a surplus of newer earn under the mitigation voyages. At the and available competing vessels (compared time the tanker market was very volatile, with the 1992-built single-purpose Falcon Editor’s Note: Readers are referred to depressed market. The charter hire was Carrier) made the triangulation concept a summary of the Rowan Court of Appeal USD 21,500 per day for 418 days totalling theoretical exercise but not a realistic busi- judgment, which appeared in BIMCO USD 8,874,662, from which it deducted the ness model to be applied in the poor market Bulletin 3/2012 and which also con- actual net earnings of USD 2,579,981 for a which followed the cancellation. sidered the concept of “approval of loss of USD 5,760,405. majors”. The Panel accepted owner’s calculations Charterer challenged this figure assert- and awarded damages, including an allow- This summary has been prepared by ing that the owner’s mitigation efforts were ance for legal fees, as discussed above. ll Patrick V. Martin, Esq., counsel to the inadequate and ineffective. Its expert wit- Society of Maritime Arbitrators of New ness entered into evidence a theoretical Parties York (SMA). triangulation matrix which owner should Falcon Carrier Shipping, Ltd., as owner of have followed. Also, the ability to trade the the M/V Falcon Carrier, claimant, and ST

84 BULLETIN 2014 VOLUME 109 #1 NEW YORK ARBITRATION

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13/02/2014 11:28:10 1 VOLUME 109 FEBRUARY 2014 FEBRUARY Time to revisit revisit to Time definition the port”? a “safe of Chemical tanker outlook – market at a market a crossroads POOLCON B adopted by B adopted POOLCON Documentary Committee BIMCO events in Dubai – Dubai in events BIMCO programme announced

BIMCO BULLETINBIMCO BULLETIN VOLUMEVOLUME 109103 ·· NO.NO. 16 ·· FEBRUARYDECEMBER 2014 2008 The BIMCO House, February 2014 (William A. Foster) intention, sincere effort, sincere effort, intention, choice of many alternatives. Quality is never an accident; Quality is never it is always the result of high it is always intelligent direction and skillful direction and skillful intelligent execution; it represents the wise execution; it represents BIMCO 161 Bagsvaerdvej 2880 Bagsvaerd Denmark www.bimco.org cover-01-14.indd 1