4 VOLUME 110 NOVEMBER 2015 for the RoRo sector RoRo the for

ROPAXTIME – new niche contract contract niche – new ROPAXTIME NYPE – major revision launched • Under banner the BIMCO future the in and • Today Shipping KPIs

BIMCO BULLETINBIMCO BULLETIN VOLUME 110103 NO.· NO. 4 6· NOVEMBER· DECEMBER 20152008 The BIMCO House, October 2015 to our global membership – to our global membership BIMCO is the world’s largest world’s BIMCO is the managers, brokers and agents. managers, brokers and agents. international shipping association, international We provide a wide range of services provide a wide range We which includes shipowners, operators, which includes shipowners, with 2,300 members in around 130 countries. in around 130 countries. with 2,300 members BIMCO 161 Bagsvaerdvej 2880 Bagsvaerd Denmark www.bimco.org ANNUAL CONFERENCE & AWARDS CEREMONY HAMBURG 18 NOVEMBER 2015 UPCOMING COURSES

BIMCO COURSES, SEMINARS & WORKSHOPS 9-11 November 2015 ROTTERDAM Masterclass Workshop - Laytime & Demurrage 23-25 November 2015 ANTWERP Masterclass Workshop - Time Chartering 4-5 December 2015 BEIJING Masterclass Workshop - Project & HeavyLift BIMCO’s Annual Conference presents a rare opportunity to see the fallout of DYNAMIC SESSIONS on 14-15 December 2015 BEIJING Seminar - Voyage Chartering a maritime casualty and the real potential for cyber attacks on ships. 14-16 December 2015 ISTANBUL Charter Party Workshop CRISIS MANAGEMENT and CYBER SECURITY 17-18This December event 2015 is for allSHANGHAI decision-makersSeminar in - Voyageshipping Chartering who wish to hear the latest expert advice on the prevention and handling of BIMCO SHIPPING AWARDS and NETWORKING RECEPTION 8-10 December 2015 two DUBAImajor business Masterclassthreats Workshopfor shipping. - Bills of Lading 19-20 January 2016 DUBAI Seminar - Using SUPPLYTIME

SESSION 1: FROM CRISIS TO CLEAN-UP SESSIONBIMCO 2: eCYBERLEARNING ATTACK DIPLOMA PROGRAMME This interactive and multimedia event shows how a maritime casualty situation 11 Nov. 2015Is -your 25 Feb. company 2016 MODULE prepared 5 for a cyberTanker attack?Laytime and BIMCO Demurrage will share its latest can spiral out of control and the importance of crisis management. Hear from 14 Jan. - 7 Apr.evidence 2016 on howMODULE ships 2can be vulnerableBills of Lading to cyber attacks. Hear from experts salvage, pollution clean-up and media experts on the best way to handle these on prevention and how to protect your business against an emerging threat situations, see the outcomes – and ask those all-important questions. 28 Jan. - 31that Mar. 2016is becomingMODULE increasingly 1 importantIntroduction for to decision-makers Shipping in shipping. 11 Feb. - 3 May 2016 MODULE 6 Voyage Chartering 25 Feb. - 19 May 2016 MODULE 4 Dry Cargo Laytime and Demurrage BIMCO AWARDS DINNER SPONSORS:11 Mar. - 2 Jun. 2016 MODULE 3 Time Chartering Winners of the BIMCO awards will be announced at the dinner. Award nominations celebrate shipping 14 Apr. - 25 Aug. 2016 MODULE 5 Tanker Laytime and Demurrage companies and individuals who have excelled in key areas and are based on industry recommendations: 13 May - 26 Aug. 2016 MODULE 6 Voyage Chartering 1. BIMCO Regional Shipping Personality of the Year 9 Jun. - 1 Sep. 2016 MODULE 3 Time Chartering 2. BIMCO Shipping Company of the Year 3. BIMCO Education & Training Award 18 Aug. - 11 Nov. 2016 MODULE 2 Bills of Lading 4. BIMCO Contracts & Clause Award 5. BIMCO President’s Award 2 Sep. - 4 Nov. 2016 MODULE 1 Introduction to Shipping 15 Sep. - 8 Dec. 2016 MODULE 4 Dry Cargo Laytime and Demurrage CORPORATE PACKAGES 29 Sep. 2016 - 12 Jan. 2017 MODULE 3 Time Chartering BIMCO members will be able to register 10 persons as part of an attractive corporate package deal. This 7 Oct. 2016 - 19 Jan. 2017 MODULE 6 Voyage Chartering includes 10 conference passes and awards dinner seats including table logo placement. 27 Oct. 2016 - 2 Feb. 2017 MODULE 5 Tanker Laytime and Demurrage hamburg2015.bimco.org/registration 10 Nov. 2016 - 16 Feb. 2017 MODULE 4 Dry Cargo Laytime and Demurrage

ATTENDING: BIMCO committee members • board members • industry experts • maritime journalists • shipping professionals

BIMCO Education schedule available at: Web: www.bimco.org hamburg2015.bimco.orgTel: +45 4436 6800 Fax: +45 4436 6868 E-mail: [email protected] REGISTER ONLINE NOW! HOTEL ATLANTIC KEMPINSKI, HAMBURG ANNUAL CONFERENCE & AWARDS CEREMONY HAMBURG 18 NOVEMBER 2015

DYNAMIC SESSIONS on BIMCO’s Annual Conference presents a rare opportunity to see the fallout of a maritime casualty and the real potential for cyber attacks on ships. CRISIS MANAGEMENT and CYBER SECURITY This event is for all decision-makers in shipping who wish to hear the latest expert advice on the prevention and handling of BIMCO SHIPPING AWARDS and NETWORKING RECEPTION two major business threats for shipping.

SESSION 1: FROM CRISIS TO CLEAN-UP SESSION 2: CYBER ATTACK This interactive and multimedia event shows how a maritime casualty situation Is your company prepared for a cyber attack? BIMCO will share its latest can spiral out of control and the importance of crisis management. Hear from evidence on how ships can be vulnerable to cyber attacks. Hear from experts salvage, pollution clean-up and media experts on the best way to handle these on prevention and how to protect your business against an emerging threat situations, see the outcomes – and ask those all-important questions. that is becoming increasingly important for decision-makers in shipping.

BIMCO AWARDS DINNER SPONSORS: Winners of the BIMCO awards will be announced at the dinner. Award nominations celebrate shipping companies and individuals who have excelled in key areas and are based on industry recommendations: 1. BIMCO Regional Shipping Personality of the Year 2. BIMCO Shipping Company of the Year 3. BIMCO Education & Training Award 4. BIMCO Contracts & Clause Award 5. BIMCO President’s Award

CORPORATE PACKAGES BIMCO members will be able to register 10 persons as part of an attractive corporate package deal. This includes 10 conference passes and awards dinner seats including table logo placement. hamburg2015.bimco.org/registration

ATTENDING: BIMCO committee members • board members • industry experts • maritime journalists • shipping professionals

hamburg2015.bimco.org REGISTER ONLINE NOW! HOTEL ATLANTIC KEMPINSKI, HAMBURG Shipping KPIs

p6 -11 Shipping must not underestimate the threat to its cyber security p54

NYPE – time charty party revision CONTENTS p14 SHIPPING MARKET BIMCO OVERVIEW & OUTLOOK ROUND-UPS Watchkeeper: “Piracy” – it comes in BIMCO at London International Macro economics SE Asia Piracy: criminal networks, many forms Shipping Week 2015 – a view from corporate collusion and corruption 4 22 the ground 36 56 Shipping Key Performance BIMCO at London International Dry bulk shipping Latest EU policy and regulation Indicators (KPIs) – under the BIMCO Shipping Week 2015 – BIMCO, EU news banner NAVFOR and the CSO Alliance share 6 24 their latest insights over an English 38 60 Shipping Key Performance breakfast Tanker shipping Indicators (KPIs) – today and in the Vetting of dry bulk terminals 9 future 40 SHIPPING LAW 26 The interplay between mediation & ROPAXTIME – new niche contract Container shipping arbitration 12 for the RoRo sector 42 64 IMO London judgement NYPE – time charty party revision Outline of relevant IMO issues Bunker price mechanism – better Bankruptcy of bunker supplier correlation between physical 68 14 28 44 market and oil futures London arbitration award BIMCO members’ comments and New deliveries Pumping warranty feedback blunt freight rate rises 70 16 TANKER 46 Welcome to BIMCO – new members New trade flows poised to buoy What is the progress of the 17 32 chemship market 48 scrubber market? BOOK REVIEWS New books – On the importance of The changing face of loss medical examinations prevention 74 20 SECURITY New books – Milestones in marine Shipping must not underestimate engineering 54 the threat to its cyber security 75 Shipping KPIs p6 -11 Shipping must not underestimate the threat to its cyber security p54

NYPE – time charty party revision CONTENTS p14 SHIPPING MARKET BIMCO OVERVIEW & OUTLOOK ROUND-UPS Watchkeeper: “Piracy” – it comes in BIMCO at London International Macro economics SE Asia Piracy: criminal networks, many forms Shipping Week 2015 – a view from corporate collusion and corruption 4 22 the ground 36 56 Shipping Key Performance BIMCO at London International Dry bulk shipping Latest EU policy and regulation Indicators (KPIs) – under the BIMCO Shipping Week 2015 – BIMCO, EU news banner NAVFOR and the CSO Alliance share 6 24 their latest insights over an English 38 60 Shipping Key Performance breakfast Tanker shipping Indicators (KPIs) – today and in the Vetting of dry bulk terminals 9 future 40 SHIPPING LAW 26 The interplay between mediation & ROPAXTIME – new niche contract Container shipping arbitration 12 for the RoRo sector 42 64 IMO London judgement NYPE – time charty party revision Outline of relevant IMO issues Bunker price mechanism – better Bankruptcy of bunker supplier correlation between physical 68 14 28 44 market and oil futures London arbitration award BIMCO members’ comments and New deliveries Pumping warranty feedback blunt freight rate rises 70 16 TANKER 46 Welcome to BIMCO – new members New trade flows poised to buoy What is the progress of the 17 32 chemship market 48 scrubber market? BOOK REVIEWS New books – On the importance of The changing face of loss medical examinations prevention 74 20 SECURITY New books – Milestones in marine Shipping must not underestimate engineering 54 the threat to its cyber security 75 “Piracy” – it comes in many forms What does the word “piracy” conjure up in the minds of those whose livelihoods have nothing to do with shipping?

hildren of tender years will think of the A “home-made” contract, purporting to be a “pirate parties” they attend and the car- genuine BIMCO document, will not be accom- toon character Captain Pugwash and panied by any of the certainties enjoyed by the Chis antics afloat. Rather older folk may guiltily GUARDCON contract. It may, by contrast, recall the “pirated” music downloads and other expose the shipowner to all sorts of liabilities entertainment which they have obtained at no and other problems that may not be immediately cost to themselves. obvious to the unsuspecting user. Published by BIMCO Bagsvaerdvej 161 Few will even think of the heartache and costs “Check before fixing” – that crucial advice, 2880 Bagsvaerd associated with the curse of modern piracy which is as old as BIMCO itself, is just as valid Denmark afloat, with its violence and hostage taking, today as it always was. Owners are advised to Telephone: +45 4436 6800 along with the maritime security industry verify with the BIMCO Secretariat the deriva- Telefax: +45 4436 6868 which has grown to counter this menace. Sea- tion of any GUARDCON contract with which [email protected] farers, on the other hand, have very real knowl- they may be presented, to establish that it has www.bimco.org edge of what piracy means to them, with its been sourced and printed from the online edit- Secretary General - Angus R. Frew demands for increased security, ships wreathed ing system and is the authentic article, which Editor - Gemma Wilkie in razor wire when crossing pirate-infested carries with it both certainty and reliability.

All articles written by outside contribu- waters and the need for the specialised defences tors do not necessarily reflect the views of security guards. A “home-made” GUARDCON, it might be sug- or policy of BIMCO. gested, is a form of fraud and undermines the BIMCO has been at the forefront of regularis- efforts which have gone into the production of © Copyright – No article may be repro- duced by any means in whole or in part ing the maritime security sector, which involves the contract and its establishment in the ship- without the written permission of BIMCO. much more than placing armed guards on ships ping and maritime security sectors. A PMSC transiting hazardous waters. Assurances, ques- advertising that its contracts carry this impri- Details of publication dates and deadlines tions of liability, proper terms and conditions, matur, when it is not entitled to this claim, is also for advertising may be obtained by apply- ing to the Editor. and issues of rights and responsibilities are all committing a fraud and is clearly attempting to dealt with by the GUARDCON contract, which persuade clients of a respectability that may well ISSN 0901-814X. has become an industry “gold standard” in the be illusory. relationship between ship operators and private maritime security companies (PMSCs). And although it may be said that “imitation is the sincerest form of flattery”, the users of these So it might appear something of an irony that false documents are depriving BIMCO of reve- any PMSC, whose business is keeping ships safe nue to which the organisation is entitled and are from pirates, would indulge in some documen- taking many practical risks and exposing them- tary piracy of its own, by passing off its own selves to liabilities. The fact that the organisation home-made contracts under the GUARDCON has become aware of an increasing use of unau- brand name. Nevertheless reports have reached thorised GUARDCON contracts would suggest BIMCO that a number of PMSCs are doing that such dishonesty is not a matter of a few iso- just this, ignoring the fact that GUARDCON is lated incidents. It is arguably not that different a BIMCO copyright, of which they are, in this from those passing off fake goods as genuine and deception, in breach. branded items, attracting the attention of those responsible for standards, or professionals lying GUARDCON is available to the industry only about their qualifications and expertise. through the secure BIMCO online editing sys- Printed in compliance with Enviromental Certificate DS/ES ISO 14001 tem IDEA•2, and any contract obtained from One might speculate that the fact that websites this source comes with an assurance of authen- are full of security organisations claiming things ticity as an established and reliable document to which they are not entitled is a function of devised by the systems of the organisation, over-capacity in the maritime security sector. which is renowned for its fairness and balance. Fewer pirate attacks in the Gulf of Aden and Indian Ocean may have reduced the demand regulatory loopholes and generally “sail close to bished”, but upon investigation displaying no for their services, while the tendency to cost cut- the wind”. Pilots, port state control inspectors signs of such refurbishment. And although it ting is as prevalent in the security sector as in and accident investigators have, for instance, might be argued that machinery manufacturers any other, encouraging the unjustified claims by noted the growing number of “home-made” may not help themselves by over-pricing authen- companies desperate for business. and pirated electronic charts that they see on tic spares, driving hard-pressed operators to ships’ systems. source cheaper alternatives, there is an ethical Perhaps the tendency to cheat is itself a function dimension which should not be forgotten. of the hard times in so many divisions of the Sometimes they are grossly outdated, sometimes shipping industry, where a desperate minority they are simply inaccurate, but their users, it is This situation perhaps reached its most ridicu- will be encouraged to take short cuts, look for pointed out, are “playing with fire” in the risks lous extreme with the delivery of some suppos- they are taking with their ships and the liabili- edly brand-new ships which, upon examination, ties they may face. Pilots have boarded ships and were found to have a considerable quantity of If PMSCs are willing to use found them steaming towards rocks or being “used” or second-hand components in them. counterfeit GUARDCONs, what guided by a dubious second-hand pirated elec- Classification societies were unclear about the else are they cutting corners on? tronic chart that would have seen them com- legality of this practice, which saw “new” ships pletely miss the dredged channel. It has been operating with well-used main machinery, gen- The requirements regarding the reported that masters have been found using erators and pumps, navigation equipment and correct ownership and licensing of manufacturers’ demonstration charts on their even safety gear that clearly had been “pre- weapons, and properly qualified laptops, in preference to the proper sources. owned”. There was a report of a “brand new” guards, must be stringently applied. newbuilt product tanker which, when inspected, Here at BIMCO we encourage all Underwriters have warned about the growing was revealed to have the whole accommodation our members to conduct thorough use of questionable spare parts in machinery of block, complete with furniture, carpets and cur- due diligence whenever engaging increasing complexity, at best voiding warran- tains, “transplanted” from some unknown, older ties and at worst damaging main engines, aux- ship! In shipping, just as in life, there is no such with PMSCs. iliaries and other ship’s machinery. There have thing as a “free” lunch, and amazing bargains, –Phil Tinsley, BIMCO Security Team been numerous cases where spare parts have whether these are well-used spares or “pirated” been of inadequate quality or “said to be refur- GUARDCON contracts, should be avoided. ll Here come the drones

hey are a lot cheaper than choppers, can gestion and the need for traffic control. a real concern once the drones are buzzing Tstay in the air for hours and can be a around the houses, bringing back gardens useful “eye in the sky” for offshore surveil- They are becoming the “must have” pres- into camera range. There are plenty of other lance or other security duties. It has been ent for many, being quite easy to control and people worrying about these versatile craft suggested that they can be fitted with instru- increasingly affordable, causing palpitations falling into criminal hands or being used by mentation to sample the emissions from among regulators concerned with aviation terrorists. But the drones are increasingly ships’ exhausts, and certain ship repair- safety, with laws designed before drones had available and, like it or not, are going to be ers have used them to fly around the huge been ever conceived. Privacy may become operated for good or ill. ll expanses of a bulker’s internals to check for damage, taking a tiny camera into corners where tons of scaffolding would be the only alternative. Drones seem likely to make an impact upon all our lives in the not-too-dis- tant future.

The military is increasingly enthused about their use, and they have been seen in action flying unmanned inspection patrols over suspected pirate craft in the Indian Ocean, checking up for that giveaway sign of a boarding ladder and any visible weapons. A small drone can be flown from a patrol craft too small for a helicopter deck and can sur- vey suspects fast and efficiently. Some police forces are known to be experimenting with them for crime fighting, despite worries about civil liberties and the eyes becom- ing spies in the sky. Online retailers hope to use them to deliver parcels with great speed and regardless of traffic problems, although “It is either the regulator sniffing the exhausts, the chief’s spare parts, or the company checking there are clearly worries about low-level con- up on us.”

WATCHKEEPER BULLETIN 2015 VOLUME 110 #4 5 BY MICHAEL GREY Shipping Key Performance Indicators (KPIs) – under the BIMCO banner

What are the “standards” of a ship, or, for that matter, of a fleet of ships, operated by a shipping company?

n the past, such matters have largely ships they chartered were not in some way attitudes towards matters that the charter- been viewed as a gauge of perfor- deficient. In a number of notorious cases, ers consider important. mance, with charterers of the ships charterers had found themselves both lia- lookingI at downtime, or time off hire as ble and in the firing line of enraged public Shipowners and operators themselves a measure of a ship’s potential ability to opinion, after casualties, which cast doubt have been keen to demonstrate their own deliver. Was the ship, which was said to upon their judgement over their choice of quality and seek its improvement, so it is be capable of a 15-knot service speed, ship. The increasingly thorough scrutiny of wrong to suggest that this is a one-way or actually able to steam 360 nautical miles ships through vetting and physical inspec- external process. In a competitive world, per day, and if this was not delivered, tion has proliferated and in more recent they are looking at ways of differentiating might a performance claim against such times moved into the dry-bulk world. their ships and operations, to put distance a warranty be justified? Arbitrators over between them and their competitors and the years have been very busy resolving It is also obvious that the quality and per- to give them a better chance of business in such disputes. formance of ships is largely determined an overcrowded market. In short, they are by the capability of owners and operators, looking to improve but need a reliable tool But in more recent times, a far more all- so the charterers have looked for a wider with which improvement can be gauged. embracing determination of performance range of determinants than the physical has evolved, largely driven by the indus- condition of the ships themselves. Increas- The evolution of the Key Performance try itself. It is probably fair to suggest that ingly the vetting of potential operators has Indicator (KPIs) has been driven by this it was first driven by the oil companies, scrutinised the management and its abil- need to demonstrate excellence, quality which were increasingly anxious to ensure ities, its systems and even its policies and and best practice, but in a way that can be

6 BULLETIN 2015 VOLUME 110 #4 BIMCO Michael Grey

better understood and offers what is effec- benchmarking, used increasingly in other health-and-safety-related deficiencies tively a standard measure of these elusive industries and lends itself admirably to the recorded? How many detentions were and often subjective qualities. It is very easy maritime world. It also is capable of mea- there after port state control inspections, for a skilled exponent of public relations to suring changes that are taking place, which and what was the record of environmen- produce a convincing advertisement for a is useful in recognising improvements tal-related deficiencies? What was the pic- product, and a ship looking for business or deterioration in performance with the ture surrounding officer retention and the can be viewed in such a fashion. But to minimum of delay. experience of these officers in their ranks? measure the ship and its operator against How do all these factors (there being 64 agreed standards provides a far more reli- Altogether, the Shipping KPI System is standards in all) provide a good over- able gauge of the way in which the ship and based on a standard of 64 different per- all comparison of the ship and its opera- her owners perform. formance indicators which will permit an tor or manager? While the KPI Standard is accurate and specific comparison of ships largely ship-oriented, it is possible for some The shipping KPI which BIMCO has within each sector. “Efficiency” is a term standards to apply to the fleet or shipping recently taken over from the ship managers’ that covers a very broad spectrum, and the company. organisation InterManager is a dynamic KPI Standard against which a ship’s perfor- and evolving system, which can be recom- mance can be compared with industry and All the data collected is de-identified, so mended as a reputable and effective tool sector averages is available for a range of that it does not compromise commercially for a wide range of comparative purposes. crucial factors. sensitive information. The system was ini- It considers “performance” in its widest tiated in 2003 by a cross-industry group context and provides a valuable measure So the standard covers health and safety of experts, led by InterManager, working for both external and internal benchmark- management and performance, which is with the Norwegian Research Council, ing, helping the shipping company evaluate central to efficiency with the human ele- consultants MARINTEK and IT special- its effectiveness across the board. The KPI ment a major determinant of risk man- ists SOFTimpact, who will remain with the provides a measure against which continu- agement and the avoidance of accident. project under BIMCO ownership. The tool ous improvement can be gauged and incen- Associated with this is HR management has now built substantial credibility within tives can be established. Used internally, performance, which has a big effect on the industry. it can introduce objective reality into the the relationship between employees and company’s own view of itself, which hith- employers. Clearly, environmental perfor- BIMCO will provide the system free of erto might have largely depended upon mance is crucial, as is navigational safety charge to its members, apart from a nom- opinion and the judgement of individuals and security. Operational and technical inal set-up fee for new users, and will run as to how well they were doing. performance might be thought of as the it for the entire industry on a not-for- end product of these inter-related factors. profit basis. The Shipping KPI System, says Dependent upon mathematics and unam- BIMCO Secretary-General Angus Frew, biguous facts, the KPI is observable and What do people want to know about their is unique and valuable to the industry. quantifiable, providing valid and verifiable ship and its performance, or a ship they are BIMCO, he emphasises, will ensure that it indicators of performance that are robust hoping to employ? How does this reflect is run by industry for industry. ll against any manipulation by those seeking upon the company’s performance, because to place more favourable interpretations on there are obvious connections? How often that performance. It provides recognisable was a ship unavailable and for what rea- Editor’s Note: Michael Grey is BIMCO’s and accepted standards which are inter- sons, and how does this compare with the Correspondent in London. He is a former preted by all users in the same way, and it is average? What was the number of cargo- Editor of Lloyd’s List and a regular con- transparent and easy to understand. It is a related incidents, the number of collisions, tributor to many maritime publications. respectable and well- recognised method of the conditions of class or the number of

BIMCO BULLETIN 2015 VOLUME 110 #4 7 SHIPPING KEY PERFORMANCE INDICATORS KPIs

zz 64 different indicators zz comparison of ships performance zz anonymised and secured data zz boost performance improvements zz ship/fleet/industry benchmarking

User Feedback “The ultimate aim for the Shipping KPI System is to be the industry’s go-to standard performance system.” “Regular updates by members on their fleet, company and ships will increase the importance of a good performance management system.”

www.shipping-kpi.org BY MARKUS SCHMITZ Shipping Key Performance Indicators (KPIs) – today and in the future

In the beginning of June, BIMCO took over the Shipping KPI System, which contains the performance data of more than 4,000 ships and used by shipping companies worldwide. This article will review how it started, what the system is used for by shipping companies today and, more accurately, to give an outlook on developments for this system.

Objectives The principal objective of any KPI sys- KPIs used by shipping companies into a have come up with that myself.” Indeed we tem is to facilitate measurement of perfor- consistent and clearly defined set of KPIs regard this as one of the best comments we mance based on a rational criteria. to be recognised as an industry standard. have received to date.

KPIs have been widely used by shipping Concepts At the core of the Shipping KPI Standard companies for quite some time. Although, In order to make the best use of the Ship- is the idea of a pyramid. At the bottom of a proprietary system facilitates self- ping KPI System, it is important to under- the pyramid we find the performance data, improvement to a certain degree, it can stand some of its theoretical aspects, in which is manually collected or automati- have drawbacks: effect understanding the Shipping KPI cally measured. This is known as Perfor- Standard. mance Indicators (PIs), but a better name • The company has to expend effort to would be Performance Measurements as invent their own system - solely relying But no reason to be afraid! Some years ago, they mostly do not indicate on an individ- on in-house experience. during a presentation, someone in the audi- ual-level performance actually. An exam- ence commented, kind of disappointed, ple of such a PI would be “total number of • As part of their improvement pro- “But this is not rocket science! I could officers on board”. cess, the company will need to iden- tify the areas (in effect KPIs) where they would want to expend their money and effort. In order to set realistic targets for improvements, the user of a proprietary SPI KPI system cannot make use of industry SPI SPI averages and benchmarks. SPI

SPI • Communication with external parties SPI SPI about individual KPIs poses the risk of

using similar titles, but actually mean- KPI KPI KPI KPI ing something slightly or completely KPI different. KPI KPI KPI KPI KPI KPI KPI KPI The best illustration for the above issues is KPI KPI KPI KPI KPI KPI KPI KPI the crew retention KPI, which is a widely accepted concept but can be expressed in PI PI PI PI PI PI PI PI PI many different ways in the industry. PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI PI The challenge was not to invent new KPIs, PI PI PI PI PI PI PI PI PI or even to identify the “best” KPIs, but to PI PI PI PI PI PI PI PI PI PI harmonise the multitude of (often similar)

BIMCO BULLETIN 2015 VOLUME 110 #4 9 Only when several PIs are put in relation This aggregation is made possible by 2. Is the measurement taken per quar- to each other do you actually get a sensi- applying a so-called rating for each KPI. ter, last rolling year or previous ble performance measurement. So another The rating scheme normalises a KPI (of year? Again, in principle, the standard related PI would be “total number of train- arbitrary scale and measurement unit) to attempts to measure performance at ing hours”, as Key Performance Indicator a value between 0 and 100, where 0 repre- each quarter, but in some cases this is (KPI). “Total number of training hours by sents the bottom of expected performance not possible. For example, budgets or total number of officers”, which is indeed and 100 the top of expected performance. other fiscal targets are defined usually an effective leading KPI to measure the Knowing the rating of KPIs makes them per year and spent per year. Breaking efforts of a shipping company when invest- easier to interpret but also allows the cal- such budgets down by quarter would ing in the training of their crew. Therefore culation of averages across KPIs as all KPIs not represent reality. influencing safety and other performance suddenly use the same scale. This can be measures. compared to the process of taking mea- The above differentiation is necessary at surements of length in “inches”, “feet” and this stage, and it is important for anyone The Shipping KPI Standard describes 64 “centimetres” and converting them all to working with the Shipping KPI Standard PIs and, based on 34 KPIs. In order to pro- “metres” in order to be able to compare and System to be aware of this and take vide a high-level view of operational per- them and calculate consistently. this into account when measuring PIs or formance, it is helpful to aggregate these interpreting KPIs. 34 KPIs further and assign them to one When measuring performance, special of the 8 top-level Shipping Performance attention needs to be given to two aspects: Usage Indexes (SPIs) covering: The initial purpose of the Shipping KPIs is 1. Is the measurement taken per ship for self-improvement. As the saying goes, • SPI001: Environmental Performance or per fleet of ships? In principle, the “you cannot improve what you cannot • SPI002: Health and Safety Performance standard attempts to measure perfor- measure”. The Shipping KPI System gives • SPI003: HR Management Performance mance per ship, but in some cases this a shipping company the advantage of set- • SPI004: Navigational Safety Perfor- is not possible. For example, the KPI ting realistic targets based on comparable mance mentioned above, related to training, industry segments and spending its money • SPI005: Operational Performance can only be used by fleet as seafarers on areas which would be of most benefit to • SPI006: Security Performance are deployed across the fleet, and any it. • SPI007: Technical Performance investment in training is an investment • SPI008: Other in a fleet and not a single ship. As the KPI Standard is widely accepted

History Timeline The Shipping KPI System has a substantial history behind it, making it both robust and mature. The • 2006 June very same history might also explain some of the decisions taken and also open for future oppor- Start KPI of Project (Phase 1) by InterManager tunities. • 2008 October The system offers a platform for calculating ship-specific KPIs and benchmark operational perfor- KPIs and Ratings defined mance of its own ships against suitable subsections of the industry. The system was made available • 2009 May in its first version in June 2011, but the software system itself builds on the results of the Shipping Start KPI Project (Phase 2) KPI Project initiated by InterManager in 2006. • 2010 November KPIs validated, release of Shipping KPI Standard The objective of Phase 1 of the original project was to establish a widely accepted set of KPIs to measure operational performance of ships. • 2011 April Set up KPI Association, Invitation to Round For this purpose, around 22 ship managers and owners came together. In order to avoid reinvent- Table Members ing the wheel, all parties shared the KPIs they were working with at the time, including established • 2011 June KPIs from stakeholders like Oil Companies International Marine Forum (OCIMF), for example “Lost Public Availability of Shipping KPI System (pre- Time Injury Frequency (LTIF)” and “Crew retention”. The result was a set of more than 200 KPI can- sented at IMO) didates. The challenge was not necessarily to invent new KPIs but to choose from this large pool • 2012 April of KPIs a consistent and manageable set size. Milestone 1,000 ships This resulted in a set of 34 chosen KPIs, and although 34 is a much more manageable number than • 2013 July 200, even this number is too large to provide an easy understandable overview of the operational Milestone 2,000 ships performance. The project therefore continued to establish KPI ratings as a means to aggregate the • 2014 August 34 KPIs into 8 top-level Shipping Performance Indexes. Milestone 3,000 ships With the KPI definitions and the aggregation in place, Phase 1 was concluded. But Phase 1 was • 2015 June mostly based on theoretical concepts. These concepts were substantiated by the practical experi- BIMCO takes ownership ence of the 22 companies, but they needed to be validated with real-life measures. For this pur- • 2015 July pose, Phase 2 of the project was initiated in 2009, where performance data of around 500 ships Milestone 4,000 ships were collected and verified. • 2015 September Phase 2 was completed in 2011 with positive validation and minor changes in the KPI definitions, New Steering Committee and Expert Group and then used as the base for implementation of the KPI System as we know it today. established

10 BULLETIN 2015 VOLUME 110 #4 BIMCO and clearly defined, it forms the basis for • Extension effective communication with current and In recent years, certain aspects of ship potential new customers. This can take operations have become highly visible. many forms, starting from generating a As a consequence in today’s industry, suitable benchmark report for customers these aspects might not be sufficiently to a company deciding to grant its cus- represented in the standard. One exam- tomers access to the system or, by using ple of this would be KPIs related to the Web-API display their KPIs, together Environmental Performance. The stan- with the industry benchmark on their dard contains a few, but they should be own website. reviewed and extended based on the needs of the industry. Further, some users of the system, from the tanker segment of the industry, report that • Target audience Markus Schmitz they use the system for Tanker Manage- The Shipping KPI Standard was devel- ment Self-Assessment (TMSA) evidence. oped for the whole industry, but it does They use the KPIs and their benchmark in not attempt to hide the fact that ship the overall industry to some extent to jus- managers were the driving force for its tify their self-assessment as part of TMSA. inception. With BIMCO taking the lead, Finally, some companies are taking the the standard needs to be reviewed with initial steps to incorporate individual KPIs regard to the needs of owners and char- and targets to their contracts between ter parties. owner and manager or between charterer and owners as part of the overall contract • Best practices Editor’s Note: Markus Schmitz is the remuneration concept. Using the KPI Standard in relation to Founder and Managing Director of TMSA appears obvious in retrospect. SOFTimpact Ltd in Cyprus, a software Outlook But the standard itself does not help with and service provider specialising in the In 2011, the first version of the Shipping this use. An analysis needs to be derived maritime industry. KPI Standard was fixed. A standard by as to how the KPI Standard relates to He started his career in 1998 as an enter- prise resource planning (ERP) consul- definition cannot change every other day, and can be used in a structured manner tant with Hewlett Packard in Germany. so apart from correcting minor mistakes for TMSA, Ship Energy Efficiency Man- Specialising in Baan ERP, Markus has and extending some samples, the standard agement Plan (SEEMP), etc. participated in several Baan ERP imple- was mostly unchanged. But at the same mentations in central Europe, South time the world has changed, and a stan- Conclusion America and China. As the founder of SOFTimpact, he has directed his com- dard should adapt to the world around it if BIMCO’s Shipping KPI System is based on pany to focus on the shipping industry, it is to stay relevant. the Shipping KPI Standard, developed over particularly shipowners and managers, several years by the Shipping KPI proj- and became a known vendor of Crew Following this thought, BIMCO will facili- ect started by InterManager. The system and Payroll modules based on the ERP software from Microsoft, called MS tate the following changes to the Shipping is in use today by more than 4,000 ships Dynamics AX. KPI Standard: for a diverse set of purposes, including For several years, he was personally self-improvement, promotional activities, involved in the KPI Project of InterMan- • Simplification TMSA evidence tracking as well as perfor- ager in an advisory role. SOFTimpact The aspect of collecting data per ship mance base contracting. was later selected by InterManager to and some per fleet is a source of con- implement the backend system for gath- ering and benchmarking the KPI data of fusion and, in consequence, unreliable. Under the guidance of BIMCO and its participating companies, the Shipping Same goes for the period of data col- members and learning from past experi- KPI System. He facilitated the transition lection (per quarter, per year, etc). Both ences, we are looking forward to simplify to BIMCO and guarantees with his com- aspects will be reviewed, and one con- and to extend the underlying KPI Stan- pany the continued smooth operation and support of the system. sistent mechanism needs to be identified dard as well as improve the overall user in order to improve ease of use and to experience. Over and above enhancing and operat- ing the Shipping KPI System, SOFTim- develop data quality. pact is the exclusive partner of BIMCO Both BIMCO and SOFTimpact are here for related services, including KPI-related • Clarification to help you apply this well-defined set of training, consulting and development. Each KPI and PI in the standard has a KPIs to your company - in an effort to save Additionally, SOFTimpact offers integra- tion services for backend systems as well detailed description and also some cal- costs, improve operational performance as as KPI-related mobile applications and culation examples. But the past few well as enhance transparency within the connectivity solutions. years demonstrated that it can still be industry. Markus Schmitz, Managing Director, improved. The KPI definition needs to SOFTimpact Ltd be clarified and the examples need to be Find us under www.shipping-kpi.org or Tel: +357-25-875639 amended to be of real value to users. talk to us at [email protected]! ll [email protected]

BIMCO BULLETIN 2015 VOLUME 110 #4 11 BY ANNA WOLLIN ELLEVSEN ROPAXTIME – new niche contract for the RoRo sector

In June 2015, BIMCO further expanded its portfolio of time charter parties with the publication of ROPAXTIME, a standard contract for the RoRo passenger ferry sector. It is already being used by Stena RoRo and other companies in this niche trade which is a very encouraging start for this new contract.

A ground breaker ROPAXTIME is a welcome addition to of the catering crew running the restau- There may be specific trades where all BIMCO’s range of standard contracts as it rants, bars and shops on board, is clearly crew are directly employed by the owners is the first ever purpose made form for the regulated as well as the victualing, clean- for reasons of receiving state subsidies and carriage of both “soft” and “hard” cargo in ing and laundry services. Likewise, it also this can be achieved with ROPAXTIME by terms of passengers and rolling cargo, such describes what inventory should be avail- adding specific wording to this effect and as trucks and trailers. Previously, parties able for hotel services and the right to tweaking the clauses which refers to Own- in the RoPax trade had to rely heavily on install gaming machines. ers’ and Charterers’ Crew. amended versions of general-purpose dry cargo standard forms such as NYPE, BAL- A central provision of ROPAXTIME is the Lashing crew TIME and GENTIME. passenger clause which provides in detail Cargo operations and stevedoring is often for all passenger related issues and makes it a cause of discussion between the par- Deleting and amending wording and add- clear that passengers are on board the ship ties and have therefore been carefully ing new “rider” clauses brings with it the at the charterers’ risk and responsibility. addressed in ROPAXTIME. In short, char- risk of introducing conflicting clauses and terers are responsible for loading, stowing, creating ambiguity. This can leave parties In respect of documentation relating to lashing, unlashing and discharging. How- uncertain of what their responsibilities and contracts of carriage of both passengers ever, the lashing and unlashing is com- obligations are and lead to disputes. Using and cargo, ROPAXTIME specifies that it monly performed by the Owners’ Crew and ROPAXTIME will speed up negotiations is for the charterers to issue tickets or any it is often the case that there is not enough and minimise the risk of disputes arising other contracts of carriage such as bills of crew on board to do the lashing and at the from the interpretation of the contract. lading. However, bills of lading are gener- same time keep up with other duties such ally not used in this trade, where waybills as watch keeping and maintenance work. The sub-committee given the task of and consignment notes are more common To overcome this issue, the charterers have developing ROPAXTIME was chaired by for shipping goods. the possibility to request owners to place Mr Robert Almström of Stena RoRo and additional crew on board for lashing pur- included representatives from Macholl Charterers’ and owners’ crew poses. The parties should agree on a daily & Specht, Enrico Scolaro Shipbrokers, A feature typically found in RoPax opera- rate for the additional lashing crew, which Ülgener Law Offices, and the Swedish tions is that charterers will directly employ is payable by the charterers. It is important Club. The result is a clearly written and crew on board the ships. ROPAXTIME, to note that when Owners’ Crew perform balanced document that comprehensively therfore, makes a clear distinction between the lashing and unlashing this way they do addresses the interests of owners and char- Owners’ Crew and Charterers’ Crew. The it in the capacity as servants of the charter- terers in the RoPax trade. two groups are included in the Definitions ers, who will remain responsible for these Section and who belongs to which group operations. Trade specific clauses is determined on the basis of the employ- In addition to the standard terms and ment contract of the crew member in ques- Pilot exemption conditions you would expect to find in tion. Generally, personnel working in the Since RoPax ships generally operate on the a BIMCO contract, ROPAXTIME con- restaurants and shops on board belongs same line and can call the same ports sev- tains several provisions addressing issues to the Charterers’ Crew, while the master eral times a day, it would not make sense to particular to the RoPax trade. For exam- and deck and engine crew would fall under take a pilot on every occasion. It is there- ple, the responsibility and employment Owners’ Crew. fore common in this trade that the mas-

12 BULLETIN 2015 VOLUME 110 #4 BIMCO Anna Wollin Ellevsen

webinar broadcasted on 9 September. It was also presented at the North Sea Oper- ators’ Conference on 28 September, and at the Interferry Conference on 5 Octo- ber. In addition, a number of articles have also been published in various trade mag- azines.

Using ROPAXTIME Sample copies of ROPAXTIME and accompanying Explanatory Notes can be downloaded free of charge from BIMCO’s ter is incentivised for obtaining a pilot occasions have accepted late payment of website: www.bimco.org. exemption. This will depend on local reg- hire, this cannot be used to argue that own- ulations regarding compulsory pilotage ers have waived their right to withdraw in If you would like to use the contract in and whether the master has a valid Pilot- respect of future payments. This clarifica- your business, BIMCO’s IDEA•2 online age Exemption Certificate. If the mas- tion should be helpful in avoiding disputes charter party editor tool will provide you ter successfully obtains pilot exemption, and creating certainty for the parties. with full access to the contract. ll the owners should be compensated by the charterers at an agreed rate for the pilotage. Cargo claims

A detailed clause regulating liability Editor’s Note: Anna Wollin Ellevsen, Late payment of hire between owners and charterers for third Senior Legal and Contractual Affairs The drafters have taken the opportunity party cargo claims has been included. This to clarify a point in the provision regard- clause is modelled on the Inter-Club New Officer at BIMCO, is involved in the ing the owners’ right to withdraw follow- York Produce Exchange Agreement which development, revision and promotion ing charterer’s failure to pay hire on time. was drawn up to keep cargo claims down of BIMCO’s wide range of standard con- If payment is late, owners should give writ- and avoid costly litigation. Broadly speak- tracts and clauses. She is a lawyer by ten notice to charterers explaining this ing, liability is allocated on the basis of the training and holds a Master of Commer- and include the grace period within which cause of damage. For example, owners are the charterers should pay. In addition, the liable for cargo claims caused by unsea- cial Laws from University of Lund, Swe- notice should make clear that owners will worthiness of the ship, while charterers are den and a Master of Maritime Laws from withdraw their ship if the charterers do not liable for cargo damage caused by cargo Southampton University, England. Anna pay before the end of the grace period. The handling operations. joined BIMCO in 2007. Previous employ- important clarification to ROPAXTIME ment includes working as a junior judge is that it has been expressly stated that the Promotional activities at a district court in Sweden and as an owners’ right to withdraw will apply on ROAPXTIME has generated an encourag- each and every occasion hire is due. This ing level of interest from the industry. It associate lawyer at a Swedish law firm. means that even if owners on previous was presented at a well-attended BIMCO

BIMCO BULLETIN 2015 VOLUME 110 #4 13 NYPE – time charter party revision

This major revision promises to be both balanced and comprehensive.

IMCO jointly issued the first revision of the New York Produce Exchange Time Charter (NYPE) since 1993, following three years of intensive discussions between BIMCO,B Association of Ship Brokers and Agents (ASBA) the copyright holder and the Singapore Maritime Foundation (SMF).

BIMCO, ASBA and the SMF have consulted with the industry globally during the development of the new edition of NYPE to gather a clear picture of commonly made amendments and rider clauses added by practitioners. Careful account has been taken of the interests of owners and charterers together to create a more bal- anced agreement than in previous versions of the charter. ll

Søren Larsen, BIMCO’s Deputy Secretary Nigel Hawkins, Chairman of the ASBA drafting General, said: committee, said:

We are delighted that our close cooperation The 1993 NYPE Charter Party was ripe for

with ASBA and SMF has resulted in the completion updating. ASBA is therefore pleased that with of this major project to produce a much improved our friends at BIMCO and the Singapore Maritime NYPE that will be of great benefit to the industry. Foundation we have agreed the wording of a NYPE fit for the present day. ASBA hope that the industry will find this new NYPE a clear and logical Inga Froysa, Chairperson of the BIMCO NYPE document, and, that the industry will note some familiar language contained in past NYPEs. revision sub-committee, added: Users of the current NYPE form will certainly still

recognise and be familiar with the core elements of the time charter party, but they can also expect to Michael Chia, Chairman of the Singapore see some significant changes and improvements. Maritime Foundation, said: “Notably, the contract incorporates many of The revised NYPE is the first international the rider clauses that are routinely added to the existing NYPE – but we have made sure that any shipping form that is a collective effort spanning new clauses incorporated into the new NYPE are the globe involving ASBA, BIMCO and the SMF. relevant, balanced and consistent with the other With the extensive global industry stakeholder provisions. consultation we believe that the end product is a “Overall, our aim was to create a modern NYPE contract that better meets user needs and will see with global appeal – and I believe that this has been quick acceptance and adoption. achieved.

14 BULLETIN 2015 VOLUME 110 #4 BIMCO Key features of NYPE 2015 include: • A choice of trip or period charter • Optional Not Always Afloat But Safely Aground (NAABSA) provision • Choice of cargo readiness at delivery port or first load port • Obligation on owners/charterers to restrict further employment imme- diately prior to delivery/re-delivery that might delay the ship • Owners to provide and maintain Certificates of Financial Responsibility for oil pollution as required at the start of the charter period • Detailed bunker provisions for period and trip charter options covering quantities and prices; bunkering operations and sampling; quality and liability; fuel testing; and low sulphur fuels • Updated and clarified hire payment provisions relating to grace period, suspension and withdrawal consistent with recent legal decisions • Detailed and clarified speed and performance clause • A broad choice of law and arbitration options – New York/US law; Lon- don/English law; Singapore/Singapore or English law; or a free choice agreed by the parties • additional clauses dealing with a range of current issues: – hold cleaning/residue disposal in accordance with MARPOL – International Maritime Solid Bulk Cargoes (IMSBC) Code – hull fouling – electronic bills of lading – slow steaming – piracy – ISM/ISPS Codes – ballast water exchange regulations

BIMCO - Company Security Officers: All BIMCO member CSOs should have now received 3 publications from the BIMCO Security department:

WEAPON SERIAL NUMBER REFUGEES AT SEA CSO GUIDANCE FOR GUIDELINES GUIDANCE WEAPONS ON BOARD FOR MASTERS

Refugees at Sea Guidance LOCATING WEAPON SERIAL NUMBERS (continued) BIMCO GUIDELINES AK47 for Benelli Argo Refugees on board Available via BIMCO website MASTERS

Respect cultural sensitivity Identify leaders/spokespeople www.bimco.org Ensure safety and supervision of women & children Provide water/food/shelter/medical aid Confiscate dangerous items/knives/weapons Beware of potential conflict between migrant groupings Confirm info to MRCC where possible Continuously monitor own safety & security of crew and ship Benelli MR1 BIMCO GUIDELINES Situation with MASTERS for Benelli Nova numbers/health/diversity WEAPON SERIAL NUMBERS of migrants/medical skills within migrant group and sense of hostility if any Once the Private Maritime Security Company (PMSC) has boarded the ship: for1. Ensure that the PMSC Team Leader (TL) displays the weapons for 2. Confirm the weapon type and number is as stated on the data sheet REMEMBER: NO automatic weapons may be brought on board Insist on screening/refugeeRefugees checks ashore at Sea Guidance BIMCO GUIDELINES BIMCO GUIDELINES 3. Ensure the weapon is not loaded at this point Clean and disinfect areas used 4. Check the serial numbers ( Browning Bar Match Mass Rescue - Action List / Aide Memoire / Ship’s Bridge Card flip page over for photographs showing serial number location) Check own head count Refugee sighting & obligations COMPANY SECURITY OFFICERS (CSO) MASTERS Effective stowaway search before sailing Disembarkation of refugees 5. Ask the TL to operate the working parts of the weapon to demonstrate Inform nearest MRCC the cleanliness and operational capability (check for no rust or seized Dispose of PPE REGARDING WEAPONS ONparts) BOARD WEAPON SERIAL NUMBERS Browning Longtrac Commence SAR procedures if in distress 6. Check that the ammunition fits the magazines correctly and is in good condition MRCC Review legitimacy/real need. Master’s decision MRCC Request Request logistics assistance prepared 7. Confirm the amount of rounds in the magazines Request or sighting? OOW Log - Continuous record 8. Ensure that the TL is able to describe the actions to be taken in the event of an accidental or negligent discharge of the weapon when on board Maintenance of communication with MRCC Yes Insist on port of disembarkation The equipment list provided by the local agent or PMSC must be an exact match to what is brought on board. Inform all vessel stakeholders, Any discrepancies must be brought to the immediate attention of the Company Security Officer (CSO) Immediate action or ship agent before departure. Owners/managers/P&I/Flag/charterer REMEMBER: UNLICENSED WEAPONS ARE ILLEGAL Consider how to assist/protect/rescue Izhmash No – Master could consider Company Security Officers (CSO) are responsible for checking that correct Already refugees on boardAllow crew time to discuss event licensing procedures are in place prior to awarding any armed transit Once the Private Maritime Security Company (PMSC) has boardedL1A1 the ship: Dangerous cargoNote the stressed and signs of PTSD Protect? Weather conditions Vessel to lee of refugees to a Private Maritime Security Company (PMSC). PMSCs are required to Crew debrief Approach from astern Limited accommodation Crew Briefing and Preparations provide certificates that match the name of the security company stated in Placing ship into danger Management debrief Master debrief to Owners/managers/charterers 1. Ensure that the PMSC Team Leader (TL) displays the weapons Too risky Wear uniform/PPE GUARDCON, or any other contract employed for the transit covered: Seal off dangerous areas Inform P&I/Flag LOCATING WEAPON SERIAL NUMBERS Lock access doors Confirm voyage instructions AK47 Rescue? Never walk/be alone Benelli Argo Prepare all relevant stores held 2. Confirm the weapon type and number is as stated on the data sheet 1. Confirm that the PMSC has legally procured and owns the weapons by Steyr Scout Decide where to shelter refugees – Benelli MR1 REMEMBER: NO automatic weapons may be brought on board checking the PMSC invoice annotated with the weaponBenelli Nova serial numbers © BIMCO consider weather, time to port, season etc. If Stood By Control social media communications Zastava 2010 If Towing Browning Bar Match On Boarding 2. Ensure that the appropriate export license and end userBrowning certificate Longtrac are 3. Ensure the weapon is not loaded at this point valid. (UK Government or equivalent export trading license such as an Inform MRCC of numbers Open General Trade and Control License (OGTCL)Izhmash or Open Individual flip page over for photographs showing serial number location) Consider: Maintain communications L1A1 Request likely time on task General: Weather Trade and Control License (OITCL) 4. Check the serial numbers ( Identify mix of genders/children Size and state of tow Establish trust/reassure Spare clothing/life vests held Steyr Scout Keep refugees calm Floating ropes Zastava 2010 Speed Identify state and hostility of refugees MOB boat in the water if safe Zastava PAP Mooring rope 3. If a third party provider is supplying weapons the PMSC must have 5. Ask the TL to operate the working parts of the weapon to demonstrate

documentary evidence to show actual ownership,Zastava PAP licensing and disposal the cleanliness and operational capability (check for no rust or seized of the firearms parts)

Actions: 4. Check that the weapon serial numbers (and type of weapon) on the Single point of embarkation 6. Check that the ammunition fits the magazines correctly and is in good Gangway/pilot ladder/nets PMSC data sheet match those on the license before confirming the task Women and children first condition Injured? Use of lifting appliances? Megaphone © BIMCO Hygiene controls 5. Ensure sufficient ammunition is included Control of possessions on boarding 7. Confirm the amount of rounds in the magazines 6. Ensure the ship Master has the details of the weapon serial numbers, type of weapons and amount of ammunition prior to the embarkation of 8. Ensure that the TL is able to describe the actions to be taken in the event the PMSC of an accidental or negligent discharge of the weapon when on board

7. If the PMSC has added “re-location weapons” as additional to the task, these must be checked as thoroughly as the weapons being used for your specific transit The equipment list provided by the local agent or PMSC must be an exact match to what is brought on board. Any discrepancies must be brought orto shipthe immediateagent before attention departure. of the Company Security Officer (CSO)

Checking a weapon’s details is as important as checking a person’s passport details. REMEMBER: UNLICENSED WEAPONS ARE ILLEGAL REMEMBER: NO LICENSE – NO CONTRACT!

Many thanks to all members that forwarded the requested details of their CSOs. The BIMCO support for the CSO Alliance continues and will benefit from your support and free enrollment. CSO Alliance [email protected] Any BIMCO member still to forward details of their CSOs and receive the free bridge cards should contact [email protected] BIMCO BULLETIN 2015 VOLUME 110 #4 15 BIMCO members’ comments and feedback

BIMCO sometimes receives information from members about situations or issues which they have encountered and would like to share with other BIMCO members.

Owners’ experience at Dakar

We would like to warn other members about the experience one of our ships have had when calling at Dakar recently.

On arrival at Dakar the chief engineer advised the contents of the vessel’s fuel tanks to customs officers. Unfortunately, in the process a small typo mistake was made where the contents of three fuel tanks were stated incorrectly. However, the total capacity of fuel on board the vessel were correctly declared. Instead of focusing on the total fuel content, the customs officers opted to focus on the errors and, despite the correct total quantities, they decided that the fuel quantities on board the vessel were incorrectly indicated and that a fine would be imposed.

We were adamant that the whole issue amounted to no more than small typo mistake, which did not in any way affect or distort the total quantity of fuel on board the vessel on arrival. As such there should not be a basis for a fine in the first place. Unfortunately, the customs officers were indifferent to our reasoning and an initial fine was set at an excessive amount of €100,000.

The port agent requested that the fine be annulled on the basis of the type, which was not possible. But the customs officers were pre- pared to reduce the total amount. With intense negotiations the port agent managed to reduce the fine to about €50,000.

Customs demanded that a letter backed by our P+I club be issued promising payment of the amount within 15 days otherwise the ves- sel would be detained until the issuance of said letter.

Unfortunately, the action of the custom officers and their judgement constitute a clear case of misappropriation of rights. Such behaviour from a governmental authority is arbitrary and reveals how a ves- sel is unprotected and exposed to an alleged violation of said rules enforced by local customs officers and other authorities.

Yours faithfully, [Member in Greece]

If you have an experience you would like to share, or have any comments about the Bulletin, please email [email protected].

16 BULLETIN 2015 VOLUME 110 #4 BIMCO Welcome to BIMCO!

BIMCO would like to extend a warm welcome to the following new members, admitted during the period from 1 June to 30 September 2015.

OWNER MEMBERS AGENCY MEMBERS Blue Planet Shipping Ltd. Piraeus, Greece A. Corbetta & Partners S.R.L Porto Marghera - Venice, Italy Diavaz Oceanteam Servicios Navieros Ciudad del Carmen, Mexico Agencia Maritima San Jose, Costa Rica Falcon Maritime A/S Copenhagen, Denmark AHM Marine LLC Abu Dhabi, UAE Hyproc Shipping Co. Oran, Algeria Alliance Logistics Casablanca, Morocco I. Barbon Srl. Mestre-Venice, Italy Champion Logistics Nigeria Limited Lagos, Nigeria Liberty One Ship Management Bremen, Germany Consorcio Maritimo Centroamericano, S.A De C.V Santa Tecla, El Salvador Lighthouse Navigation Pte Ltd Bangkok, Thailand Consorcio Maritimo Centroamericano, S.A. Puntarenas, Costa Rica Narval Chartering & Trading S.A Piraeus, Greece Consorcio Maritimo Centroamericano, S.A. Escuintla, Guatemala Neptune ehf Akureyri, Iceland Consorcio Maritimo Centroamericano, S.A. Corinto, Chinandega, Nicaragua Niriis Shipping S.A. Athens, Greece Consult Navigation Agency Port Said, Egypt Phaethon International Ltd Odessa, Ukraine Frank Armitt & Son Ltd Runcorn, Cheshire, UK Prima Shipping Oy AB Tolkkinen, Finland IMGC Group Puerto Ordaz, Venezuela PT Karana Line Jakarta, Indonesia KBS GUINEE Conakry, Guinea Samherji hf Akureyri, Iceland Laucam Maritima SAS Cartagena, Colombia Sea-good Pte. Ltd. Singapore, Singapore Oudkerk bvba Stabroek, Belgium Soloi Inc. Maroussi, Greece Pharaoh Marine Shanghai, China South32 Marketing Pte Ltd Singapore, Singapore Point Shipping Services Ltd. Warrenpoint, N. Ireland, UK Spring Marine Bulk S.A. Piraeus, Greece Port Agency Services (South Africa) Durban, South Africa Unico Marine DWC LLC Dubai, UAE Riada Shipping & Logistics Tripoli, Libya Vantage Shipping Lines S.A Athens, Greece Sarl Sermarine Algiers, Algeria Vessel Management Services Ltd. San Gwann, Malta Seamar Shipping Services & Logistics Fiumicino, Italy Seashore Solutions Comercio Rio de Janeiro, Brazil Sermarine Shipping Ltd. London, UK BROKER MEMBERS Stark Shipping LLC Ilyichevsk, Ukraine Amos Shipbroking Sdn. Bhd. Johor Bahru, Malaysia Transmar Ship & Forwarding Agency SL Tarragona, Spain Bravo Tanker Services Ltd. Shanghai, China United Heavy Lift GmbH & Co KG Hamburg, Germany Deudan Agencies Skagen, Denmark Fearnley Offshore AS Oslo, Norway Global Services OTM S.A.S. Bogota, Columbia ASSOCIATE MEMBERS J. Shipbrokers GmbH Birsfelden, Switzerland AVS Kuresel Gemi Tedarigi ve Yonetimi A.S Istanbul, Turkey Johnsen & Bergman Eftf. AS Rud, Norway CV. Esterlita Marine Supply Surabaya, Jawa, Indonesia Marship - Corretagem Maritima SA Alges, Portugal DGS Maritime Crewing Agency Rijeka, Croatia Martrade BV Sliedrecht, Netherlands Falck Global Assistance Smørum, Denmark PJ Marine Shanghai Co. Ltd. Shanghai, China GMP Marine Sedgefield, County Durham, UK PJ Marine Singapore Pte. Ltd. Singapore, Singapore Meridian Global Consulting Mobile, Al, USA Port Hill Marine Ltd Blyth, UK Palau International Ship Registry Houston, TX, USA Shipbroker International Limited Aboyne, UK Patriot Risk Management Ltd Nicosia, Cyprus Stalco Shipping & Brokerage, C.A Caracas, Venezuela Sea Guardian S.G. Ltd. Nicosia, Cyprus Vertical Horizon Shipping Pte Limited Shanghai, China Sol Marine Off Shore S.A Barranquilla, Colombia United Kingdom Hydrographic Office Taunton, Somerset, UK United States Maritime Resource Center, Inc Middletown, RI, USA WIZA Shipping & General Trading Ltd. Istanbul, Turkey Meet BIMCO

DATE VENUE EVENT CONTACT 4 Nov. 2015 Brussels ECSA Piracy Working Group Giles Noakes: [email protected]

10-12 Nov. 2015 Hamburg 6th Gasfuelled ships Conference 2015 Lars Robert Pedersen: [email protected] 50% discount for BIMCO’s ship owner members

11 Nov. 2015 Hamburg Young Shipping Professionals networking event Debra Devied-Clayton: [email protected] Lars Robert Pedersen: [email protected]

12-13 Nov. 2015 Manila CrewConnect Global 2015: The Asia-Pacific Manning & Training Conference Aron Frank Sørensen: [email protected] 20% discount for BIMCO members

17-18 Nov. 2015 Washington D.C. Green Ship Technology North America Peter Lundahl Rasmussen: [email protected] 15% discount for BIMCO members

17-19 Nov. 2015 Hamburg BIMCO Annual Conference and Awards Dinner 2015 Michael Lund: [email protected]

25-26 Nov. 2015 Barcelona Platts 4th Mediterranean Bunker Fuels Conference Lars Robert Pedersen: [email protected]

10 Dec. 2015 Hamburg German Shipowners Associations Dinner Lars Robert Pedersen: [email protected]

2 Feb. 2016 Oslo e-Navigation Underway International 2016 Lars Robert Pedersen: [email protected]

8 Mar. 2016 London BIMCO Security Committee Lars Robert Pedersen: [email protected]

15 Mar. 2016 Copenhagen BIMCO KPI Expert Group Lars Robert Pedersen: [email protected]

15-18 Mar. 2016 Copenhagen Green Ship Technology Conference Lars Robert Pedersen: [email protected]

12 Apr. 2016 Hamburg BIMCO Marine Committee Meeting Lars Robert Pedersen: [email protected]

12 May 2016 Hamburg Motorship Propulsion and Emissions Conference 2016 Lars Robert Pedersen: [email protected] Shipping’s premier Charter Party Editor solution

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For more information, visit www.bimco.org or contact [email protected] BY MICHAEL GREY The changing face of loss prevention

“We are moving away from telling people what to do,” says Karl Lumbers, who retired this summer after nearly 30 years at the forefront of loss prevention with the UK P&I Club. As he spoke to the BIMCO Bulletin on the eve of his retirement, we asked Karl Lumbers to reflect on the changes that had taken place in this increasingly important element of P&I insurance during his career with the club.

arl Lumbers joined the staff of Thomas Miller, managers of the UK P&I Club, in 1986, following aK career as a deck officer in the Austral- asian liner trades, coming ashore with a foreign-going Master’s Certificate. In these trades, which had largely con- verted to containerisation from break- bulk during his time at sea, cargo care was ingrained into the deck officer’s professional knowledge. The UK Club, along with others, recognised the need for this special expertise in the handling of claims.

The UK Club’s loss prevention pro- grammes, said Lumbers, had their roots in cargo claims and the belief that some- thing could be done to help members reduce cargo losses through practical risk reduction. As a non-profit making mutual insurance association, a club is well placed to share experience gained from claims- producing incidents, to help members as a whole. There was a history of loss pre- vention stretching back more than half a century, with circulars being published regularly to inform members about cur- rent concerns, while the “Carefully to Carry” committee, which was put together to advise on matters of cargo carriage, has Karl Lumbers a similarly long pedigree. The club had also initiated a condition survey programme to ensure only shipowners of an adequate amounts of claims data, which would have element in mitigating risk and preventing standard were allowed to enter the mutual. been extraordinarily difficult in pre-com- future losses. It was also recognised that puter days, has been a major advance made communication with members was nec- Shortly after Lumbers arrived at the possible by technology. essary for improvement, with information UK Club, computer systems were pro- gleaned from claims analysis and the iden- grammed to provide a detailed analysis of Asking questions about claims and where tification of meaningful trends being cir- large claims. The ability to scrutinise large the money was going was seen as a crucial culated to inform them.

20 BULLETIN 2015 VOLUME 110 #4 BIMCO What was behind a claim? Was it structural advice may enable matters to be put right or mechanical failure, inadequate mainte- which might subsequently cause problems nance or poor design? Was human element with port state control inspectors or vet- a factor? Were there trends which could be ting teams. detected that identified root causes? A major development took place in 2011, Michael Grey Furthermore, it was also recognised that when a new claims-based system using the message needed to be transmitted to the methodology of “threats and conse- those aboard ship, as it was these officers quences” was established to assist members who were key players in any improvement. in reducing claims. Using the “bow-tie” In 1988, the first of what would become a approach, this has involved everyone in series of claims-related videos was made, the chain, from the ships’ crews who are specifically for those aboard ship to help “at the sharp end” to claims handlers, changing technology of commercial ship- them understand exactly how, why and underwriters, those involved in loss pre- ping. There is less structural, mechanical where liability claims occurred. Down vention and risk assessors who are the link or equipment failure. Although there are through the years, says Lumbers, the club between ship and shore. fewer people aboard most ships, the costs has had a crucial role in raising awareness of claims for personal injury are soaring. of claims and how they can be prevented. For the member, the reports from the “Slips, trips and falls” remain a signifi- A huge amount of information on spe- assessors, along with claims records, will cant source of pain and injury, and heavy cific problems as they are identified has give some indication as to whether the claims. There are still a considerable num- been promulgated in many different ways, risk profile is in the region of what may be ber of claims for deck officer and crew through video and DVD, through special expected for ships of this type and what error, despite all the efforts that have gone risk booklets and increasingly through improvements can be made. It is a proac- into training and technical advances such electronic alerts of various kinds. tive, practical system that is being further as Electronic Chart Display and Informa- developed with a self-assessment scheme, tion Systems (ECDIS) and other naviga- In 1990, the club employed seven ship designed to help members identify threats tional improvements. There is concern inspectors, all very experienced master which might cause a claim aboard their about blackouts, which have a habit of mariners or chief engineers, who would ships, along with controls in place to miti- occurring at the most hazardous times. visit ships and provide members with an gate these. The value of being able to iden- independent professional assessment of tify an “accident waiting to happen” and to He remains very positive about the way their quality. This proactive system of help- head this off, with mitigating controls, is in which recent developments have seen ing members reduce their claims has been easy to see. ships’ crews more linked in to the proac- effective and has been further developed tive process of claims reduction. There has over the years. The inspectors, who have The messages being transmitted from been great interest in the “bow-tie” system evolved into “risk assessors”, are not aboard the club, whether through the ship visits, in which crews can be encouraged to iden- ship to judge or threaten the ship’s person- club circulars or large number of technical tify threats and hazards, and how these nel but are able to judge where improve- bulletins which are regularly published, can be controlled and their effects miti- ments might be necessary, can give helpful emphasise that the knowledge available gated. He believes that such a system, with advice from their long experience and atten- from claims and their analysis is a useful the involvement of a crew, really can pro- dance aboard different ships and are able to tool for everyone operating ships, whether mote a degree of “ownership” aboard ship, provide a level of comparison of standards afloat or ashore. “These are the matters encouraging professionalism and pride in which can be very helpful to members in from which claims are being derived, and one’s own ship. As a former seafarer, Karl benchmarking their performance. here is the data to demonstrate it” might be Lumbers, encouraged to take pride in the considered the main thrust of the message, ships he served in, believes that this greater It is very revealing to see the attitude of encouraging members to look towards involvement will be wholly positive. ll crew members to the risk assessors board- their own risks in these categories, aboard ing their ships when they discover that their own ships. Data is invaluable, says these are helpful professionals who are Lumbers, noting that it is difficult to man- Editor’s Note: Michael Grey is BIMCO’s on their side, offering practical advice on age what cannot be measured. Correspondent in London. He is a former how to keep people safer, and on cargo Editor of Lloyd’s List and a regular con- care or navigational standards, and that What are the main changes that Karl Lum- they are not being judgemental or causing bers has seen in his career during the tributor to many maritime publications. them trouble. Indeed, the assessor’s helpful past 29 years? Many of these reflect the

BIMCO BULLETIN 2015 VOLUME 110 #4 21 BY GEMMA WILKIE

BIMCO at London International Shipping Week 2015

A view from the ground

BIMCO joins young shipping professionals in London to hear their views on market confidence and on London’s position as a global hub for maritime.

IMCO joined thousands of pro- the UK – and of course to bolster its sta- fessional Network London (SPNL) event fessionals from across the inter- tus as one of the primary global mari- – which is usually attended by a mix of peo- national shipping industry time centres. But the goal of LISW since its ple at the early-mid stages of their career – duringB the second London International inception has also been to create a global alongside industry leaders such as Jeremy Shipping Week (LISW) in September. atmosphere and attract professionals from Penn from The Baltic Exchange. The focus Across 80 industry events, all sectors around the globe to visit the events tak- of the event was a panel of three people who of the international shipping industry ing place in London during the week. This lead the shipping professional networks in came together – regulators, charterers, networking opportunity provided a strong Hamburg, Hong Kong and Copenhagen – ship owners, ship managers, bunker sup- platform for BIMCO to connect with mem- discussing and answering questions about pliers, lawyers, ship brokers, bankers, bers attending – and to support the events the challenges that face people building insurers, insurance brokers, commod- for professionals at earlier stages of their their career in shipping today. ity traders and brokers, ship suppliers, careers during the Shipping Professional port operators, shipping service provid- Network London event. Keep it in the family ers and more. The panel covered the question of how one Who are the next generation in gets into shipping – how they do business The UK shipping industry uses the event shipping? and develop their career. As part of this, the to raise its public and political profile in BIMCO chose to support the Shipping Pro- panel discussed how family-run businesses are still a key pathway into the shipping industry and also the relative difficulty of “breaking in” to a family-run company if 2013 2015 you are unconnected. The panel agreed that networking and building contacts still Overall market confidence (out of 10) 6.4 6.2 gives people the best chance of entering some of the long-established, family-run • The likelihood of their business making a major investment or • 6.4 • 5.8 significant development over the next 12 months (out of 10) companies – and aids career progression.

% of respondents who believed tanker rates would increase in 50 35 Shipping professionals more the coming year cautious in 2015 based on the shipping market outlook % of respondents who believed dry bulk rates would increase 45 35 in the coming year The SPNL also announced the results of a joint survey conducted with Moore Ste- % of respondents who believed container rates would increase 31 29 phens on the opinions of young profession- in the coming year als working primarily in the shipowning, shipbroking, ship management, charter- % of respondents who believed finance costs would increase 44 40 in the coming year ing, advisory and associated industries in London. Respondents were asked for their views of the current state of the market,

22 BULLETIN 2015 VOLUME 110 #4 BIMCO Gemma Wilkie

and how they believed it would perform Claudio Chistè, chairman of SPNL, said at responded well, with its traditional blend over the next 12 months – and the results the event: of practicality and entrepreneurialism, and were compared with a previous run of the will doubtless continue to do so. This is one survey in 2013 to see how opinions had “The past two years have been extremely dif- of the things which continues to attract tal- changed. Overall, the survey showed that ficult for the international shipping industry, ented young professionals into the industry. people’s outlook had become more cau- with world economies generally struggling to tious and slightly more pessimistic – sum- climb out of recession. But shipping is a resil- “Costs, on a number of different levels, must marised in the table to the left. ient and robust industry which has a history be addressed, and a global view taken at of finding solutions to problems. all times. In identifying these issues, SPNL Some things remained unchanged from the hopes to help the UK address them. Lon- 2013 survey: “Shipping faces serious challenges on a don’s maritime community needs a group of wide variety of fronts – from overcapac- young professionals, and those professionals • Demand trends, competition, and the ity, competitive pressure and environmen- testify by their very presence in London that cost and availability of finance remained tal concerns, to political unrest and strict they want to be here. But they need to be in the three leading factors respondents felt regulatory oversight. The industry has London which is properly connected to the were most likely to affect their business rest of the world, able to compete on a global performance over the next 12 months stage and, moreover, in a London which is part of the EU.” ll • Competitiveness, taxation and the abil- ity to adapt to a fast-changing envi- ronment remained the three leading challenges for London to remain a rele- vant global maritime centre.

No fewer than 80% of respondents felt Editor’s Note: Gemma Wilkie has been that it was in the best interests of London’s BIMCO’s Communications Director since standing as a global centre for maritime commerce for the UK to remain a member 2014. of the European Union.

BIMCO BULLETIN 2015 VOLUME 110 #4 23 BY GEMMA WILKIE

BIMCO at London International Shipping Week 2015

BIMCO, EU NAVFOR and the CSO Alliance share their latest insights over an English breakfast

The room hired for BIMCO’s breakfast briefing on security issues during London International Shipping Week was full with industry leaders keen to hear the latest from BIMCO, EU NAVFOR and CSO Alliance – and to enjoy a traditional English breakfast.

EU NAVFOR: a collective effort by also monitor fishing activity off the coast Major General Smith welcomed the signifi- maritime industry and naval forces of Somalia. cant reduction in pirate attacks since 2012, keeps pirate attacks suppressed stating that this had been achieved by the EU Naval Force’s main tasks are to escort The first speaker at BIMCO’s event was ‘collective effort’ of shipping companies merchant vessels carrying humanitar- EU Naval Force Operation Commander, and dedicated naval forces, including the ian aid for the World Food Programme Major General Martin Smith MBE. Gen- European Union Naval Force. The General (WFP) and vessels of AMISOM as they eral Smith stated that whilst Somali-based warned however that whilst opportunity transit along the Somali coast, and to deter piracy in the Indian Ocean and Gulf of for pirates to get out to sea and attack ships and disrupt piracy in the Gulf of Aden and Aden is suppressed, there is no room for had reduced, the pirates’ intent and capa- Indian Ocean. EU Naval Force warships complacency regarding the ongoing threat. bility remains. He continued:

The Future of Maritime Security being discussed at LISW15, with BIMCO, Head of EUNAVFOR, Major General Martin Smith MBE and Mark Sutcliffe, CSO’s Alliance. Photo credit: Port to Port Maritime

24 BULLETIN 2015 VOLUME 110 #4 BIMCO “It is clear that we have (together) come a long way since early 2011, when 736 hostages and 32 ships were being held for ransom in anchorages off Somali beaches.

“However, the recent incidents of Iranian dhows being captured by groups of armed men demonstrate that there are still some who are prepared to go out to sea and take vessels for ransom.”

Major General Smith went on to say that because of the naval patrols and merchant vessels’ self-protection measures, includ- ing the use of private armed security teams (PAST), in the Indian Ocean, counter- piracy forces assess that the threat from long-range pirate attacks in the near future is reduced. He added: BIMCO’s Chief Maritime Security Manager, Giles Noakes, takes the stage. Photo credit: Port to Port Maritime “Collectively we have been able to curtail their use of mother ships to attack far from the coast, but I remain convinced that if clarity. He confirmed his concerns over Crisis Management Exercise pirates perceive that we are lowering our illegal, unregulated and unreported fishing Following the BIMCO breakfast brief, the guard, they will seize the opportunity and off the coast of Somalia and informed the maritime security company Port2Port plan an attack on a vulnerable ship. And gathered crowds that this could be a cata- sponsored a Crisis Management Exercise if they take one ship, this could re-energise lyst for a return of Somali-based piracy. run by Dave Buston from Trident, which their business model which, you know all Giles spoke about the need to ensure ves- allowed participants to consider their abil- too well, could cost the international com- sel owners, charterers and port authorities ities and planning considerations in a sce- munity and shipping industry dearly.” take precautions regarding cyber security nario-based exercise. and understand the threat which could lead The current EU Naval Force mandate to dramatic consequences. The exercise was named “Daesh Dawn” runs until December 2016. In the coming and used ISO standards and Business Con- months, EU Member States will carry out CSO Alliance – sharing best practice tinuity Guidelines to steer participants a strategic review of the piracy threat to and information into following correct procedures. Partici- enable them to make a collective decision Mark Sutcliffe, the Director of CSO Alli- pants worked in groups on their proposed on how best to proceed post-2016. ance, finished the breakfast brief with an response to each stage of the scenario and explanation of potential benefits to CEOs delivered summaries to an expert panel. BIMCO: the need for clarity on piracy and CSOs of using the CSO Alliance web- The expert panel then summed up each reporting categories site and was appreciative of the support stage, building the pace and complexity of Giles Noakes, BIMCO’s own Chief Mar- offered by BIMCO to ensure a wider range the exercise into a thought-provoking and itime Security Manager, took the stage to of CSOs throughout the world could share testing discussion. inform everyone about the concerns held ideas, file specific reports and gather infor- over reporting categories throughout the mation from each other in the future. Giles Noakes BIMCO Chief Security man- known piracy risk areas of the world and ager was the moderator for the event and that work was ongoing to ensure all report- A new initiative for BIMCO members to confirmed it had been a useful tool for test- ing authorities used the same categories in gain free membership to the CSO Alliance ing operational planning and post incident the future. This would allow everyone to was also announced – members can contact management. ll know the full extent of piracy with more [email protected] for more information.

BIMCO BULLETIN 2015 VOLUME 110 #4 25 BY ARON SØRENSEN Vetting of dry bulk terminals

BIMCO launched its Dry Bulk Terminal Vetting Scheme in January 2015 requesting owners to report on their experiences encountered during port calls. The aim of this project is to get an overview of bulk terminal’s performance and if needed to improve the safety and co-operation between ship and terminal.

his project is based on ships Within each of the five categories there are rently launched preliminary results on completing a questionnaire on a series of related sub-questions included. the BIMCO website (Marine/Technical the following five categories: The answers from the sub-questions will section) highlighting the country, port, T be used to guide future users and will be month of the latest report and the num- • Mooring and berth arrangements updated on the BIMCO webpage. If for ber of reports received for the port in ques- • Terminal services example there is a surge at one of the ter- tion . This is the format that will be used to • Terminal equipment minals, this information will be shared to inform the user about ports receiving less • Information exchange between the ship members. To ensure anonymity to ships than five reports. and the terminal BIMCO will not publicise detailed infor- • Loading and unloading handling mation about any terminal prior to receiv- When more than 5 reports have been ing 5 reports on each port. received on a port more detailed infor- The ship is also asked to rate the services mation will be made available to BIMCO received: Since the launch, BIMCO has received members. The web site as it is under devel- close to 200 reports on about 140 differ- opment will include a star rating giving an • Excellent – Standard of services, ent terminals around the world. This is a excellent overview of the performance of equipment and/arrangements was good result however, we still need more the terminal: excellent and entirely safe. It would reports in order for this project for users serve as an example of best practice for to be effective. • One star (bad) other terminals. • Two stars Current participants will notice a slight • Three stars (average) • Very good – Standard of services, equip- change in the host survey platform. We • Four stars ment and/arrangements was of high have changed to a new platform capable of • Five stars (good) quality and always safe to the ship and/ delivering the same features and offering or her crew. a smooth transition. It will also not affect So far, the answers paint a positive picture past or future responses from members. of the interaction between a ship and ter- • Average – Typical terminal standard - minal. The rating of one or more catego- experiencing both good and bad how- In order to ensure that your form is ries has only been fair or poor in about 7% ever in general the services, equipment registered in the database all ships will of the cases. Comments and reasons have and/arrangements were safe and overall have to update to using the latest version been submitted to explain the low rat- met expectations. of the form. The survey form is marked ing score. For example, the lack of Eng- version 2.0 and can be found on the lish speaking staff seems to reasons many • Fair – Standard of services, equipment BIMCO website. times. Any rating report will be closely and/arrangements was below aver- reviewed together with the observations age and in some areas improvements to The information gathered will be made upon which it was given. safety had to be made. available to BIMCO members via the BIMCO website. It will provide timely The collection of rating scores is not an • Poor – Standard was unacceptable or guidance to ships, owners and charter- end in itself: It does little good to have unsafe for the ship and/or her crew. ers on the actual status and performance knowledge about poor conditions at cer- of terminals and berths. BIMCO cur- tain terminals, if nothing is done to correct

26 BULLETIN 2015 VOLUME 110 #4 BIMCO LEVEL 0

BIMCO DRY BULK TERMINAL VETTING Search for terminal

Quality of the facilities and service at dry bulk terminals worldwide ARE OF INCREASING importance for the daily operation. Since early 2015 ships officers have kindly completed a quick survey each time their ship leaves a terminal in order to obtain an overview of the performance. The survey data covers the quality of the following facilities and services at the given terminals: • handling of loading/unloading • mooring and berthing arrangements • information exchange between the terminal and the ship When the terminal is • quality and availability of equipment; and selected, the user will • terminal services be referred to level 1. Aron Sørensen Terminals are given a star rating provided its performance based on the five categories. In case the terminal do not yet have 5 reports in the database, a text Select country from the dropdown list will appear telling the number of reports submitted to date. Select terminal from the dropdown list

LEVEL 1

BIMCO DRY BULK TERMINAL VETTING the situation. Both BIMCO mem- bers and the Secretariat should be • List the name of the selected country involved in taking action when • List the name of the selected terminal / including the UN-LOCODE • List the number of reports and the last update (only month and year) such occasions occur. The link will bring you THE OVERALL EXPERIENCE WITH THE TERMINAL WAS RATED to a new sub-site, where detailed An example of a correction could information will be listed. The user will be be: If a number of reports about more referred to level 2. CATEGORIES: information terminal X has revealed that that the personnel at the terminal can- The handling of loading and unloading was rated link Important information collected from the not speak English. The owner The mooring and berth arrangements was rated link reporting and related to the specific or manager will then be able to The information exchange between ship and terminal, rated link terminal, may be ensure that a native speaking per- issued: e.g. ”high The terminal equipment was rated link safety standard” or son can be present before calling at ”do not speak English” The terminal services was rated link terminal X.

IMPORTANT NOTICES: In the future it should also be made possible to upload photos and a sit- uation report to the dry bulk vet- ting website making it possible for BIMCO to contact the termi- LEVEL 2 - Category 1 nal or terminal organisations with a request for clarification; publish BIMCO DRY BULK TERMINAL VETTING a terminal alert on the web page; and alert Port State authorities. The handling of loading and unloading was rated

Yes Similar sites for all five • Whether the terminal adhered to the agreed loading/unloading plan? No We are off to a good start with this N/A categories. project to improve dry bulk ter- • Whether a copy of the agreed loading/unloading plan available to the Yes terminal control room personnel? No N/A minals for members but we still

• Whether the original loading/unloading plan changed? Yes need more BIMCO members own- No

Yes ing or operating bulk carriers to • Whether the terminal loading/unloading operation damage any parts No of the ship or her equipment? N/A participate in providing constant

Yes • Whether it necessary to suspend the loading due to reaching the No feedback and reports to make this trimming stage? N/A Specific (relevant) comments from the successful. ll Yes • Whether the cargo trimmed to the Master’s requirements? No survey reports will be N/A listed.

• Whether the final cargo quantity (as stated on the bill of lading) Shore figures determined by shore figures or based on a draft survey? Draft survey Editor’s Note: Aron Frank

• Specific comments: Sørensen is BIMCO’s Chief Marine Technical Officer.

BIMCO BULLETIN 2015 VOLUME 110 #4 27 Outline of relevant IMO issues

The IMO Sub-Committee - Carriage of Cargoes and Containers (CCC) deals with cargo operations, such as packaged dangerous goods, solid bulk cargoes, bulk gas cargoes, and containers. The 2nd session of CCC was held on 14-18 September in London.

he International Maritime Solid tory under International Convention for Bulk Cargoes Code (IMSBC the Prevention of Pollution from Ships Code) was drafted to prime haz- (MARPOL) Annex V. ardsT associated with the shipment of solid bulk cargoes - hazards such as Bauxite cargoes structural damage caused by improper BIMCO co-sponsored two submissions cargo distribution, loss or reduction of which proposed a draft circular to be dis- stability during a voyage and chemical seminated to warn the shipping industry of reactions of cargoes. The IMSBC Code the carriage of bauxite cargoes subsequent facilitates the safe stowage and shipment to the aftermath of the sinking of Bulk of solid bulk cargoes by providing infor- Jupiter. The submissions called for a need mation on the dangers associated with to further investigate the cargo’s proper- the shipment of solid bulk cargoes. ties and characteristics, including if nec- essary, an appropriate testing method for The BIMCO Solid Bulk Cargo Database the transportable moisture limit. The sub- (SBCD), which can be accessed on BIM- committee was also informed that China CO’s website, provides an easy to use refer- had commenced bauxite research in April ence tool. Shore-based personnel, but also this year. It was agreed that all research 1. Moisture content of the cargo indicated shipboard staff might find the information would be considered for a more compre- in the certificate is less than the indic- useful. The main objective of the SBCD is hensive outcome of the work for the corre- ative moisture limit of 10%. The parti- to collect data and information on new or spondence group. cle size distribution is as detailed in the unusual cargo properties and the appro- individual schedule for Bauxite in the priate cargo handling procedures, includ- BIMCO also reports that a circular with IMSBC Code; or ing any available information related to: the terms of reference for a correspondence pre loading cleaning requirements, undue group to investigate on the carriage of 2. Cargo is declared as Group A and the delays, inspection guidance, loading, car- bauxite and its liquefaction tendencies. It shipper declares the transportable riage instructions, discharge and cleaning is with the intention of proposing amend- moisture limit and moisture content requirements, etc. ments to the bauxite schedule. Bauxite is in accordance with section 4.3.1 of the currently a Group C cargo (cargoes that do IMSBC Code; or The IMSBC Code is an important source not liquefy or possess a chemical hazard). and at the CCC 2nd session two crucial The circular and the terms of reference for 3. Competent authority (the flag state) issues were discussed: the correspondence group were approved has assessed the cargo and determines at the plenary. that the particular cargo does not pres- •• Carriage of bauxite cargoes and their ent Group A (cargoes which may liq- potential ability to liquefy; and The essence of the circular is that the Cap- uefy) properties. Such assessments shall tain should not accept a cargo of bauxite be provided by the shipper to the Cap- •• Amendments to make the marine envi- for loading unless: tain as required by section 1.2.1 of the ronment (HME) requirements manda- IMSBC Code; or

28 BULLETIN 2015 VOLUME 110 #4 IMO IMO Headquarters, London. Photo credit: International Maritime Organisation / flickr

4. Captain has reason to doubt that the in accordance with the MARPOL Annex the IMSBC Code in MARPOL Annex V cargo being loaded is not consistent V by devolving clauses for voyage charter was finalised by the working group. with the shipper’s declaration then he/ parties and especially on the regulatory she should stop loading and have the side. At this session two outstanding issues Proposed amendments were made for shipper verify the properties of the had to be resolved: removing the non-mandatory HME cargo[1]. If necessary, advice should be requirements from the IMSBC Code guide- sought from the competent authority of 1. Establish the missing legal link between lines to MARPOL Annex V. The proposal the country of loading MARPOL Annex V and the IMSBC to make them mandatory was not agreed Code; and and the HME requirements together with BIMCO will disseminate the CCC circular the discussion from CCC 2nd session will to its members once it is officially issued 2. Make the non-mandatory HME be sent to the Marine Environment Protec- by the IMO and update the BIMCO Cargo requirement criteria the shipper’s obli- tion Committee (MEPC) for consideration database accordingly. gation to classify and declare that his and decision. Consequent amendments to solid bulk cargo is HME or not. the IMSBC Code and the prepared guide- Bulk cargoes harmful to the marine lines will be sent to MEPC. environment It was agreed at the CCC 2nd session that BIMCO has been extensively involved in the IMSBC Code in its entirety should The next CCC session will take place from identifying cargoes harmful to the HME not be made mandatory under MARPOL 12 -16 September 2016. ll Annex V. In order to link MARPOL Annex V to the IMSBC Code, the proposed 1 [2013] EWHC 2199 (Comm) amendment to include the definition of

IMO BULLETIN 2015 VOLUME 110 #4 29 Professional Development is a continuous part of our project management career

Quality Ship Management Beyond Compliance

THOME GROUP OF COMPANIES 16 Raffles Quay, #43-01 Hong Leong Building, Singapore, 048581 Telephone: 65-6220 7291 Email: [email protected] Website: www.thome.com.sg

Thome FP BIMCO.indd 1 15/09/2015 09:25 Professional Development is a continuous part of our project management career

Quality Ship Management Beyond Compliance

THOME GROUP OF COMPANIES 16 Raffles Quay, #43-01 Hong Leong Building, Singapore, 048581 www.laeisz.de Telephone: 65-6220 7291 Email: [email protected] Website: www.thome.com.sg

Thome FP BIMCO.indd 1 15/09/2015 09:25 BY MIKE CORKHILL New trade flows poised to buoy chemship market

Down by the bow for several years, the chemical tanker market is set to rebound on the back of new US and Middle East petrochemical plants.

ixed messages have been economies began to falter. Furthermore, IMO Type 1 and 2 chemical parcel tank- received from the chemical any sign of a rebound in business activity ers, with their stainless steel cargo tanks tanker community during the within the stuttering Eurozone was and the ability to fully segregate over 40 Mcourse of 2015. While spot rates began unsuccessful. cargo grades on a single voyage, will be to pick up during the spring, by as much called upon to deliver high-quality inter- as 7%, cargo volumes remained flat and Despite this recent market turmoil and the mediate and finished products to an ever- contracts of affreightment (COA) were downside effects of the rather substantial widening customer base. At the same time renewed at unchanged, low levels. chemical tanker orderbook, the long-term shippers of bulk chemicals from US and prognosis for this class of ship is good. Middle East loading ports will be looking Looking at operating costs, shipown- The availability of cheap feedstock in the for additional coated, IMO 2 and 3 chem- ers have benefited from the comparative US and the Middle East has prompted ical/product tanker tonnage to carry their strength of the USD and the declining cost major investments in new, export-oriented high-volume cargoes to distant markets. of bunkers due to the oil price slide. On the chemical production capacity. China, a other hand, the requirement to burn pre- key intended market for this new output The strengthening of chemical tanker mium fuel with a sulphur content of 0.1% of bulk chemicals, continues to develop its earnings since April 2015, on the back of or less in emission control areas (ECAs) as own petrochemical industry. To the extent improved spot market freight rates, has of 1 January 2015 has hit chemships hard that the country’s imports will be counter- been aided by the ability of the simpler because such ships, with their multiple balanced by rising exports of intermediate ships to swing between the chemical and cargoes and berth calls, spend more time and finished products. refined petroleum product markets. The in port than other ship types. demand for product tanker tonnage was It all bodes well for increased demand strong in the second quarter of 2015, and Long road back to profits in the years ahead for the two principal as a result chemical shippers had less ton- Chemical tanker owners have struggled to types of chemical tanker. Sophisticated, nage available on which to draw. Odfjell, make ends meet for several years follow- ing the September 2008 banking crisis. After several years of rough seas chemical parcel tankers are Consumer confidence evaporated with the sailing towards calmer waters. financial meltdown, undermining demand for both the chemical industry’s output and chemship services. Pre-crisis business practices proved to be unsustainable and shipowners have had to implement some painful cost-cutting and management restructuring measures to boost efficien- cies and improve sagging fleet utilisation.

Just when the chemical tanker campaign appeared to be nearing its destination on the long road back to profitability, commodity prices collapsed in the second half of 2014. Rather than spur increased spending and growing demand, rapidly declining prices created mayhem. Planned investments in new projects were put on hold, job layoffs jumped, stock markets got the jitters and previously strong Asian

32 BULLETIN 2015 VOLUME 110 #4 TANKER Mike Corkhill

The global petrochemical centre of Houston, with its busy Ship Channel, will be handling even more traffic in the years ahead a leading chemship operator, reported that ing methanol to Asia at the rate of 8 mta as well as chemical/product tankers. its results for the period represented its from Gulf and West Coast ports by 2019. Because the primary destination for the best quarterly performance since the third Although methanol is classified as an IMO growing exports of bulk and speciality quarter of 2008. Type 3 cargo, many charterers now spec- chemicals from the two regions will be the ify its carriage in Type 2 chemical tank- nations of Asia, shipowners will benefit US petrochemical rebound ers. A fleet of approximately 50 IMO from long delivery voyages of 6-11,000 Competitively priced petrochemical feed- Type 2 chemical/product tankers of the nautical miles and the resultant rise in stock in the US has become available as a 45,000 dwt medium range (MR) size will tonne-mile figures. result of the shale revolution. The expand- be required to accommodate planned US ing output of US shale oil and gas is rich exports of this product. New breed of chemships in natural gas liquids (NGLs) and, of the Growing seaborne movements of bulk five NGL components, ethane is by far the Middle East adds value chemicals have already prompted the cheapest and most abundant, accounting Following a slight decline in recent years, development of a new chemical tanker for about 50% of the total volume. An ideal Middle East chemical output has resumed design - the large IMO Type 2/3, coated petrochemical feedstock, ethane is becom- its growth profile and will continue to chemical/product tanker of around 75,000 ing available in quantities in excess of what expand strongly through the remainder dwt. The first two such vessels, Odfjell’s the vast and growing US chemical industry of this decade. Much of the new produc- Bow Pioneer and National Chemical Carri- is able to utilise for domestic consumption. tion capacity is aimed at overseas buyers, ers (NCC) of Saudi Arabia’s NCC Fajr, were to the extent that chemical exports from delivered in 2013. Operated under NCC’s As of March 2015 some 226 US chemical the region are set to reach the 30 million commercial management and the world’s investment projects totalling US$138 bil- tonnes per annum (mta) level by 2019, up biggest Type 2 chemical tankers, the pair lion were underway, twice the level of two from 20 mta in 2014. are enabling economy of scale benefits to years earlier. Over 60 per cent of these be derived in the delivery of Middle East investments were made by companies Middle East nations have been invest- chemical exports. based outside the US and the majority of ing in new chemical plants to add value to the new capacity will be located in Louisi- their plentiful oil and gas resources. The Although some operators active in the ana and Texas, close to major shale plays. new facilities will be producing not only chemical trades have 75,000 dwt Pana- bulk organic chemicals such as metha- max tankers in their fleets, these vessels With one particular bulk chemical prod- nol, mono ethylene glycol (MEG), ethylene are configured as refined product carri- uct, methanol, the US has brought 2.1 dichloride, xylene and methyl tertiary- ers with 12 epoxy-coated cargo tanks and million tonnes per annum (mta) of new butyl ether (MTBE) that have traditionally limited cargo segregation capabilities. In production capacity into play over the been exported in volume from the Gulf but contrast, Bow Pioneer and NCC Fajr are past year, while 5.9 mta is under construc- also, increasingly, speciality chemicals. As true chemical tankers. In line with IMO tion and 19.6 mta is planned. As the US regards bulk chemicals, MSI is forecasting requirements for IMO 2 ships, the max- is unable to make use of all this new out- the need for an additional 40 MR chemi- imum capacity of the cargo tanks on the put, it is about to become a net exporter of cal/product tankers to load the new Mid- two ships is 3,000m3. Each ship has 31 methanol. The transition from its current dle East production volumes due onstream zinc silicate-coated tanks offering a total net importer status is set to occur during by 2019. of 86,000m3 of cargo space. The one pump 2016. per tank arrangement, pipework and man- Like that from the US, the increasing ifold connections on the vessels make it Maritime Strategies International (MSI) Middle East output will also boost demand possible to carry up to 31 different cargoes estimates that the US is likely to be export- for stainless steel chemical parcel tankers in a fully segregated manner.

TANKER BULLETIN 2015 VOLUME 110 #4 33 The chemical logistics infrastructure is spreading - amongst Odfjell’s Chinese terminals is a Yangtze River facility 230km upstream of Shanghai

Bow Pioneer and NCC Fajr are the extreme focal point for chemship owners seeking to is a bimodal epoxy based on a carefully example of the trend towards the use of reduce operating costs and improve effi- engineered blend of materials. Shipown- larger chemical tankers for the carriage of ciencies across their fleet. Reducing berth ers are likely to be specifying hard coat- these new flows of bulk chemicals. Several calls through increased cargo transship- ings increasingly in the future to minimise owners have recently added to their fleets ments using barges at the main chemical cleaning downtime whilst maintaining the MR size, IMO Type 2/3 vessels that boast ports is one important tool. Others include integrity of both the ship and the cargo in excess of 20 coated tanks and cargo seg- optimising onboard bunker tank capaci- when changing grades. regations. These 45-50,000 dwt chemships ties to accommodate the required volumes represent attractive options for charterers of low-sulphur fuel in ECAs and align- Imminent market rebound seeking to reduce transport costs. Some of ing bunker barge deliveries with principal Approximately 125 chemical tankers total- the newbuildings have been provided with berth calls. ling 2.4 million dwt are due for delivery increased flexibility through a common in 2015. In terms of numbers some 60% of cargo manifold to complement the tra- Tank cleaning is not only a labour-inten- these newbuildings will have stainless steel ditional bank of chemical manifold con- sive operation but also a costly one in tanks, 25% zinc and/or epoxy coatings and nections. The additional feature enables terms of time and money. A year ago, the remainder hard coatings. streamlined handling of homogeneous when oil prices were high, the fuel needed cargoes, including petroleum products. to heat wash water so it could push the cost Allowing for the removal of some older of cleaning a full complement of chemship ships due to the termination of IMO cer- Streamlining chemship logistics tanks up to the US$100,000 mark. tificates of fitness and recycling, the chem- Chemship operators portray themselves ical tanker fleet is set for net growth of not so much as shipping companies but, Stainless steel tanks are the easiest to about 6% in 2015. While this influx of new rather, chemical logistics specialists. The clean but this tank material is not a feasi- tonnage will delay the onset of a sustained leading players have established their own ble option when carrying large volumes of rebound in freight rates until the new year, storage terminal facilities as well as part- bulk chemicals. Traditional epoxy pheno- 2016 is set to mark the long-awaited emer- nership arrangements with other logistics lic and zinc silicate coatings have served gence from what has been a long, dark tun- service providers to augment and enhance the industry well but neither is compatible nel for the chemship fleet.. ll their seaborne transport capabilities. They with the full range of bulk chemicals com- have worked out sophisticated stowage monly shipped by sea. planning regimes, port turnaround sched- ules and tank cleaning practices for their Paint manufacturers have tackled the Editor’s Note: Mike Corkhill is a techni- cal journalist and consultant specialis- ships and, because safety and reliabil- problem by introducing ‘hard’, smooth ing in oil, gas and chemical transport, ity are paramount in the delivery of these tank coatings marketed as being cleaning- including tanker shipping. A qualified high-value cargoes, emphasis is placed on friendly and resistant to all but the most Naval Architect, he has been the Editor of LNG World Shipping for the past 10 continuously adapting safety drills and aggressive cargoes. The most well-estab- years and from its inception. Although training programmes on the basis of expe- lished of these is a cross-linked copoly- recently retired from the post, he rience and lessons learned. mer claimed to be compatible with more remains involved with the publication as cargoes than stainless steel. Another Consultant Editor. Reducing port turnaround times is a key such hard coating recently introduced

34 BULLETIN 2015 VOLUME 110 #4 TANKER GFS A4 visual_Full Page 15/09/2015 09:22 Page 1

GFS A4 visual_Full Page 15/09/2015 09:22 Page 1

10-12 November 2015 Grand Elysee Hotel l Hamburg, Germany

SUPPORTED BY:

Join unique Technical visits and two day conference Titled ‘Gas as a maritime fuel for ECA compliance’, the 6th Gas Fuelled Panellists include: Ships Conference will include technical visits to the Stena Germanica Paolo Tonon, Vice President, methanol-fuelled ferry and the Becker Marine/AIDA Cruise LNG hybrid Head of Maersk Maritime Technology barge where delegates will see first-hand the practicalities of using Captain Wolfram Guntermann, LNG and methanol. Director Environmental Fleet Management, The conference will include two days of topical, technical presentations Hapag-Lloyd and roundtable discussions, plus an operator panel on ECA Rowil Ponta, Managing Partner, implementation and compliance, which will give attendees a valuable Nordic Hamburg Shipmanagement insight into how major operators are addressing the next deadline Per Stefenson, in 2020. 10-12 NovemberTechnical Division, Stena 2015 Rederi. View the full programme online now To book a placeGrand or to find out more Elysee about sponsorship Hotel opportunities lpleaseHamburg, contact the Events Team Germanyon +44 1329 825335, email [email protected] or visit: www.motorship.com/gfsconference SUPPORTED BY:

SPONSORED BY:

GOLD SPONSOR SILVER SPONSOR

GFS A4 visual_Full Page 15/09/2015 09:22 Page 1 Join unique Technical visits and two day conference Titled ‘Gas as a maritime fuel for ECA compliance’, the 6th Gas Fuelled Panellists include: Ships Conference will include technical visits to the Stena Germanica Paolo Tonon, Vice President, methanol-fuelled ferry and the Becker Marine/AIDA Cruise LNG hybrid Head of Maersk Maritime Technology barge where delegates will see first-hand the practicalities of using Captain Wolfram Guntermann, LNG and methanol. Director Environmental Fleet Management, The conference will include two days of topical, technical presentations Hapag-Lloyd and roundtable discussions, plus an operator panel on ECA Rowil Ponta, Managing Partner, implementation and compliance, which will give attendees a valuable Nordic Hamburg Shipmanagement insight into how major operators are addressing the next deadline Per Stefenson, in 2020. Technical Division, Stena Rederi.

View the full programme online now To book a place or to find out more about sponsorship opportunities please contact the Events Team on +44 1329 825335, email [email protected] or visit: www.motorship.com/gfsconference

10-12 November 2015SPONSORED BY: Grand ElyseeGOLD SPONSOR Hotel l Hamburg,SILVER SPONSOR Germany

SUPPORTED BY:

Join unique Technical visits and two day conference Titled ‘Gas as a maritime fuel for ECA compliance’, the 6th Gas Fuelled Panellists include: Ships Conference will include technical visits to the Stena Germanica Paolo Tonon, Vice President, methanol-fuelled ferry and the Becker Marine/AIDA Cruise LNG hybrid Head of Maersk Maritime Technology barge where delegates will see first-hand the practicalities of using Captain Wolfram Guntermann, LNG and methanol. Director Environmental Fleet Management, The conference will include two days of topical, technical presentations Hapag-Lloyd and roundtable discussions, plus an operator panel on ECA Rowil Ponta, Managing Partner, implementation and compliance, which will give attendees a valuable Nordic Hamburg Shipmanagement insight into how major operators are addressing the next deadline Per Stefenson, in 2020. Technical Division, Stena Rederi.

View the full programme online now To book a place or to find out more about sponsorship opportunities please contact the Events Team on +44 1329 825335, email [email protected] or visit: www.motorship.com/gfsconference

SPONSORED BY:

GOLD SPONSOR SILVER SPONSOR DID YOU KNOW... BIMCO Chief Shipping Analyst SAND PETER ...that BIMCO’s Shipping Economist will Macro Economics present the latest market insights at BIMCO’s Annual Conference and Awards Dinner on 18 November 2015 in Hamburg, ! Germany? Demand supported by EU and US while China is creating uncertainty

Global economy All eyes are on China in recent months as most other non-Chinese eco- The GDP growth rates in the US continue to strengthen. Following the pace, lower exports and consumer spending being the explanation. EU28, euro area and United States GDP growth rates Per cent change over the previous quarter nomic indicators have been dwarfed by the government’s actions and revision of the first quarter growth from -0.7% up to +0.6%, the second- 2 markets’ reactions. It is all of the things that we don’t know about the quarter growth rate has also been revised upward to an annualised rate 2015 has also been a disappointment for South Korea’s manufacturing

Chinese economy that is worrying, not the fact that the economy is in of 3.7%, owing to stronger business investments, and higher government industry, impacting the overall GDP level in second quarter, which came 1 a transition phase which inevitably will drive down GDP growth and and consumer spending. in 0.3% up from the first quarter. change import and export patterns. 0 Asia EU The apparent troubles in the second largest economy in the world have To provide stimulus to its economy, the Chinese Central Bank (PBoC) has As the European recovery continues at a time-consuming pace, the -1 shaken the belief in the overall global growth story. China’s growth has lowered interest rates as well as the amount of cash (reserve requirements) unemployment level responds remarkably well and has now come down positively affected global growth, especially in recent years when the that banks must keep on hand to boost lending. In a statement released to 10.9% in the Euro area. This is the lowest level seen since February -2 Western growth engine has stuttered. Thus we all become more sensitive by the PBoC, it said that “economic growth remains under pressure” and 2012 and a much-needed relief since the pinnacle at 12.1% in mid-2013. -3 than usual when China changes its course and we don’t see the full picture initiatives were carried out to “support the real economy to continue to It remains the southernmost parts of Europe where the unemployment

and understand what’s happening. develop healthily”. is most severe. 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 2007-Q4 2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 EA19 EU28 United States We have seen declining commodity prices in the past years, and more While the official GDP growth for the second quarter hit bull’s eye exactly Europe is also impacted by the sanctions against Russia and to a smaller Source: Eurostat recently the stock market got shook up. The world’s multinationals pre- at 7%, which was the government’s official target, factors pointed out extent by the Russian sanctions against Europe. The EU is Russia’s largest pared for quite different demand levels of key commodities as production already in 2007 to be more accurate for China’s economic development by trade and investment partner. The Russian GDP fell by 4.6% in the second in a transition phase that brings around slower yet safer and more sustain- was scaled up. Today we have a glut of coal, iron ore and oil although we the incumbent Premier Li Keqiang tell a different story. The three factors quarter year-on-year, while the EU28 GDP growth rose by 0.4% in the able growth. According to the International Monetary Fund (IMF) this are experiencing the highest economic activity in the world ever. he mentioned were the cargo volume on the province’s railways, electric- second quarter from the previous quarter. requires that the market is given a more decisive role in the economy. At ity consumption and loans disbursed by banks. Using these factors, the the end of the day, we all need to know more about these changes in order Key commodity prices economy seems to only be growing by up to 3% if it grows at all. The lack Outlook to understand them and so we don’t become anxious about them. The call 2006-2015 160 200 of trustworthy data means that the uncertainty is severe. Our base case for China is that the authorities will still manage to pull off in the financial markets is for the Chinese authorities simply to commu-

140 175 a soft landing. Regardless of where the “real” GDP growth is at, China is nicate what they intend to do before they do it and explain what they aim The Caixin China General Manufacturing Purchasing Managers’ Index at accomplishing by the moves. 120 150 (PMI) saw the quickest deterioration in operating conditions for over 100 125 six years in August. It now stands at 47.2, being below 50 threshold level At some point in time, we will stop talking about a recovery and focus 80 100 dividing expansion from contraction since March. Accompanying that, more on the lack of investments that has brought down the “potential 60 75 USD per tons

USD per barrel the “official” PMI also dropped below the 50 threshold level in August. Is future growth level”. The combination of the demographic situations in 40 50 this what a 7% GDP growth looks like? many of the developed nations mean a declining workforce and the lack 20 25 of investments that lowers the productivity gains results in future GDP 0 0 The labour market conditions are equally poor at a six-year low. That’s growth that will not reach the highs of the past. This “new normal” affects likely to be troubling the government most of all. A short-term fix could the shipping industry already, implying that the ability to think ahead as Jan. 2006 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011 Jan. 2012 Jan. 2013 Jan. 2014 Jan. 2015 Sep. 2006 Sep. 2007 Sep. 2008 Sep. 2009 Sep. 2010 Sep. 2011 Sep. 2012 Sep. 2013 Sep. 2014 Sep. 2015 May . 2006 May . 2007 May . 2008 May . 2009 May . 2010 May . 2011 May . 2012 May . 2013 May . 2014 May . 2015 be stimulus to the construction industry, which is labour intensive, but a well as the willingness to adapt are prerequisites in coming years. Brent crude oil price Thermal coal price, FOB Australia (RH-axis) Iron ore spot price CFR N China (RH-axis) long-term solution must also be found. Source: BIMCO, Clarksons What should comfort us, in the midst of uncertainty and with a longer- The Japanese economy grew by 1.0% in first quarter 2015 compared to the term mindset, is the fact that the world’s largest economic regions, the US previous quarter. This strong growth rate was brought around by higher EU (23.7% of world GDP) and the US (22.2% of world GDP), are back on The Federal Reserve Bank (Fed) is still scouting for the right moment to business spending. The data put economic growth in Japan at the stron- solid and positive growth tracks. While China’s economic growth is under increase interest rates. If it wasn’t for the most recent uncertainty about gest level in two years. However, sluggish consumer spending and lower pressure, China’s share of world GDP is “still only” 12.1% according to China, which is felt in the US too, it would probably have happened by now. industrial output in April could limit the expansion in second-quarter Eurostat, UN, the IMF and World Bank. Global GDP growth in 2015 is somewhat. Davos 2009 © Chappatte in “International Herald Tribune”, 29 January 2009 estimated at 3.3% by the IMF, slightly lower than 3.4% in 2014. ll Considering the US is getting close to full employment and the acknowl- edgement by the Fed that the inflation rates cannot be controlled, the In Japan, the PMI rose to a seven-month high in August, showing an only thing which stands in the way now is the lack of rising payrolls. overall improvement and new orders coming in faster. New export orders Global seaborne trade is dependent on global growth, thus it is vital if general shipping demand is to go forward that a smooth Being a large but closed economy (only 12% of US consumer spending still grow quietly, as trade with China is slowing down considerably. transition from a sustained recovery to normalized demand become successful. The article was finalised on 10 October 2015. Read is imported), the US will gain most by raising payroll to boost consumer The September PMI was slightly lower. As expected, the second-quarter about the impact on shipping on the following pages… spending, rather than being focused on the nation’s competitiveness. growth was limited; it actually became negative at 1.6% annualised growth

36 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK DID YOU KNOW... BIMCO Chief Shipping Analyst SAND PETER ...that BIMCO’s Shipping Economist will Macro Economics present the latest market insights at BIMCO’s Annual Conference and Awards Dinner on 18 November 2015 in Hamburg, ! Germany? Demand supported by EU and US while China is creating uncertainty

Global economy All eyes are on China in recent months as most other non-Chinese eco- The GDP growth rates in the US continue to strengthen. Following the pace, lower exports and consumer spending being the explanation. EU28, euro area and United States GDP growth rates Per cent change over the previous quarter nomic indicators have been dwarfed by the government’s actions and revision of the first quarter growth from -0.7% up to +0.6%, the second- 2 markets’ reactions. It is all of the things that we don’t know about the quarter growth rate has also been revised upward to an annualised rate 2015 has also been a disappointment for South Korea’s manufacturing

Chinese economy that is worrying, not the fact that the economy is in of 3.7%, owing to stronger business investments, and higher government industry, impacting the overall GDP level in second quarter, which came 1 a transition phase which inevitably will drive down GDP growth and and consumer spending. in 0.3% up from the first quarter. change import and export patterns. 0 Asia EU The apparent troubles in the second largest economy in the world have To provide stimulus to its economy, the Chinese Central Bank (PBoC) has As the European recovery continues at a time-consuming pace, the -1 shaken the belief in the overall global growth story. China’s growth has lowered interest rates as well as the amount of cash (reserve requirements) unemployment level responds remarkably well and has now come down positively affected global growth, especially in recent years when the that banks must keep on hand to boost lending. In a statement released to 10.9% in the Euro area. This is the lowest level seen since February -2 Western growth engine has stuttered. Thus we all become more sensitive by the PBoC, it said that “economic growth remains under pressure” and 2012 and a much-needed relief since the pinnacle at 12.1% in mid-2013. -3 than usual when China changes its course and we don’t see the full picture initiatives were carried out to “support the real economy to continue to It remains the southernmost parts of Europe where the unemployment

and understand what’s happening. develop healthily”. is most severe. 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 2007-Q4 2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 EA19 EU28 United States We have seen declining commodity prices in the past years, and more While the official GDP growth for the second quarter hit bull’s eye exactly Europe is also impacted by the sanctions against Russia and to a smaller Source: Eurostat recently the stock market got shook up. The world’s multinationals pre- at 7%, which was the government’s official target, factors pointed out extent by the Russian sanctions against Europe. The EU is Russia’s largest pared for quite different demand levels of key commodities as production already in 2007 to be more accurate for China’s economic development by trade and investment partner. The Russian GDP fell by 4.6% in the second in a transition phase that brings around slower yet safer and more sustain- was scaled up. Today we have a glut of coal, iron ore and oil although we the incumbent Premier Li Keqiang tell a different story. The three factors quarter year-on-year, while the EU28 GDP growth rose by 0.4% in the able growth. According to the International Monetary Fund (IMF) this are experiencing the highest economic activity in the world ever. he mentioned were the cargo volume on the province’s railways, electric- second quarter from the previous quarter. requires that the market is given a more decisive role in the economy. At ity consumption and loans disbursed by banks. Using these factors, the the end of the day, we all need to know more about these changes in order Key commodity prices economy seems to only be growing by up to 3% if it grows at all. The lack Outlook to understand them and so we don’t become anxious about them. The call 2006-2015 160 200 of trustworthy data means that the uncertainty is severe. Our base case for China is that the authorities will still manage to pull off in the financial markets is for the Chinese authorities simply to commu-

140 175 a soft landing. Regardless of where the “real” GDP growth is at, China is nicate what they intend to do before they do it and explain what they aim The Caixin China General Manufacturing Purchasing Managers’ Index at accomplishing by the moves. 120 150 (PMI) saw the quickest deterioration in operating conditions for over 100 125 six years in August. It now stands at 47.2, being below 50 threshold level At some point in time, we will stop talking about a recovery and focus 80 100 dividing expansion from contraction since March. Accompanying that, more on the lack of investments that has brought down the “potential 60 75 USD per tons

USD per barrel the “official” PMI also dropped below the 50 threshold level in August. Is future growth level”. The combination of the demographic situations in 40 50 this what a 7% GDP growth looks like? many of the developed nations mean a declining workforce and the lack 20 25 of investments that lowers the productivity gains results in future GDP 0 0 The labour market conditions are equally poor at a six-year low. That’s growth that will not reach the highs of the past. This “new normal” affects likely to be troubling the government most of all. A short-term fix could the shipping industry already, implying that the ability to think ahead as Jan. 2006 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011 Jan. 2012 Jan. 2013 Jan. 2014 Jan. 2015 Sep. 2006 Sep. 2007 Sep. 2008 Sep. 2009 Sep. 2010 Sep. 2011 Sep. 2012 Sep. 2013 Sep. 2014 Sep. 2015 May . 2006 May . 2007 May . 2008 May . 2009 May . 2010 May . 2011 May . 2012 May . 2013 May . 2014 May . 2015 be stimulus to the construction industry, which is labour intensive, but a well as the willingness to adapt are prerequisites in coming years. Brent crude oil price Thermal coal price, FOB Australia (RH-axis) Iron ore spot price CFR N China (RH-axis) long-term solution must also be found. Source: BIMCO, Clarksons What should comfort us, in the midst of uncertainty and with a longer- The Japanese economy grew by 1.0% in first quarter 2015 compared to the term mindset, is the fact that the world’s largest economic regions, the US previous quarter. This strong growth rate was brought around by higher EU (23.7% of world GDP) and the US (22.2% of world GDP), are back on The Federal Reserve Bank (Fed) is still scouting for the right moment to business spending. The data put economic growth in Japan at the stron- solid and positive growth tracks. While China’s economic growth is under increase interest rates. If it wasn’t for the most recent uncertainty about gest level in two years. However, sluggish consumer spending and lower pressure, China’s share of world GDP is “still only” 12.1% according to China, which is felt in the US too, it would probably have happened by now. industrial output in April could limit the expansion in second-quarter Eurostat, UN, the IMF and World Bank. Global GDP growth in 2015 is somewhat. Davos 2009 © Chappatte in “International Herald Tribune”, 29 January 2009 estimated at 3.3% by the IMF, slightly lower than 3.4% in 2014. ll Considering the US is getting close to full employment and the acknowl- edgement by the Fed that the inflation rates cannot be controlled, the In Japan, the PMI rose to a seven-month high in August, showing an only thing which stands in the way now is the lack of rising payrolls. overall improvement and new orders coming in faster. New export orders Global seaborne trade is dependent on global growth, thus it is vital if general shipping demand is to go forward that a smooth Being a large but closed economy (only 12% of US consumer spending still grow quietly, as trade with China is slowing down considerably. transition from a sustained recovery to normalized demand become successful. The article was finalised on 10 October 2015. Read is imported), the US will gain most by raising payroll to boost consumer The September PMI was slightly lower. As expected, the second-quarter about the impact on shipping on the following pages… spending, rather than being focused on the nation’s competitiveness. growth was limited; it actually became negative at 1.6% annualised growth

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 37 QUICK FACTS 2 October Dry Bulk Shipping Total fleet size (change since 1 January) DWT million: 772.99 (+2.1%) Rate indices (change since 11 June) BDI: 889 (+41%) Markets are slowly improving from a very low level as the demand side falters BCI: 1931 (+138%) • BPI: 701 (+1%) BSI: 691 (+3%) • BHSI: 392 (+17%) Latest update on Baltic Indices available at www.bimco.org

Demand The shipping market and underlying profitability can only improve at the expense of the shorter hauls. The complete absence of South South Asian scrap price vs Chinese steel price scrap prices keep heading lower and lower as volumes decrease. 2007-2015 if the fundamental conditions (supply and demand) also improve. African thermal coal exports to China for more than a year now is 1,200 Only 37 ships were sent to the blow torch in July and August. Therefore transportation of larger volumes, longer sailing distances a devastating example of this, especially when it is substituted by in general or a lower increase of dry-bulk fleet size is a prerequisite non-seaborne imports. In 2014 South Africa supplied China with 1,000 As trading conditions continue to challenge all shipowners and for better markets to arrive. 5.2mt of thermal down from 12.4mt in 2013. 800 operators, everything that can be done to delay the delivery of the

600 next ship has been done within the legally binding nature of a new- On the first issue about more commodities, we have seen coal as the The third issue on fleet size will be discussed in the supply section building contract. It is not easy to discuss terms with shipyards at primary culprit so far, with grains potentially also sinking into the of this report. 400 a late stage in the building process, but the result is now clear. 2015 red before the end of the year. Volumes of steam coal and coking 200 is about to receive “only” 49 million DWT, which will bring fleet

coal are both contracting notably, and our forecast is for an annual The freight rates for all dry-bulk segments have been low through- 0 growth down to a 10-year low at 2.5%. decline in transport driven by the lack of demand from China (-51 out 2015, the July/August spike for Capesize ships being the short- million mt) in the East and the UK (-13mt) in the West cushioned lived exception. Averages for the first eight months of 2015 range Outlook Jul. 2007 Jul. 2008 Jul. 2009 Jul. 2010 Jul. 2011 Jul. 2012 Jul. 2013 Jul. 2014 Jul. 2015 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011 Jan. 2012 Jan. 2013 Jan. 2014 Jan. 2015 by increased appetite for imported steam coal in India (+16mt). from USD 5,605 per day for a Handysize to USD 8,163 per day for China domestic steel plate 20 mm (USD/ton) Scrap price ($/LDT) When traditional demand growth is not increasing, we need to look Prospects for the latter have declined somewhat over the summer as a Capesize. Source: BIMCO, Bloomberg / Poten & Partners harder for future growth. Here the glut of high-iron-content ore in domestic production and power-plant stocks both have risen. the international markets and the following low prices may finally The poorest freight market on record is due to a combination of bring around a sizeable substitution in consumption by Chinese The coal-exporting nations suffering from this decline in demand demand weakness and capacity abundance. Unfortunately, there steel mills, away from the domestically produced low-iron-content are the two giants, Indonesia and Australia, while US exports are are no easy ways to escape this. As China is going through a period first half of the year. Unfortunately, our expectations have proven to ore, in favour of imports. down on lower UK imports. of transition that does not favour the dry-bulk shipping industry, be all too right. Spiking Capesize rates immediately cooled owners’ the prime driver is out of the picture. Capacity has been abundant interest in the hope that a market rebound was around the corner. Calculations done by BIMCO show that monthly imports into On the positive side, the longer-than-normal grain season in South for years, so it’s the change to the demand side, the variable that the China could be 20mt higher per month (+26%). A total of an America has benefited primarily the Supramaxes, which apparently industry cannot impact, which is at the epicentre in 2015. Furthermore, the strong Chinese steel export at discount prices to extra 240 million tons on an annual basis could bring deployment defy gravity as being the segment with the highest freight rates, the countries that used to prefer scrap steel to new steel means that for around 155 Capesizes, assuming an unchanged distribution while also facing the biggest increase in fleet size in the dry-bulk Supply between Australian and Brazilian imports (75%/25%). sector. Additionally, strong steel exports out of China have contrib- Speaking of the contributing factors to an improved shipping mar- uted to higher Supramax fleet use. ket, the dry-bulk fleet has grown only marginally during the first Last year, Australia grew its share significantly as 90% of Chinese nine months. The inflow of 39.7 million DWT, which has been Dry bulk supply growth incremental demand came from Australia. As Brazilian miner The second issue about ton–miles has also come into play this offset by demolition of 23.8 million DWT, means a fleet growth of 100 20% Vale is expecting to grow its output over the next year, this would year as a part of the decline in coal has cut off the longer trades just 2.1%. Continuance of a low fleet growth is vital to achieving improve the prospects. Working against would be more Brazilian 80 16% an eventual recovery and a return of sustainable earnings for the ore transported on 400,000-DWT Valemax class ships operated by industry. 60 12% the miner itself or related parties. Baltic Exchange time charter averages 40 8% 2015 A central element in that equation is a low level of new orders. This For the coming months: September-November, BIMCO expects the 20,000 has been accomplished by a landslide margin. In Clarksons order- 20 4% supply of new ships to stay subdued and slow paced towards the end

18,000 Million DWT

book statistics, there were only 84 new contracts recorded at the rate p.a. Growth of the year. The deteriorating demand-side conditions are expected 16,000 0 0% 14,000 end of August. Such a cautious attitude is quite the opposite of what to be somewhat reversed as we move into the stronger months of the 12,000 happened less than two years ago, when capacity equal to the year- -20 -4% year. The vital commodities, coal and iron ore, are both expected 10,000 to-date amount in 2015 (4.7 million DWT) was contracted in just to be in higher demand in coming months, enhancing owners’ -40 -8% 8,000 16 days! 2011A 2012A 2013A 2014A 2015F 2016E 2017E and operators’ opportunities to find employment for their ships. USD per day 6,000 To be delivered p.a. Demolition Conversions Growth rate (RH axis) Altogether this should support the freight rates although no large- 4,000 Demolition also holds a key position in today’s and tomorrow’s scale improvement to the fundamental balance is likely to develop. ll Source: BIMCO estimates on Clarksons raw data 2,000 fleet-growth level. Although 306 ships have left the fleet so far in 0 2015, owners’ interest in making use of the demolition “tool” to A is actual. F is forecast. E is estimate which will change if new orders are placed. The Jul. 2015 limit supply growth seems to have evaporated completely over the Jan. 2015 Feb. 2015 Mar. 2015 Apr. 2015 May 2015 Jun. 2015 Aug. 2015 Sep. 2015 Oct. 2015 supply growth for 2015-2017 contains existing orders only and is estimated under the Capesize Panamax Supramax Handysize summer. In early July, BIMCO cautioned that a new full year record assumptions that the scheduled deliveries fall short by 10% due to various reasons and More shipping market analysis online at www.bimco.org Source: BIMCO, Baltic Exchange, Clarksons level of demolished capacity would not arrive in spite of a record 40% of the remaining vessels on order are delayed/postponed.

38 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK QUICK FACTS 2 October Dry Bulk Shipping Total fleet size (change since 1 January) DWT million: 772.99 (+2.1%) Rate indices (change since 11 June) BDI: 889 (+41%) Markets are slowly improving from a very low level as the demand side falters BCI: 1931 (+138%) • BPI: 701 (+1%) BSI: 691 (+3%) • BHSI: 392 (+17%) Latest update on Baltic Indices available at www.bimco.org

Demand The shipping market and underlying profitability can only improve at the expense of the shorter hauls. The complete absence of South South Asian scrap price vs Chinese steel price scrap prices keep heading lower and lower as volumes decrease. 2007-2015 if the fundamental conditions (supply and demand) also improve. African thermal coal exports to China for more than a year now is 1,200 Only 37 ships were sent to the blow torch in July and August. Therefore transportation of larger volumes, longer sailing distances a devastating example of this, especially when it is substituted by in general or a lower increase of dry-bulk fleet size is a prerequisite non-seaborne imports. In 2014 South Africa supplied China with 1,000 As trading conditions continue to challenge all shipowners and for better markets to arrive. 5.2mt of thermal down from 12.4mt in 2013. 800 operators, everything that can be done to delay the delivery of the

600 next ship has been done within the legally binding nature of a new- On the first issue about more commodities, we have seen coal as the The third issue on fleet size will be discussed in the supply section building contract. It is not easy to discuss terms with shipyards at primary culprit so far, with grains potentially also sinking into the of this report. 400 a late stage in the building process, but the result is now clear. 2015 red before the end of the year. Volumes of steam coal and coking 200 is about to receive “only” 49 million DWT, which will bring fleet coal are both contracting notably, and our forecast is for an annual The freight rates for all dry-bulk segments have been low through- 0 growth down to a 10-year low at 2.5%. decline in transport driven by the lack of demand from China (-51 out 2015, the July/August spike for Capesize ships being the short- million mt) in the East and the UK (-13mt) in the West cushioned lived exception. Averages for the first eight months of 2015 range Outlook Jul. 2007 Jul. 2008 Jul. 2009 Jul. 2010 Jul. 2011 Jul. 2012 Jul. 2013 Jul. 2014 Jul. 2015 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011 Jan. 2012 Jan. 2013 Jan. 2014 Jan. 2015 by increased appetite for imported steam coal in India (+16mt). from USD 5,605 per day for a Handysize to USD 8,163 per day for China domestic steel plate 20 mm (USD/ton) Scrap price ($/LDT) When traditional demand growth is not increasing, we need to look Prospects for the latter have declined somewhat over the summer as a Capesize. Source: BIMCO, Bloomberg / Poten & Partners harder for future growth. Here the glut of high-iron-content ore in domestic production and power-plant stocks both have risen. the international markets and the following low prices may finally The poorest freight market on record is due to a combination of bring around a sizeable substitution in consumption by Chinese The coal-exporting nations suffering from this decline in demand demand weakness and capacity abundance. Unfortunately, there steel mills, away from the domestically produced low-iron-content are the two giants, Indonesia and Australia, while US exports are are no easy ways to escape this. As China is going through a period first half of the year. Unfortunately, our expectations have proven to ore, in favour of imports. down on lower UK imports. of transition that does not favour the dry-bulk shipping industry, be all too right. Spiking Capesize rates immediately cooled owners’ the prime driver is out of the picture. Capacity has been abundant interest in the hope that a market rebound was around the corner. Calculations done by BIMCO show that monthly imports into On the positive side, the longer-than-normal grain season in South for years, so it’s the change to the demand side, the variable that the China could be 20mt higher per month (+26%). A total of an America has benefited primarily the Supramaxes, which apparently industry cannot impact, which is at the epicentre in 2015. Furthermore, the strong Chinese steel export at discount prices to extra 240 million tons on an annual basis could bring deployment defy gravity as being the segment with the highest freight rates, the countries that used to prefer scrap steel to new steel means that for around 155 Capesizes, assuming an unchanged distribution while also facing the biggest increase in fleet size in the dry-bulk Supply between Australian and Brazilian imports (75%/25%). sector. Additionally, strong steel exports out of China have contrib- Speaking of the contributing factors to an improved shipping mar- uted to higher Supramax fleet use. ket, the dry-bulk fleet has grown only marginally during the first Last year, Australia grew its share significantly as 90% of Chinese nine months. The inflow of 39.7 million DWT, which has been Dry bulk supply growth incremental demand came from Australia. As Brazilian miner The second issue about ton–miles has also come into play this offset by demolition of 23.8 million DWT, means a fleet growth of 100 20% Vale is expecting to grow its output over the next year, this would year as a part of the decline in coal has cut off the longer trades just 2.1%. Continuance of a low fleet growth is vital to achieving improve the prospects. Working against would be more Brazilian 80 16% an eventual recovery and a return of sustainable earnings for the ore transported on 400,000-DWT Valemax class ships operated by industry. 60 12% the miner itself or related parties. Baltic Exchange time charter averages 40 8% 2015 A central element in that equation is a low level of new orders. This For the coming months: September-November, BIMCO expects the 20,000 has been accomplished by a landslide margin. In Clarksons order- 20 4% supply of new ships to stay subdued and slow paced towards the end

18,000 Million DWT book statistics, there were only 84 new contracts recorded at the rate p.a. Growth of the year. The deteriorating demand-side conditions are expected 16,000 0 0% 14,000 end of August. Such a cautious attitude is quite the opposite of what to be somewhat reversed as we move into the stronger months of the 12,000 happened less than two years ago, when capacity equal to the year- -20 -4% year. The vital commodities, coal and iron ore, are both expected 10,000 to-date amount in 2015 (4.7 million DWT) was contracted in just to be in higher demand in coming months, enhancing owners’ -40 -8% 8,000 16 days! 2011A 2012A 2013A 2014A 2015F 2016E 2017E and operators’ opportunities to find employment for their ships. USD per day 6,000 To be delivered p.a. Demolition Conversions Growth rate (RH axis) Altogether this should support the freight rates although no large- 4,000 Demolition also holds a key position in today’s and tomorrow’s scale improvement to the fundamental balance is likely to develop. ll Source: BIMCO estimates on Clarksons raw data 2,000 fleet-growth level. Although 306 ships have left the fleet so far in 0 2015, owners’ interest in making use of the demolition “tool” to A is actual. F is forecast. E is estimate which will change if new orders are placed. The Jul. 2015 limit supply growth seems to have evaporated completely over the Jan. 2015 Feb. 2015 Mar. 2015 Apr. 2015 May 2015 Jun. 2015 Aug. 2015 Sep. 2015 Oct. 2015 supply growth for 2015-2017 contains existing orders only and is estimated under the Capesize Panamax Supramax Handysize summer. In early July, BIMCO cautioned that a new full year record assumptions that the scheduled deliveries fall short by 10% due to various reasons and More shipping market analysis online at www.bimco.org Source: BIMCO, Baltic Exchange, Clarksons level of demolished capacity would not arrive in spite of a record 40% of the remaining vessels on order are delayed/postponed.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 39 QUICK FACTS Tanker Shipping 2 October Fleet sizes (change since 1 January) Crude (DWT million): 383.59 (+2.1%) Product (DWT million): 138.39 (+4.5%) Rate indices (change since 11 June) More optimism in sight for tankers in the winter season BDTI: 725 (-20%) • BCTI: 506 (-30%) Latest update on Baltic Indices available at www.bimco.org

Demand 2015 has been the year of the tanker. The fundamental improve- Suezmax and Aframax have seen freight rates cut in two since mid- year; after six years with one order a month on average, 2015 has BIMCO forecasts the present and next year supply growth for oil ments with slow supply-side growth for some years coupled with June, while Handysize has been the one to drop the most among oil seen 29 new contracts in the first eight months. For the VLCCs, the product tankers to be at 5.4% and 5.7% respectively, meaning two low oil prices from mid-2014 created strength on both sides. Freight product tankers. orders with delivery in particular 2017 (21) and in 2018 (14) have “full” years too for that segment. rates started to take off in October 2014 for all types and sizes. The been favoured by investors. In 2015, 50 new VLCC contracts in total combination of an early start to the fourth-quarter seasonal strength In a rush of excitement, it’s easily forgotten that such high refin- have been signed. Outlook heading into winter and the fact that the oil prices continued to slide ery crude runs can only go on for so long, if end consumption sup- Looking forward, the winter markets are expected to soften, as the became a catalyst. ports it. End consumption has supported it some of the way but not One of the launchers which has lifted the freight rates into orbit eventual lower refinery crude oil throughput when no more stocks all the way. Swollen stocks of crude oil and oil products are now is two years of very slow fleet growth. Today the fleet holds 648 can be filled and margins begin to crumble as demand slips. Until Throughout 2015, the global refinery throughput has been on the seen everywhere. Preliminary OECD total industry stock change VLCCs, whereas 628 VLCCs were active by mid-2013. That’s a then BIMCO expects earnings for both crude oil and oil product rise. The normal seasonal lower throughput in the first half of the in second-quarter was 1.1mb/d. All stocks but gasoline increased, growth of just 3% in 26 months. Looking forward into the future tankers to remain strong. Our expectations are primarily sup- year with widespread maintenance did not occur. Owing to rising US crude oil stocks too. In comparison global oil demand dropped inflow of crude oil tankers, we can see the delivery pace is picking ported by low fleet growth for crude oil tankers and long-haul and already elevated refinery margins from East to West, refineries by 0.1mb/d over the same period of time and is expected to see an up and the demolition potential is vanishing with just 14 VLCCs trades for oil product tankers. simply wanted all the crude oil they could get. This development increase of 1.6mb/d to be consumed for the full year over 2014. being more than 20 years old and another 16 getting inside the win- still provides strong demand and solid freight rates for the tanker dow of the fourth special survey in 2016. High volatility in freight rates can be expected in the coming half industry. In India, we saw a record of 4.74 million barrels per day year half a year, when it may also be prudent to look at the time Global oil demand and supply (mb/d) of crude throughput in June, marking a truly global trend, 2014-2016E On order for a scheduled delivery during the next 16 months are charter market, where one- and three-year time charter rates are whereas Middle Eastern refineries also hit a record throughput 98 71 VLCCs. This means a double-paced inflow as it has taken 34 both at their highest level since 2009. At USD 48,000 per day and because of increased runs in Saudi Arabia. 97 months for the latest 71 VLCCs to be put into active service. USD 43,500 per day, time charters will make positive returns after 96 all costs inclusive of capital cost and depreciations are deducted. October is traditionally another month of lower throughput as 95 The change in supply-side conditions will slowly tighten the freight refineries get ready for the winter season when crude runs normally 94 market, and as we look into 2016, the tide could turn fundamentally In the longer run, an eventual repeal of the US crude oil export peak. Moreover, the American “Labor Day” on 7 September marks 93 as a fleet growth of 4.4% is likely to outstrip demand growth. As the ban will likely have some impact on the tanker trading lanes. The the end of the US driving season which started on Memorial Day, 92 coming two years are now “full” in terms of remaining in control of US congress is set to vote on the issues during this autumn. For the 91 25 May. This means that the recent 10mb/d production of gasoline per day Million barrels supply-side growth, any additional crude oil tanker orders should supporters the case is clear: US refineries are saturated with light 90 will come down. be placed for 2018 delivery. sweet crude which is produced abundantly. For those in favour of 89 keeping the crude oil export ban still in place there is “national

Some of that weakness may already have caused freight rates to 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 interest”, which currently seems to hold the upper hand. Currently, come down sharply, in combination with the global financial uncer- Demand Supply Crude tanker supply growth the only crude oil exports today go to Canada (0.5mb/d). Source: BIMCO, International Energy Agency (IEA) tainties originating from China. Very large crude Carriers (VLCCs), 40 8% Moreover, the eventual lifting of international sanctions on Iran Supply 30 6% is likely to see a steady increase in crude oil, both sweet and sour, Contrary to what happens too often, the strong freight markets for into the market over the coming one to three years, depending on Oil tanker freight rates oil product tankers have not resulted in a knee-jerk run to the ship- 20 4% much-needed investments to boost production and time to regain 2014-2015 yard to order a massive amount of new ships. This stands in opposi- market shares. BIMCO expects the re-entry of Iranian crude oil 120,000 10 2% tion to the crude oil tanker orders seen in 2015, as if the lid has come into the market will change trade patterns as other suppliers will

100,000 off finally after several years of resisting the temptation. Million DWT be squeezed on their market share. The key will be West African 0 0% rate p.a. Growth 80,000 produced sweet crude now going to Europe and East Asia. The By end-August 2015, 56 product tankers with a total capacity of -10 -2% latter is the vital one and a stronghold behind the current upturn. 60,000 4.8 million DWT, predominantly LR2 (20) and LR1 (21), have been The overall impact on the tanker earnings from these changes -20 -4% ll

USD per day ordered and will be delivered in 2016-17. They are aiming to get a holds the potential to become both negative and positive. 40,000 2011A 2012A 2013A 2014A 2015F 2016E 2017E share of the market for longer-haul trades out of Middle East refin- To be delivered p.a. Demolition Growth rate (RH axis) 20,000 eries, predominantly into the Western markets. This ordering trend Source: BIMCO estimates on Clarksons raw data 0 has been on for two years now.

Jul. 2014 Jul. 2015 A is actual. F is forecast. E is estimate which will change if new orders are placed. The Aug. 2014Sep. 2014Oct. 2014Nov. 2014Dec. 2014Jan. 2015Feb. 2015Mar. 2015Apr. 2015May 2015Jun. 2015 Aug. 2015Sep. 2015Oct. 2015 Among the crude oil tanker segments, we have already seen more supply growth for 2015-2017 contains existing orders only and is estimated under the VLCC Suezmax Aframax LR2 LR1 MR Handysize orders for both Aframax and VLCCs than we did in the whole of assumptions that the scheduled deliveries fall short by 10% due to various reasons and More shipping market analysis online at www.bimco.org Source: BIMCO, Clarksons 2014. Aframax in particular has been popular with investors this 30% of the remaining vessels on order are delayed/postponed.

40 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK QUICK FACTS Tanker Shipping 2 October Fleet sizes (change since 1 January) Crude (DWT million): 383.59 (+2.1%) Product (DWT million): 138.39 (+4.5%) Rate indices (change since 11 June) More optimism in sight for tankers in the winter season BDTI: 725 (-20%) • BCTI: 506 (-30%) Latest update on Baltic Indices available at www.bimco.org

Demand 2015 has been the year of the tanker. The fundamental improve- Suezmax and Aframax have seen freight rates cut in two since mid- year; after six years with one order a month on average, 2015 has BIMCO forecasts the present and next year supply growth for oil ments with slow supply-side growth for some years coupled with June, while Handysize has been the one to drop the most among oil seen 29 new contracts in the first eight months. For the VLCCs, the product tankers to be at 5.4% and 5.7% respectively, meaning two low oil prices from mid-2014 created strength on both sides. Freight product tankers. orders with delivery in particular 2017 (21) and in 2018 (14) have “full” years too for that segment. rates started to take off in October 2014 for all types and sizes. The been favoured by investors. In 2015, 50 new VLCC contracts in total combination of an early start to the fourth-quarter seasonal strength In a rush of excitement, it’s easily forgotten that such high refin- have been signed. Outlook heading into winter and the fact that the oil prices continued to slide ery crude runs can only go on for so long, if end consumption sup- Looking forward, the winter markets are expected to soften, as the became a catalyst. ports it. End consumption has supported it some of the way but not One of the launchers which has lifted the freight rates into orbit eventual lower refinery crude oil throughput when no more stocks all the way. Swollen stocks of crude oil and oil products are now is two years of very slow fleet growth. Today the fleet holds 648 can be filled and margins begin to crumble as demand slips. Until Throughout 2015, the global refinery throughput has been on the seen everywhere. Preliminary OECD total industry stock change VLCCs, whereas 628 VLCCs were active by mid-2013. That’s a then BIMCO expects earnings for both crude oil and oil product rise. The normal seasonal lower throughput in the first half of the in second-quarter was 1.1mb/d. All stocks but gasoline increased, growth of just 3% in 26 months. Looking forward into the future tankers to remain strong. Our expectations are primarily sup- year with widespread maintenance did not occur. Owing to rising US crude oil stocks too. In comparison global oil demand dropped inflow of crude oil tankers, we can see the delivery pace is picking ported by low fleet growth for crude oil tankers and long-haul and already elevated refinery margins from East to West, refineries by 0.1mb/d over the same period of time and is expected to see an up and the demolition potential is vanishing with just 14 VLCCs trades for oil product tankers. simply wanted all the crude oil they could get. This development increase of 1.6mb/d to be consumed for the full year over 2014. being more than 20 years old and another 16 getting inside the win- still provides strong demand and solid freight rates for the tanker dow of the fourth special survey in 2016. High volatility in freight rates can be expected in the coming half industry. In India, we saw a record of 4.74 million barrels per day year half a year, when it may also be prudent to look at the time Global oil demand and supply (mb/d) of crude throughput in June, marking a truly global trend, 2014-2016E On order for a scheduled delivery during the next 16 months are charter market, where one- and three-year time charter rates are whereas Middle Eastern refineries also hit a record throughput 98 71 VLCCs. This means a double-paced inflow as it has taken 34 both at their highest level since 2009. At USD 48,000 per day and because of increased runs in Saudi Arabia. 97 months for the latest 71 VLCCs to be put into active service. USD 43,500 per day, time charters will make positive returns after 96 all costs inclusive of capital cost and depreciations are deducted. October is traditionally another month of lower throughput as 95 The change in supply-side conditions will slowly tighten the freight refineries get ready for the winter season when crude runs normally 94 market, and as we look into 2016, the tide could turn fundamentally In the longer run, an eventual repeal of the US crude oil export peak. Moreover, the American “Labor Day” on 7 September marks 93 as a fleet growth of 4.4% is likely to outstrip demand growth. As the ban will likely have some impact on the tanker trading lanes. The the end of the US driving season which started on Memorial Day, 92 coming two years are now “full” in terms of remaining in control of US congress is set to vote on the issues during this autumn. For the 91 25 May. This means that the recent 10mb/d production of gasoline per day Million barrels supply-side growth, any additional crude oil tanker orders should supporters the case is clear: US refineries are saturated with light 90 will come down. be placed for 2018 delivery. sweet crude which is produced abundantly. For those in favour of 89 keeping the crude oil export ban still in place there is “national

Some of that weakness may already have caused freight rates to 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 interest”, which currently seems to hold the upper hand. Currently, come down sharply, in combination with the global financial uncer- Demand Supply Crude tanker supply growth the only crude oil exports today go to Canada (0.5mb/d). Source: BIMCO, International Energy Agency (IEA) tainties originating from China. Very large crude Carriers (VLCCs), 40 8% Moreover, the eventual lifting of international sanctions on Iran Supply 30 6% is likely to see a steady increase in crude oil, both sweet and sour, Contrary to what happens too often, the strong freight markets for into the market over the coming one to three years, depending on Oil tanker freight rates oil product tankers have not resulted in a knee-jerk run to the ship- 20 4% much-needed investments to boost production and time to regain 2014-2015 yard to order a massive amount of new ships. This stands in opposi- market shares. BIMCO expects the re-entry of Iranian crude oil 120,000 10 2% tion to the crude oil tanker orders seen in 2015, as if the lid has come into the market will change trade patterns as other suppliers will

100,000 off finally after several years of resisting the temptation. Million DWT be squeezed on their market share. The key will be West African 0 0% rate p.a. Growth 80,000 produced sweet crude now going to Europe and East Asia. The By end-August 2015, 56 product tankers with a total capacity of -10 -2% latter is the vital one and a stronghold behind the current upturn. 60,000 4.8 million DWT, predominantly LR2 (20) and LR1 (21), have been The overall impact on the tanker earnings from these changes -20 -4% ll

USD per day ordered and will be delivered in 2016-17. They are aiming to get a holds the potential to become both negative and positive. 40,000 2011A 2012A 2013A 2014A 2015F 2016E 2017E share of the market for longer-haul trades out of Middle East refin- To be delivered p.a. Demolition Growth rate (RH axis) 20,000 eries, predominantly into the Western markets. This ordering trend Source: BIMCO estimates on Clarksons raw data 0 has been on for two years now.

Jul. 2014 Jul. 2015 A is actual. F is forecast. E is estimate which will change if new orders are placed. The Aug. 2014Sep. 2014Oct. 2014Nov. 2014Dec. 2014Jan. 2015Feb. 2015Mar. 2015Apr. 2015May 2015Jun. 2015 Aug. 2015Sep. 2015Oct. 2015 Among the crude oil tanker segments, we have already seen more supply growth for 2015-2017 contains existing orders only and is estimated under the VLCC Suezmax Aframax LR2 LR1 MR Handysize orders for both Aframax and VLCCs than we did in the whole of assumptions that the scheduled deliveries fall short by 10% due to various reasons and More shipping market analysis online at www.bimco.org Source: BIMCO, Clarksons 2014. Aframax in particular has been popular with investors this 30% of the remaining vessels on order are delayed/postponed.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 41 Container Shipping QUICK FACTS 25 September Total fleet size (change since 1 January) TEU million: 19,427.48 (+6.5%) Low demand on high-volume trades weighs down as supply rises Rate Index (change since 5 June) CCFI: 814.09 (-6%) • SCFI: 571.95 (-8%)

Demand The container shipping market may find comfort in the fact that in China and includes long-term contractual rates in addition to spot The fleet has grown by 5.8% until now and is expected to reach 7.3%, ships with a capacity of 4,000 TEU or less, while May to August saw global volumes were up by 1.1% in the first six months of 2015. freight rates. which is the highest in four years and largely surpassing demand 28 new orders for ships in the same size range. Following a disastrous first quarter, all three months of the second growth. quarter posted year-on-year increases. Behind the headline, though, The severe lack of exports from China is seen from the composite Outlook the story of US East Coast imports was the only positive one on the index, which dropped below 800 in early July. This is the first time The lack of European demand is of concern. In the short term, this vital East–West trading lanes. First-half growth of 17% was posted on record (index started January 2009) that the index went below Container supply growth is because container shipping is a low-margin business and industry after an immensely strong first quarter. 800. Since then the composite hasn’t really improved despite a 25% 1,750 14% profitability requires sustainable freight rates on high-volume trades. increase in the freight rate index for European-bound cargoes as 1,500 12% In the long term, half of all new ships are bound for a future on the

On the US West Coast, it’s been slow all year, starting with the labour US-bound cargoes saw freight rates slip further. 1,250 10% Asia to Europe trading lane, cascading the present work horses onto disputes that weren’t resolved until mid-March. Since then year-on- other trading lanes. 1,000 8% year growth in the second quarter was almost on par with 2014. But As volumes drop and new ships are introduced on a weekly basis, 750 6% for the first half year alone, inbound loaded volumes dropped by 2% it’s even more difficult to strike the balance that will see freight rate Idle containership 500 4% according to BIMCO data. improvements. However, the Europe index rates have gone up under ‘000 TEU (units idle breakdown by size range) 100 huge volatility in the spot market, and the trend is rising. In June, 250 2% rate p.a. Growth 90 On the Asia to Europe trades, volumes were down by 4.2% in the spot freight rates rebounded at USD 205 per TEU; in July the rebound 0 0% first half of the year as 7.4 million TEU was transported. Northern happened at USD 400 per TEU and in August at USD 469 per TEU, 80 -250 -2% European imports fell by 3.6%, while the East Med and Black Sea moving on up, but still USD 500 per TEU below the level of 2014. 70 60 imports fell by 4.8%. In the first six months of the year, the euro -500 -4% 2011A 2012A 2013A 2014A 2015F 2016E 2017E 50 dropped 19% compared to the yuan, and this resulted in more costly In our last report we discussed if a potential gap in the market was the To be delivered p.a. Demolition Growth rate (RH axis) 40 Vessel count Vessel imports, which dampened importers’ interest. reason for 6-12 months’ charter rates for ships sized 1,000-4,250 TEU Source: BIMCO estimates on Clarksons raw data 30 to significantly increase over the first five months of 2015. Today we 20 Intra-Asia shipments remain a stronghold with ongoing positive can see half of the gain is now gone, and the rise in time-charter rates A is actual. F is forecast. E is estimate which will change if new orders are placed. The 10 growth around 4-5%, but the increased uncertainty surrounding seemed to be more of a short-term imbalance rather than a long-term supply growth for 2015-2017 contains existing orders only and is estimated under the 0 assumptions that the scheduled deliveries fall short by 10% due to various reasons and Jul. Jul. Jul. Jan. Jan. Jan. the economic development in China adds doubt as to whether such a improved market. 30% of the remaining vessels on order are delayed/postponed. 2013 2014 2015 1,000-1,999 3,000-5099 over 7,500 Size (teu): strong growth rate can be sustained for the full year. 2,000-2,999 5,100-7,499 Supply Source: Alphaliner Beyond the Shanghai spot rates, a fuller picture of how container 2015 will see a new record inflow of newbuilt tonnage. BIMCO At the halfway point through the year, container-ship capacity equal freight rates are faring for shipments out of China is the China forecasts close to 1.6 million TEU will be delivered by the end of 2015. to that of the full 2014 has been ordered. At the end of August 1.4 Containerized Freight Index (CCFI), which covers ten major ports This marks the highest inflow of new capacity ever. As the record million TEU of new contracts had entered into the orderbook. Orders A successful cascading of ships left over on higher-volume trades settles, it will be done by less than 200 ships. The trend is strong, hold no surprises at all, neither in size nor in numbers, as no ships should not increase supply of capacity beyond requirement on the as 436 ships were needed to reach 1.502 million TEU in 2008. The with a capacity in the range of 5,300 TEU to 8,800 TEU have been secondary trades where it is about to be deployed. China containerized freight index 2014-2015 container-ship fleet is going through large charges these years, as ordered since 2011. Moreover, half of the new orders were in the 1,700 1,700 owners strive to cut down unit costs by introducing bigger and bigger shape of 37 ships with +18,000 TEU capacity, with another 39 ships The deteriorating freight market has significantly reversed the trend 1,600 1,600 ships everywhere. The average size of a newbuilt ship in 2015 is 8,400 with 10,000-14,000 TEU capacity. This leaves 175,000 TEU for the seen in the first half, which saw the idle fleet go as low as back in 2011. 1,500 1,500 TEU; in 2008 it was 3,435 TEU. remaining 49 ships ordered between 1,400 TEU and 9,700 TEU. Back in June, BIMCO mentioned that idling of larger ships because 1,400 1,400 of overcapacity would be prudent. It now seems as if idling across the 1,300 1,300 In the past three years, owners have parted with 553 ships with a In our last report we signalled that the rise in charter rates for small board has been exercised. Nine ships of 8,500-13,900 TEU were idle 1,200 1,200 combined capacity of 1.162 million TEU. 2015 marks an end to this to medium-sized container ships could see new orders surface if rates at the end of August according to Alphaliner. Cancelled sailings and 1,100 1,100 Index value Index value flurry that has dented fleet growth markedly. So far, only 51 ships with remained high. In spite of rates coming off somewhat, we have seen service suspensions have been the options preferred by the operators 1,000 1,000 a combined capacity of 94,000 TEU have been sold for demolition a flood of orders since May. January to April saw only 13 orders for until now. ll 900 900 with the average built year being 1991, similar to that of 2013-14. 800 800 Container-ship demolition activity has been weak for a full year now. 700 700 The demolition potential remains scarce as only 561,000 TEU is more This publication has been prepared by BIMCO for information purposes only. It has been prepared independently, and based solely on pub- Jul. 2014 Jul. 2015 than 20 years old. In spite of that, November and December could see Jan. 2014Feb. 2014Mar. 2014Apr. 2014May. 2014Jun. 2014 Aug. 2014Sep. 2014Oct. 2014Nov. 2014Dec. 2014Jan. 2015Feb. 2015Mar. 2015Apr. 2015May. 2015Jun. 2015 Aug. 2015Sep. 2015 licly available information. Whilst all reasonable care has been taken to ensure that its contents are not untrue or misleading, no representa- Composite US West coast US East coast Europe an increase if demand growth stays low. This is why 250,000 TEU tion is made as to its accuracy or completeness and no liability whatsoever is accepted for any loss arising from reliance on it. Source: BIMCO, Shanghai Shipping Exchange remains in our forecast.

42 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK Container Shipping QUICK FACTS 25 September Total fleet size (change since 1 January) TEU million: 19,427.48 (+6.5%) Low demand on high-volume trades weighs down as supply rises Rate Index (change since 5 June) CCFI: 814.09 (-6%) • SCFI: 571.95 (-8%)

Demand The container shipping market may find comfort in the fact that in China and includes long-term contractual rates in addition to spot The fleet has grown by 5.8% until now and is expected to reach 7.3%, ships with a capacity of 4,000 TEU or less, while May to August saw global volumes were up by 1.1% in the first six months of 2015. freight rates. which is the highest in four years and largely surpassing demand 28 new orders for ships in the same size range. Following a disastrous first quarter, all three months of the second growth. quarter posted year-on-year increases. Behind the headline, though, The severe lack of exports from China is seen from the composite Outlook the story of US East Coast imports was the only positive one on the index, which dropped below 800 in early July. This is the first time The lack of European demand is of concern. In the short term, this vital East–West trading lanes. First-half growth of 17% was posted on record (index started January 2009) that the index went below Container supply growth is because container shipping is a low-margin business and industry after an immensely strong first quarter. 800. Since then the composite hasn’t really improved despite a 25% 1,750 14% profitability requires sustainable freight rates on high-volume trades. increase in the freight rate index for European-bound cargoes as 1,500 12% In the long term, half of all new ships are bound for a future on the

On the US West Coast, it’s been slow all year, starting with the labour US-bound cargoes saw freight rates slip further. 1,250 10% Asia to Europe trading lane, cascading the present work horses onto disputes that weren’t resolved until mid-March. Since then year-on- other trading lanes. 1,000 8% year growth in the second quarter was almost on par with 2014. But As volumes drop and new ships are introduced on a weekly basis, 750 6% for the first half year alone, inbound loaded volumes dropped by 2% it’s even more difficult to strike the balance that will see freight rate Idle containership 500 4% according to BIMCO data. improvements. However, the Europe index rates have gone up under ‘000 TEU (units idle breakdown by size range) 100 huge volatility in the spot market, and the trend is rising. In June, 250 2% rate p.a. Growth 90 On the Asia to Europe trades, volumes were down by 4.2% in the spot freight rates rebounded at USD 205 per TEU; in July the rebound 0 0% first half of the year as 7.4 million TEU was transported. Northern happened at USD 400 per TEU and in August at USD 469 per TEU, 80 -250 -2% European imports fell by 3.6%, while the East Med and Black Sea moving on up, but still USD 500 per TEU below the level of 2014. 70 60 imports fell by 4.8%. In the first six months of the year, the euro -500 -4% 2011A 2012A 2013A 2014A 2015F 2016E 2017E 50 dropped 19% compared to the yuan, and this resulted in more costly In our last report we discussed if a potential gap in the market was the To be delivered p.a. Demolition Growth rate (RH axis) 40 Vessel count Vessel imports, which dampened importers’ interest. reason for 6-12 months’ charter rates for ships sized 1,000-4,250 TEU Source: BIMCO estimates on Clarksons raw data 30 to significantly increase over the first five months of 2015. Today we 20 Intra-Asia shipments remain a stronghold with ongoing positive can see half of the gain is now gone, and the rise in time-charter rates A is actual. F is forecast. E is estimate which will change if new orders are placed. The 10 growth around 4-5%, but the increased uncertainty surrounding seemed to be more of a short-term imbalance rather than a long-term supply growth for 2015-2017 contains existing orders only and is estimated under the 0 assumptions that the scheduled deliveries fall short by 10% due to various reasons and Jul. Jul. Jul. Jan. Jan. Jan. the economic development in China adds doubt as to whether such a improved market. 30% of the remaining vessels on order are delayed/postponed. 2013 2014 2015 1,000-1,999 3,000-5099 over 7,500 Size (teu): strong growth rate can be sustained for the full year. 2,000-2,999 5,100-7,499 Supply Source: Alphaliner Beyond the Shanghai spot rates, a fuller picture of how container 2015 will see a new record inflow of newbuilt tonnage. BIMCO At the halfway point through the year, container-ship capacity equal freight rates are faring for shipments out of China is the China forecasts close to 1.6 million TEU will be delivered by the end of 2015. to that of the full 2014 has been ordered. At the end of August 1.4 Containerized Freight Index (CCFI), which covers ten major ports This marks the highest inflow of new capacity ever. As the record million TEU of new contracts had entered into the orderbook. Orders A successful cascading of ships left over on higher-volume trades settles, it will be done by less than 200 ships. The trend is strong, hold no surprises at all, neither in size nor in numbers, as no ships should not increase supply of capacity beyond requirement on the as 436 ships were needed to reach 1.502 million TEU in 2008. The with a capacity in the range of 5,300 TEU to 8,800 TEU have been secondary trades where it is about to be deployed. China containerized freight index 2014-2015 container-ship fleet is going through large charges these years, as ordered since 2011. Moreover, half of the new orders were in the 1,700 1,700 owners strive to cut down unit costs by introducing bigger and bigger shape of 37 ships with +18,000 TEU capacity, with another 39 ships The deteriorating freight market has significantly reversed the trend 1,600 1,600 ships everywhere. The average size of a newbuilt ship in 2015 is 8,400 with 10,000-14,000 TEU capacity. This leaves 175,000 TEU for the seen in the first half, which saw the idle fleet go as low as back in 2011. 1,500 1,500 TEU; in 2008 it was 3,435 TEU. remaining 49 ships ordered between 1,400 TEU and 9,700 TEU. Back in June, BIMCO mentioned that idling of larger ships because 1,400 1,400 of overcapacity would be prudent. It now seems as if idling across the 1,300 1,300 In the past three years, owners have parted with 553 ships with a In our last report we signalled that the rise in charter rates for small board has been exercised. Nine ships of 8,500-13,900 TEU were idle 1,200 1,200 combined capacity of 1.162 million TEU. 2015 marks an end to this to medium-sized container ships could see new orders surface if rates at the end of August according to Alphaliner. Cancelled sailings and 1,100 1,100 Index value Index value flurry that has dented fleet growth markedly. So far, only 51 ships with remained high. In spite of rates coming off somewhat, we have seen service suspensions have been the options preferred by the operators 1,000 1,000 a combined capacity of 94,000 TEU have been sold for demolition a flood of orders since May. January to April saw only 13 orders for until now. ll 900 900 with the average built year being 1991, similar to that of 2013-14. 800 800 Container-ship demolition activity has been weak for a full year now. 700 700 The demolition potential remains scarce as only 561,000 TEU is more This publication has been prepared by BIMCO for information purposes only. It has been prepared independently, and based solely on pub- Jul. 2014 Jul. 2015 than 20 years old. In spite of that, November and December could see Jan. 2014Feb. 2014Mar. 2014Apr. 2014May. 2014Jun. 2014 Aug. 2014Sep. 2014Oct. 2014Nov. 2014Dec. 2014Jan. 2015Feb. 2015Mar. 2015Apr. 2015May. 2015Jun. 2015 Aug. 2015Sep. 2015 licly available information. Whilst all reasonable care has been taken to ensure that its contents are not untrue or misleading, no representa- Composite US West coast US East coast Europe an increase if demand growth stays low. This is why 250,000 TEU tion is made as to its accuracy or completeness and no liability whatsoever is accepted for any loss arising from reliance on it. Source: BIMCO, Shanghai Shipping Exchange remains in our forecast.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 43 BY CARL-JOHAN GARSTEN Bunker price mechanism – better correlation between physical market and oil futures

Physical bunker prices are sometimes difficult to work out and every so often impossible to understand, especially during periods of high volatility.

here is no independent price verification method – in some Comparison chart for Rio de Janeiro instances trading can even between market indications and forecasting prices becomeT a “guess my price” game. Often, MGO from 2015-02-18 to 2015-10-15 sellers do not even want to give an indi- cation unless the buyer has a firm order. The bunker market suffers from a lack of transparency, which is not acceptable from the buyer’s perspective.

Oil Futures – New Benchmark Oil futures were introduced to the mar- ket, by New York Mercantile Exchange, NYMEX in 1983 and in London by the International Petroleum Exchange, IPE in 1989. Before this, the Platts market pub- lication was the sole benchmark publica- tion for marine bunkers. Platts journalists simply made calls to various suppliers and traders around the globe to ask them what prices they were recording during the trad- ing day. Prior to oil futures it was neces- sary to have some kind of benchmark reference numbers.

Now it is time to start using oil futures as the new reference point. We already do this to a certain extent, but the figures are used solely gasoil (MGO). There is a correlation price in each port. After that the oil future as a long-term price guidance. However this between crude oil and various bunker changes “in converted form”, it will adjust does not mirror the daily trading and there- fuels. Crude oil, priced in USD per barrel, to the starting price. The physical price fore makes price reaction far too slow. needs to be converted into readable num- should follow the oil future curve as close bers for the bunker market. Crude priced as possible - almost by 100%. If not, buyers Oil futures close of the day seems to be in USD per barrel, by using a formula con- should be entitled to receive an explana- accurate enough for the following day’s verts the barrel into fuel oil 380 HS priced tion on why the physical price curve dif- price adjustment for the physical spot bun- in USD / mton. For GasOil no formula is fers from the oil future curve. ker market. needed since both are in USD / mton. The idea is that - the physical prices should Crude oil is the base for all bunker fuel Method to be adopted follow the oil future variations as closely as available from 380 cst fuel oil to marine Everything starts with the physical bunker possible. If everyone sets their own price

44 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK instead of following the oil futures then the time for price valuation in each port. The variations become unpredicatable. Today, creation of starting prices should be esti- the physical market ignores the oil futures mated in as many suitable ports as possible. and creates its own bunker prices outside market value. Once all starting prices are established on day one, the daily price adjustments will Another advantage when relying on the be based on oil futures, and replaced by Carl-Johan Garsten variations in oil futures is that bunker new oil future values every day starting prices can be updated often: for example, from day two (2) onwards. Two prices will every minute instead of once a day as it is be available in parallel, 1) one based on oil today in most ports. future values and 2) another price based New Benchmark test on the physical values for each port. The Has oil future as the new benchmark been The idea is to have a real-time price quote closing prices of the day will be presented tested by companies? reflecting the commodity price change as in the same diagram and form two curves per changes in supply and demand as far for comparison and control of the physical Yes, MABUX (Marine Bunker Exchange) as possible. Oil future contracts are like market as seen in the graph. has tested this benchmark for the last 6 shares, which are being sold and bought years – and has seen that it works well. The and priced by the oil exchanges, NYMEX From time to time some ports especially foundation has been laid but more work is and ICE. The result of these contractual the smaller ones need to be reset, because needed to make it more user-friendly and closing prices forms the basis for the physi- of the unwillingness to follow the oil commercial. The importance is that the cal price settings and adjustments. futures market variations. This is not a theory should work in practice. ll problem, and we need to let those people Change of Benchmark who are less enthusiastic about using oil

In practice each individual port will have its futures influence the daily physical prices, Editor’s Note: Carl graduated from the own benchmark. The starting value of the with more time to adopt to the new way of “Navigation College” as Master Mariner benchmark is manually created from what quoting and calculating prices. in Malmo, Sweden 1964. After his stud- the market considers to be a fair price at the ies he joined the “Military Academy”, in Sweden and became 1965 Navy Officer in the Reserve. After a number of years at sea he Comparison chart for Rotterdam returned to University for further stud- ies and graduated from the University of between market indications and forecasting prices Lund in Sweden with a Bachelor of Eco- 380 HSFO nomics in 1974. from 2015-02-18 to 2015-10-15 Carl worked as Deck officer and as Cap- tain in the Swedish merchant navy. In 1975 he came to work ashore as Ship- ping Manager for the trading company Joint Trawlers. He then started his own trading activities in 1979 but after 10 years relocated to West Africa. From 1988 until 1993 Carl was hired by Sen- tram Ferry Service in Dakar, Senegal as President Director General. Sentram provided ferry service along the West African coast. In 1994 he returned to Europe and was appointed Managing Director for an independent oil com- pany, High Services, specialising in high sea bunkering. The company was sold in 2002 and the same year Carl founded the company Marine Bunker Exchange (MABUX) AB, a service company for the marine bunker industry, where he pres- ently is active.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 45 BY NIKHIL JAIN New deliveries blunt freight rate rises

The products tanker sector, having suffered sharp declines in rates following the immediate aftermath of the 2008 recession, has performed consistently since 2011 – thanks to the changing landscape in the oil products trade market.

ver the last six years, the vol- sector, and the shifting of the refining indus- Middle East to Europe and the US backed by ume of refined products traded try’s focus eastward have sharply reduced rapid refining capacity expansions. In the by sea has grown by 140 mil- the cargo demand from major importing case of naphtha, the Middle East remains lionO tonnes, equivalent to a CAGR of countries (in Asia, in the Middle East and the single largest supplier to Europe and 2.9% over 2008-14. Nonetheless, trade in the US). With the US now producing excess Asia, with the US also catching up slowly. tonne-mile terms has grown at a faster quantities of gasoline, European refiners It became a net exporter of naphtha in 2014 3.8% per annum over the same period have been diverting supplies to Africa and as petrochemical plants switched to cheaper reflecting an increase in the average voy- the Middle East. Growing gasoil surplus in shale gas for feedstock. age distance (up from 2,966 miles in the US has pushed shipments to Europe and 2008 to 3,126 miles in 2014). The imbal- Latin America, with trade volume on the We expect these trends to further, albeit the ance in supply and demand of certain US-Latin America routes rising two-folds growth in seaborne trade and tonne-miles products has been the driving factor over 2008-13. is likely to be slower this time as the non- behind this growth in tonne-mile trade. OECD oil demand is expected to grow mod- Another trend gaining strength is the rise erately from now on. Reflecting the end of The shale revolution in the US oil and gas in jet fuel-kerosene exports from Asia and an era of rapid demand growth (2003-08) as

Figure 1

46 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK Figure 2: Total product tonne-mile demand and seaborne trade by com- modity (million tonnes) 1200 3,500 1200 3,500 1000 3,000 1000 3,000 2,500 800 2,500 800 2,000 600 2,000 600 1,500 1,500 400 400 1,000 1,000 200 500 200 500 0 - 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Gasoil Gasoline JetGasoil Fuel GasolineNaphtha FuelJet Fuel oil NaphthaOther Editor’s Note: Nikhil Jain, Drewry Mari- AllFuel Products oil OtherBillion tonne-mile (Right axis) time Research, [email protected] Source: Drewry’sAll Product Products Tanker Market Annual 2015/16 Billion tonne-mile (Right axis)

the emerging economies approach the end Freight rates in the products tanker market product tankers, projected to rise regardless of the first phase of industrialisation and have improved in general over the past three of the expected lowering in utilisation rates electrification. years, helped by rising tonnage demand. to 75-80% in 2015. While tonnage supply has also risen in tan- Taking into consideration the recent and dem with demand, overall fleet utilisation However, when the dust settles, we expect long-term trends for each trade route and has still wavered within a narrow range of there will be a downward correction in rates the major changes taking place in supply 80-85% for most segments. in line with falling utilisation levels, which and demand of individual products in each are an outcome of a much faster growth in trade zone, we expect the seaborne trade in Rising tonnage deliveries and influx of tonnage supply than demand. We forecast refined products to grow at a CAGR of 2.3% swing tonnage have started impacting the a decline of around 10% in the time charter over 2014-20. With the average voyage dis- utilisation rates, which averaged 81% in rates across all product tanker segments in tance rising steadily, we expect tonne-miles 2014 compared with 85% in 2013. Notwith- 2016, followed by a further downward cor- for products to increase at 2.8% per annum standing, charter rates, particularly for big- rection of 4% in 2017. Thereafter, as the sup- over the forecast period. ger product tankers, improved helped by the ply-demand gap begins to correct, we expect recent plunge in bunker prices and rising utilisation levels and freight rates to stabi- The changes taking place in trading patterns enquiries for crude tankers in the latter half lise and gradually move upward over the have affected not just the demand side in the of the year. Freight markets are expected to remainder of the forecast period. ll product tanker market but the supply side as defy the trends in utilisation rates this year well. With healthy growth in tonne-miles, too, with charter rates, particular for bigger there has been a high level of switching of product/chemical tankers (also called swing tankers) from chemicals trade to refined Figure 3: Tonne-mile supply and product-trading fleet by vessel specifica- petroleum products. To put things in per- tion (million dwt) spective, since the start of 2013, around 10 160 4,000 million dwt of swing tonnage (mainly MR2- sized) has moved into the product-trad- 140 3,500 ing fleet, accounting for almost 70% of the 120 3,000 increase that has taken place in product- 100 2,500 trading fleet since the start of 2013. 80 2,000

With the chemical tanker market reeling 60 1,500 under the pressures from lacklustre growth 40 1,000 in demand, it seems likely that this shifting of 20 500 swing tonnage to products trade will become 0 - a lasting feature. Furthermore, a bulky order- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 book and low demolitions are likely to fur- ther growth in the product-trading fleet, Product tanker Prod/Chem (Swing) tanker which is forecast to expand at a CAGR of Chemical tanker Billion tonne-mile supply (Right axis) 3.2% over 2014-20, with notable gains taking Source: Drewry’s Product Tanker Market Annual 2015/16 place in the MR2 and LR2 segments.

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 47 BY JEROEN BERGER What is the progress of the scrubber market?

The scrubber market is still far from ‘booming’ as the maritime industry’s interest in scrubber technology has hit a snag with the global crude oil price collapse and added financial uncertainty. In order to comply with the 0.1% sulphur in fuel content from 1 January 2015, in the Sulphur Emission Control Areas (SECAs), many shipowners are in wait-and-see mode. What are the upcoming trends and developments?

Technology be future proof, only time will tell. sulphur limits, and not only in so-called Scrubbing is a mature technology because it emission control areas (ECA), is essential. represents the most effective SOx removal Updates on legislation system for land based application. Scrub- Ships are a prime source of sulphur dioxide Following this discussion, BIMCO’s Past bers have been added in many ships from (SO2), which is produced by burning fos- President John Denholm is calling on gov- the 60’s (when the first ones where installed) sil fuels containing sulphur. SO2 is a major ernments and the maritime administra- in tankers as part of Inert Gas systems. But air pollutant that is toxic to humans, plants tions to exercise robust enforcement of there is no doubt that the designs out in the and animals as well as being the main cause applicable sulphur limits to ensure a con- market can be improved in terms of weight, of acid rain. The regulations to protect the tinued level playing field. Failure to do so size, effectiveness and their effect on the sea marine environment have gradually tight- would seriously expose compliant shipown- environment. ened in the last several years. What can we ers and operators who are bearing the high expect in the future? cost of ultra-low sulphur diesel oil. We see that the single stream, open loop design is quite beneficial when it comes to A global 0.5% sulphur cap may be around Fuel availability study results are likely to space and consequently lowers costs as it the corner be ready in October 2016 fits quite easily in funnel and casings with The European Union (EU) has already The IMO members at the meeting num- a relatively simple installation. But we see agreed that the 0.5% sulphur cap will apply ber 68 in IMO’s Marine Environment Pro- this variant is not flexible enough when it to all EU Member States within 200 miles tection Committee (MEPC) in May made comes to a broader use in different seas and of the coast from 2020, regardless of IMO progress in defining how the global fuel waters. Besides it is not the most sustainable decision to postpone the global cap until availability study should be carried out, option when it comes to the effect on the 2025. In the event that IMO decides to post- with the study results needing to be avail- marine environment. We need the indus- pone this, it would create a narrow corridor able by MEPC 70, which will likely be try to focus more on hybrid systems and the along the coast of North Africa in which around October 2016. This will allow for the use of active caustic soda to better neutral- the use of less expensive residual fuel will final report of the committee to be available ise the discharge. continue. The United States also strongly and any decision made by 2018. opposes to any postponement. A recently launched technology based on New ECA’s and incentives for scrubbers Membrane’s looks promising. The basic BIMCO is however concerned that a global Hong Kong has implemented a new low- units can be made much smaller (by up to 0.5% sulphur limit, will significantly sulphur regulation for vessels moored or 50%) with no wash water discharge at all. increase the cost of fuel as a level play- anchored at berths in Hong Kong waters This makes the installation easier and sim- ing field is commercially critical for own- from 1 July, 2015. Ships must use fuel with pler. This technology is similar to others but ers. Failing to ensure uniform compliance a sulphur content below 0.5%; LNG or any the key difference is that it does not spray with the sulphur emission limits within any other fuel approved by Hong Kong. If a ves- the liquid absorbent (caustic soda) into the segment of shipping will significantly dis- sel uses scrubber technology than it may be exhaust stream. Instead it suspends the liq- tort the competition between ship owners exempt from fuel switching. Masters and uid in membranes that comes in contact globally. It will not be sustainable for a com- owners of any vessels using non-compli- with the exhaust gasses but it does not mix pliant ship to compete with another ship ant fuel while at berth in Hong Kong may with the exhaust. Only the sulphur dioxide operating in non-compliance. In BIMCO’s be liable to a maximum fine of $200,000 is absorbed. Whether this technology will view, robust enforcement of the applicable and imprisonment of six months. Masters

48 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK Jeroen Berger

and owners who fail to keep the required compliance with the pH criteria set by IMO display inaccurate measures while at ports. records may also be liable to a maximum for scrubber washwater. fine of $50,000 and imprisonment of three The “sniffer” in Gothenburg showed that months. The pH discharge limit is the value that will 20% of the smoke plumes that were mea- achieve as a minimum pH 6.5 at 4 meters sured indicated levels of sulphur above the The Port of Rotterdam Authority rewards from the overboard discharge point with regulated level, but the bunker fuel sam- vessels that have a Green Award certificate the ship stationary – while most of the sys- ples made by the responsible authority (The with discounts on port duties. The Green tems run at full load. This is a contradiction Swedish Transport Agency) have not shown Award is a certificate that is issued by the in itself, but it is the way the regulation has any non-compliance at all. There have been independent Green Award Foundation to been written. no fines imposed in Gothenburg so far. vessels and shipping companies that have made additional investments like scrubbers Direct measurement (e.g. with a diver) has Level of acceptance in the vessel in order to improve the envi- been done, but this is both very risky and How is the level of acceptance of the scrub- ronmental performance, safety and quality. the results are arbitrary. “The opportunity to ber technology developing? Loyd’s List use a calculation-based methodology (com- scrubbers survey (April 2015) shares the The Green Award incentives for sea-going putational fluid dynamics or other equally interviews of several in the shipping indus- vessels are 6% discount for oil and oil prod- scientifically established empirical formu- try on this topic (see Figure 1). uct tankers with a Green Award certificate lae) is therefore good news”, said Kees Berger with a deadweight of 20,000 tonnes and from Berger Maritiem. Although the majority, 62% finds the switch more and 6% discount for LNG tankers over to low sulphur distillate fuel the best with a Green Award certificate with a dead- Most ship operators comply with the 0,1% solution, we can see from this report that weight of 20,000 tonnes and more. sulphur limit 19% of the respondents finds scrubbers the Fuel checks show 6% ECA non-compliance. best suited solution to meet the regulations Antwerp grants LNG bunker and scrub- The European Maritime Safety Agency of 2015. Compared to figures from 2014 we ber users discount for lowering particulate (EMSA) has spot tested the fuel content of see an increase in the confidence by more emissions. Ships that are powered by LNG 1,458 vessels operating in European waters than 10% in selecting the scrubber technol- for at least a 24-hour period prior to calling during the first four months of 2015 – and ogy. We believe this gain in confidence is the Port of Antwerp will be able to receive says that 90 samples failed to line up with propelled by the sharp increase in success- a 20% discount. Ships that can demon- ECA requirements. The EU has stipulated ful installed scrubbers worldwide last year. strate effective use of scrubbers in closed- that member states should conduct spot loop mode only will be eligible for a 15% checks on a minimum of 10% of ships in its The switch over to low sulphur fuels discount. waters in 2015. We see that a majority of ships meet the new sulphur emission limits by changing to a Adoption of calculation-based method to Only a few countries - Sweden and Lithu- compliant low sulphur fuel prior to enter- prove compliance with pH criteria set for ania - carry out inspections at sea, while ing an ECA. The Marine gas oil (MGO) and scrubber washwater Denmark, Norway and Poland are consid- marine diesel oil (MDO) at or below 0.10% At MEPC 68, calculation-based meth- ering to do so. The remaining countries sulphur is the most commonly available low odology was adopted as an alternative to carry out inspections when the ships are sulphur fuel. Other new grades of marine physical measurements in order to prove docked or at ports, and it is much easier to fuel like hybrid fuels or Ultra Low Sulphur in use for extended periods. The fuel will Figure 1: Solutions to meet the SOx challenges in SECAs from 2015 contain some asphaltenes and lube formu- lations and must be able to deal with this contaminant with respect to engine com- ponent cleanliness. Unstable fuel may lead to combustion difficulties, and the residues will need to be handled and tolerated by the lube oil.

Concerns for the marine environment Based on literature review and experience scrubbers (wet) for ships appear to reduce the emissions of sulphur to the atmo- sphere by 90-98%. The emissions of parti- cles and soot by 60-90% and the emissions of NOx by 10% or less. However the SOx is converted to sulfuric acid. Also a num- ber of other pollutants (e.g. metal and PAH) occurring in the exhaust gas are trapped in the wash water, in varying degrees.

Source: Loyd’s List scrubbers survey, April 2015 It is a fact that the concentrations of haz- ardous substances in the discharge of closed loop systems are higher than in open loop systems, but the mass flow rate of these Fuel Oil with a maximum 0.10% sulphur the advertisements of suppliers. With addi- substances determines the environmen- content may be a viable and economical tional processing to reduce the sulphur to tal burden. This is larger in case the ves- option in some ports. required low levels, these fuels could have sel is equipped with an open loop scrubber challenging cold flow characteristics. With (no hybrid), as they are not equipped with It is well known that heavy fuel oil (HFO) higher pour point, cloud point and cold fil- costly discharge water cleaning systems. compared with low sulphur distillate fuels ter plugging point (CFPP), some hybrid have very different properties and can cre- fuels may also require heating. A critical Although the IMO criteria is met, differ- ate operational challenges. For instance, factor when selecting these fuels is that no ent studies show that the large scale use of a change-over between two different fuel published ISO 8217 specifications exist for scrubbers have a negligible impact on the types can put machinery equipment at risk, these new products and although prepa- Marine environment and the raised con- and in a worst case scenario involving loss rations for approved specifications are in cern by different organisations needs to of power. It could jeopardise the safety of progress, these are not expected to be ready be taken seriously and be counteracted by the vessel and its crew. in the near future. detailed study and open communication.

The new grades of marine fuel or hybrid And when referring to the impact on lubri- But it is the responsibility of the scrubber fuels or hybrid ultra-low sulpher fuel oils cation, there is very little experience or data manufacturers to advise its customers on (ULSFO) should be beneficial according to gathered where this type of fuel has been the best options for the environment - long run hybrid systems, open loop mode with discharge cleaning system, the active use of Figure 2: Segments with scrubbers installed or contracted in 2015 caustic soda and more despite the negative impact on the CAPEX and thus ROI.

Market overview A market study “Business case for scrub- bers” in 2015 shows that scrubbers are pop- ular in passenger and Ro-Ro segments, but still there is limited adoption for cargo ves- sels (see Figure 2).

Figure 3 shows that hybrid and closed loop scrubbers are increasingly gaining terrain over open loop scrubbers, but as all Carni- val’s scrubbers are open loop (until further) this is still the largest group in total.

If we are looking at only cargo vessels, then Source: Berger, J. (2015). Business case for scrubbers we see in Figure 4 that hybrid and closed loop dominate.

50 BULLETIN 2015 VOLUME 110 #4 THE SHIPPING MARKET OVERVIEW AND OUTLOOK Figure 3: Scrubber type installed or sold in 2015

Source: Berger, J. (2015). Business case for scrubbers

Innovative financial instrument have their ships in charter it is not easy to fuel bill (good example of a typical chicken Up to 13.000 different vessels visiting or find resources to invest in equipment like and egg story). Berger Maritiem has identi- sailing in the North Sea and the Baltic Sea scrubbers due to prevailing difficult ship- fied this challenge and have a solution that annually are affected by the sulphur rule, ping market. It is also because they person- could overcome this hurdle; we call it Bun- which is now in force. But for the major- ally take no advantage of the investment as ker Funding. ity of the shipowners who predominately the charterer does as they practically pay his

Figure 4: Technology per target segment (cargo vessels only) in 2015

Source: Berger, J. (2015). Business case for scrubbers

THE SHIPPING MARKET OVERVIEW AND OUTLOOK BULLETIN 2015 VOLUME 110 #4 51 What is Bunker Funding? Through an indi- Figure 5: Bunker Funding principle based on calculations in 2014 vidual supplement (by customer or char- terer) on a verifiable market price of HFO bunkers. This is usually paid by the cus- tomer or in many cases payed by the char- terer, where a premium is raised which should cover for repayment, interest and credit insurance of the investment. For each individual customer a different term and conditions will apply considering the spe- cific customer business model. This is to be included in a long-term bunker- or HFO supply agreement. Figure 5 shows how Bun- ker Funding works as an example for a spe- cific customer.

Kees Berger, owner of Berger Maritiem, said: “We have done extensive research towards this financial tool and we have Source: Berger, J. (2015). Business case for scrubbers found serious interest among owners, inves- tors, EU commission and parties in the bun- ker scene. There is more financing available than well-prepared, viable projects.” October 2015) is however slightly reduced much as possible the planned huge sales and and is still intact as this is the basis for the investments made. The big question savings when installing a scrubber. The year 2015 with the enforcement of the The scrubber in general is widely accepted limitation of the sulphur content of ship In general you can say that due to this today and has demonstrated that more ves- fuel has changed the upwards trend for this decrease of 20-30% in price spread which sels are sailing successfully with this abate- abatement technology into a downwards can be compiled from Figure 6 the payback ment technology. And it is true that there turn trend but is this going to continue or time has been increased by more or less isn’t a long track record available that can will the market recover? 25-40% compared to the time before the prove the long term reliability of this tech- price of crude oil plunge. So, where cases nology, but we also see that the use of the One of the biggest question is: “Is the busi- previously had a payback time of 2-3 years, alternative low sulphur fuels in the tradi- ness case for scrubber still valid?” The crude you now have to account in theory for an tional diesel engines is not without serious oil’s price collapse certainly had quite an ROI of 2.5-4.5 years, which is still an accept- concerns - not a mature solution either. impact and raised deep concerns towards able figure. But the scrubber manufactur- the feasibility of the business case. But as ers who saw this trend and also noticed a So, to see how the market will respond to seen in Figure 6 the price gap between low slowdown in the order intake adjusted their the developments will just be a matter of sulphur MDO and HFO (from April 2014 – pricing strategy in order to compensate as time, but from our point of view this tech- nology has a future. The biggest advantage of installing this technology is that opera- Figure 6: Price gap between low sulphur MDO and HFO tors can stay flexible in the use of fuel; it is just not possible to predict the price of oil, or gas (LNG) in the future. ll

Editor’s Note: Berger Maritiem is a busi- ness consultation company for the maritime industry. With a passion for sustainability, specialised in ship per- formance optimization and emission- reducing technologies. www.bergermaritiem.nl

Jeroen Berger - Marketing & Sales Man- ager at Berger Maritiem, and author of the scrubber market study “Business case for scrubbers” published in 2015.

For more information, please mail to [email protected] Source: Ship and Bunker in Canada, 2015

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AD1.indd 1 13.10.2015 10:24:56 Shipping must not underestimate the threat to its cyber security

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 667 offices of independent member firms in 103 countries.

ccording to a US internet Organization (IMO’s) Maritime Safety costing an estimated USD 18m. scholar, “It used to be expensive Committee and its Facilitation Commit- to make things public and cheap tee have both agreed to include cyber secu- In both 2011 and 2013, there was a cyber- toA make them private; now it’s expen- rity on their agendas and to co-ordinate attack on the IT systems at the port of Ant- sive to make things private and cheap their work in developing voluntary guide- werp which resulted in the modification to make them public.” The comment is lines on cyber security practices to protect of cargo data to enable the smuggling of particularly appropriate at a time when and enhance the resilience of cyber systems heroin and cocaine, an operation carried both personal and commercial secu- supporting the operations of ports, ships, out by organised criminals. Hackers infil- rity is under growing threat from cyber marine facilities and other elements of the trated computers connected to the port, attacks. maritime transportation system. IMO has located specific containers, modified the also said that it will consult with other UN cargo manifest and made off with smug- No industry can afford to underesti- bodies and relevant international organisa- gled drugs after deleting the records. mate the level of potential threat to secu- tions such as the International Telecom- rity posed by cyber attacks. Respondents munication Union. Other organisations, Other examples of cyber attacks affecting to a Moore Stephens survey on risk man- including BIMCO, have continued to pro- the shipping industry include the compro- agement cited cyber security as a clear mote awareness of the threat posed to ship- mising attack in 2012 of “multiple systems” emerging threat to the shipping indus- ping’s cyber security. And the US Coast on a commercial ship operating under con- try. Furthermore, a recent study by PwC Guard issued its cyber security strategy tract to Transcom, with over 50 success- indicated that 75% of companies world- this year. ful hacks into Transcom systems revealing wide had detected an information security information to the attackers. breach of some kind. Governments glob- Because shipping operates on such a global ally (most noticeably the US and China) scale, it is arguably more susceptible than Modern-day pirates are also proving to be are investing heavily in cyber defence, and most industries to the threat of cyber quite adept at cyber attacks. Increasingly, most risk commentators have highlighted attack. Yet, despite public assurances from they are hiring experts to break into the IT cyber security vulnerabilities as a key risk. the shipping industry, research would sug- systems of shipping companies to obtain Investors, regulators, insurers and other gest that the industry is not as well prepared information such as blueprints to ships and stakeholders are also beginning to take as it should be – or believes itself to be – the insurance they carry. In 2011, while en notice. But where does the shipping indus- in terms of countering the threat of cyber route from the Arabian Gulf to the Medi- try stand in terms of its awareness of – and attacks. There appears to be a genuine belief terranean with a cargo of caustic soda, the preparedness for – cyber security attacks? on the part of some commentators that the Italian tanker Enrico Levoli was reported maritime industry is unaffected by such to have been targeted in this way. The ship’s Shipping has publicly acknowledged the issues, but nothing could be further from itinerary, cargo, crew and location, as well cyber security threat which it faces. A the truth. Moreover, there is no shortage of as the absence of armed guards, could 2011 report by the European and Network reported incidents to underline the point. have been known in advance by its Somali Industry Association highlighted the fact attackers. that cyber security awareness in the ship- Last year, a major fuel supplier, World Fuel ping industry was “low to non-existent”. Services (WFS), was taken to court by its The marine insurance industry could However, the shipping industry is respond- insurers over a claim involving a cyber be one of the principal victims of cyber ing. For example, International Marine attack which facilitated a bunkering scam attacks. with one reinsurer recently

54 BULLETIN 2015 VOLUME 110 #4 SECURITY announcing its intention to exclude cyber risks from its coverage. In July, meanwhile, the London P&I Club confirmed that it had seen an increasing number of instances of cyber fraud involving the interception of emails from ship agents and/or the hack- ing of ship agents’ email accounts resulting in requests to send the likes of anticipated disbursement accounts or masters’ cash to a new bank account. On most occasions, the fraudulent emails originated from the agent’s own email address, or from an email address similar to the agent’s genuine email address, and provided bank account details with only subtle differences from the agent’s genuine bank account.

The London Club warning mirrored an earlier alert by the International Transport Intermediaries Club (ITIC), which high- lighted continued attempts by fraudsters to target payments between shipping com- panies. ITIC warned its members about a scam resulting in pre-funded port costs being diverted to a fake bank account. In each case the owners received an email advising them that the port agent’s bank account was inoperable because of an annual audit. If the owners complied with the instructions, which came from an email address very similar to the agent’s, the funds were stolen.

In another incident, a ship manager received a message asking if money could be sent directly to the agent’s foreign exchange broker who “could secure banknotes which were in short supply in that part of the world”. Unfortunately, the ship manager Companies in the shipping industry should against potential threats in depth, but queried the instruction by simply hitting be under no illusion that the threat posed which is also resilient to breaches and can the “reply” button. If he had checked the to them is very real. Their systems can be detect when an incident is taking place. company’s records first and seen that the accessed electronically by people who do They control risk intelligently and recog- email address did not correspond to the not have the authority to do so. There is nise that everyone’s risk is different, blend- details held for its principal, the attempted no easy solution. This is a pervasive threat ing strong architecture, technical controls, fraud would have been uncovered. requiring a risk-and-reward judgement. insurance, outsourcing and expert advice to effectively manage such risk. They also Securing digital channels is a complex exer- The organisations that best control this understand what information is needed at cise and one that draws on a range of gover- threat are those which correctly balance each level to monitor the success of their nance and risk and assurance capabilities as opportunity and risk. They make sure security programme and to identify areas well as in-depth technical and cyber secu- that everyone understands the opportu- for improvement. rity skills. In the shipping industry, frag- nity offered and the threat posed by digital mented systems and limited connectivity and information technology. This under- It would be naïve to believe that these may have served to keep down the incidence standing starts with the board of directors developments will not impact the ship- of onboard cyber attacks, but most organ- and covers all employees, contractors and ping industry, which will need to be on its isations have shore operations which are as third parties. Such organisations integrate resolve to guard against what is a grow- susceptible to such issues as are any other risk management, actively managing cyber ing threat to its security and profitability. networked organisations. As the shipping security risks as part of their enterprise risk There are standards that can be complied industry becomes increasingly dependent management framework. with – ISO, government advice and oth- on technology, and as ship’s connectivity ers – and steps that can be taken to miti- improves, these risks come to the forefront. Companies that successfully control the gate risk. Those companies that fail to take As well as offering opportunity, technology threat of cyber attack start out by assum- the threat seriously run the risk of paying a is changing the threat profile, so it is impor- ing that they have been hacked. They heavy price. ll tant to consider both. build technology that can not only defend

SECURITY BULLETIN 2015 VOLUME 110 #4 55 SE Asia Piracy: criminal networks, corporate collusion and corruption

ccording to the latest Interna- lation and lax fines are abused as primarily shipping companies already in the Gulfs of tional Maritime Bureau (IMB) Singapore-flagged and owned vessel bunkers Aden and Guinea. The Director of the IMB incident report, now more than with their automatic identification systems has estimated that 70% of attacks on ships Ahalf of the world’s piracy attacks are (AIS) shut off to avoid suspicion. This lucra- in SE Asia go unreported. occurring in South East Asia. Piracy in the tive industry is able to earn between €30,000 Gulf of Aden, which was the scourge of up to €500,000 for each successful hit. •• There is significant demand in the region global shipping from 2011-14 has all but for the illicit product. Despite globally fall- disappeared. But the problem is far from What is curious, is the lack of response from ing oil prices, stolen oil is still cheaper than solved, whilst global piracy has dropped the regional or international community to market prices, and the evidence shows that overall - the past few years especially the address the threat. Unlike Somali piracy, SE the primary market for the stolen oil is start of 2015 has seen a consistent rise in Asia has failed to capture the headlines; it has China. Though Chinese growth has slowed attacks. not triggered multi-lateral naval patrols or to single digits, the demand for discounted the proliferation of high-level strategies that oil is always far greater than supply. Responsible for this increase are both the we have seen in the Horn, or even in West Gulf of Guinea, which remains a hotspot for Africa. Why? There are a number of challenges presented armed robbery at sea and kidnap for ran- to the countries in the region to respond: som, and south east Asia. Piracy in the waters •• SE Asian piracy has been downplayed in first, the body of water is vast, and filled with off Indonesia, the Malacca and Singapore past years, and has been described as unor- thousands of islands – there are 14,000 small straights has risen almost exponentially, rep- ganized and low-level – more appropriately islands in the Indonesian archipelago alone resenting almost 40% of 2015 attacks globally. described as theft at sea, rather than genu- – making it almost impossible to conduct ine piracy. effective surveillance. Secondly, the complex The majority of these incidents is related to division of national authorities makes coop- illegal oil bunkering. Singapore is the bun- •• The successful heists themselves have been eration a challenge. Past efforts have focus on kering capital of the world, with incidents small amounts, which has led to chronic sea-based activities, but even where interdic- occurring within the city-state’s famous under-reporting, as the value of the cargo tion has been possible, the lack of tools for ports. Vessels arrange illicit ship-to-ship is less than the cost of insurance premi- legal cooperation and mutual legal assistance (STS) transfers without paying the proper ums if the region were to be considered in have proved a hindrance for subsequent fees and avoid designated areas. Weak legis- a higher risk category – a jeopardy faced by prosecution.

Political will appears to be low for getting serious about SE Asia piracy, but this apathy has allowed serious and organised crimi- nal syndicates to proliferate and profession- alise into ‘logistical masterpieces’ that are developing corruption networks to pro- tect their activities. Karsten von Hoesslin of Risk Intelligence, who has spent many years investigating and tracking these networks explains: “Today, everything is pre-planned and is part of a larger criminal activity. It is very easy to counterfeit legal papers for the products such as palm oil, gas or petrol and to transport them.”

SE Asian piracy follows a scheme of steal- ing product and value whilst avoiding exces-

56 BULLETIN 2015 VOLUME 110 #4 ROUND-UP Image by Craig Mayhew and Robert Simmon, NASA GSFC

and of course countless numbers of individ- uals willing to be insiders or part of the net- works. The modus operandi of hijacking for product theft is deeply embedded in South East Asian shipping affairs in what many have described as a deeply corrupt industry. Insiders within the industry and of the tar- geted vessel carrying fuel are crucial for the group to gain valuable information where and how fuel and oil can be siphoned.

With ICC and IMB reports suggesting that there is a crude oil hijacking in SE Asian waters every two weeks, the region argu- ably needs renewed focus on maritime crime, and the growing consolidation and profes- sionalism of criminal networks should be of concern for the integrity of the states in the region. It is time for us to get serious about SE Asia piracy.

Indian government to allow foreign players in special categories of local shipping The government has relaxed a law allowing only Indian ships to be hired for carrying cargo within the country’s ports - in special sive violence, hostage taking and hijacking between the actors on and off-shore. categories where the local players do not have of African piracy – arguably another reason a presence. why it has failed to gain headline. According to von Hoesslin, there are between 6-8 key criminal networks at play in SE Asia, The so-called Cabotage law protects Indian On average a team of 7-12 pirates will usually but like any criminal enterprise these are sup- shipping companies from the big interna- board the attacked vessel for a period of time ported by vast networks of corrupt officials, tional players. But the Indian fleet owners do (an estimated six to ten hours) in order to pro- facilitators, money launderers and low level not operate in the categories that have been ceed with the siphoning of product whilst the operatives that are spread across all of the opened up, such as roll-on, roll-off in move- original crew is gagged and bound. Since no countries in the region. ment of passengers, cars and trucks; and LNG individuals are kidnapped for ransom, a rea- vessels. sonable degree of violence can be expected, His analysis shows an organisational struc- although usually only light weapons are used. ture with a handful of group leaders who The shipping ministry is keen to encourage These incidents all occur usually under the move about with impunity, connected to a coastal shipping to reduce the logistics cost cover of night. Stolen goods are then carried dozen fixers or middle men from all over the and also reduce the country’s carbon foot- on a phantom ship, with another 15 pirates region; they connect to half a dozen known print. This new ruling from 2 September, says manning the vessel, which will take the stolen buyers of illicit crude who eagerly bargain that the provisions of Section 4O7 (1) of the crude to be blended, refined and sold under down the price of the illicit product. There Merchant Shipping Act, 1958, will not apply the cover of counterfeit documents. These are at least four skilled forgers in play to sup- to the above ‘special’ vessels for a period of attacks occur at sea and require a high level ply false purchase and registration documen- five years. of logistic know-how as well as coordination tation, nearly ten phantom ships to hire out,

ROUND-UP BULLETIN 2015 VOLUME 110 #4 57 (shifting berth) fees, towage fees, berthage, oil fence fees, lighterage, special trimming fees, garbage disposal fees and service fees for water supply, bunker supply and power supply. Apart from the above, no extra ser- vice fees should be charged. Meanwhile, it has been decided to cancel the current liner cushion fees, pilot demurrage and pilotage plan change fees during all pilotage ser- vice. The mooring & unmooring charges and hatches open & closing charges will be incorporated into berthage.

•• Improve calculation unit and method for vessels’ port charges Pilotage charge unit for international services will be increased from 500 net tonnage to 2,000 net tonnage, whilst pilotage fees (within 10 n miles) for vessels ranging from 40,001-80,000 net tonnage and vessels over 80,000 net tonnage will be reduced to CNY0.45(USD0.07)/ net tonnage and CNY0.425/net tonnage respectively. This is a welcome move that will encourage major ports and nearly 200 non-major ports transport of automobiles, large project cargo from Kolkata to Kandla, domestic shipping Extra charges levied for night work and and boost tourism. However, many issues traffic is miniscule. The shipping ministry’s national holiday pilotage and towage ser- need to be sorted out. There should be dedi- ‘Vision for Coastal Shipping, Tourism and vices will be further reduced to 45% dis- cated facilities at major ports and non-major Regional Development’ prepared in June has count. The port operators are encouraged ports with different rates for coastal ships. a vision to increase the share of coastal and to charge towage fees on an aggregated inland water transport to 10% in the next five basis by taking the service vessel tonnage, Advantages years. LOA and entry numbers into account The shipping ministry in a report published which is subject to the tug’s horsepower last January said that fuel consumption by China adjusts its port charges and port and working time. This new notice also coastal shipping at 4.83gm/km is just 15% facility security charges specifies that the berth fees at CNY0.08 for of the consumption by road and 54% by rail. China recently issued a notice with a view to domestic shipping and CNY0.25 for inter- Rail and road transport because of their lim- adjust its vessel port charges and port facility national shipping. ited capacity and infrastructure cannot han- security charges, which will come into force dle large quantities of coal, iron ore. The cost as of 20 September, 2015. According to this •• Optimise the measures management for of carriage of goods, from coast to coast, by notice, any provision contradicting to its con- vessels’ port charges coastal shipping (about 21% by road and 42% tent thereafter will be invalid. The port charges will be managed by comb- by rail) works out to be much lower than that ing the guiding price and the cap designed by road and rail. •• Regulate vessels’ port charges by the regulator, and pilotage (shifting Port operators and pilotage institutions berth) fees, towage fees and berthage shall Poor patronage who provide vessel inbound and outbound be limited to the said cap. Meanwhile, oil Despite a vast coastline of nearly 7,500 km, 12 services are entitled to collect pilotage boom fees, lighterage and special trim-

58 BULLETIN 2015 VOLUME 110 #4 ROUND-UP Image by Craig Mayhew and Robert Simmon, NASA GSFC

ming charge shall not be more than the S. Korea outpaced by China, Japan in of the eight listed units belong to those two existing rates. All port operators and pilot- Q3 shipbuilding orders groups has been suspended in preparation age institutions may have their discretion South Korean shipbuilders were outpaced by of a jointly announcement. A dedicated five- to decide their own charges standard as Chinese and Japanese rivals in terms of new member working group has been established per the supply and demand of market as orders in the third quarter of the year amid to hammer out a feasible merger plan which is well as the competition situation, provided deepening woes over their growing losses. under the auspices of the State-owned Assets the standard is consistent with the fixed Supervision and Administration Commis- charges cap. According to the data compiled by global sion (SASAC). This group headed by China researcher Clarkson Research Services, South Shipping’s chairman, Xu Lirong has three •• Lower the charges standard for port facil- Korean shipyards bagged new orders totaling members from China Shipping and two from ity security 2.11 million compensated gross tons (CGTs) COSCO. The port facility security charges for 20 ft this September, trailing Chinese shipbuild- and 40 ft has been reduced to CNY10 and ers at 3.48 million CGTs and Japanese com- Likewise, China Merchants Group and Sino- CNY15 per container respectively. Simi- panies with 2.36 million CGTs. South Korea trans & CSC Holdings Co is alleged to carry larly, the security charges for other cargo retained its status as the world’s leading ship- out a similar consolidation as per SASAC’s´ will be reduced to CNY0.25 per ton. Col- building country in terms of new orders instruction. The two companies had already lecting and utilizing issues will be imple- between February and June. It was relegated cooperated by setting up a tanker fleet named mented in accordance with existing to second place in July and to third in August. China VLCC and another dry bulk carrier. regulation. In the first nine months of the year, South It is believed that the Chinese government Singapore launches fund for compa- Korean shipbuilders secured new shipbuild- is committed to deepening its state-owned nies to build LNG-fuelled vessels ing orders totaling 8.77 million CGTs, fol- enterprises SOEs reform in order to stream- Singapore has launched a SGD 12 million lowed by China with 6.33 million CGTs and line bloated industries and boost their inter- fund for companies to build vessels fuelled Japan with 5.99 million CGTs. As of end-Sep- national competitiveness. Besides, Chinese by liquefied natural gas, as the city-state tries tember, China had the largest order back- regulatory encourages more private capital to to encourage use of LNG while also trying to log, totaling 40.42 million CGTs, trailed by involve in the SOEs reform. Some media even maintain its role as the world’s top bunker- South Korea with 32.08 million CGTs and reports that the State Council of China has ing hub. Japan with 21.2 million CGTs, according to approved a blueprint for SOE reform like a the data. Temasek investment holding model, namely, Companies would be able to tap the fund for state-owned capital operating companies up to SGD 2 million per vessel. Companies South Korean shipbuilders are struggling would channel funds to the SOEs, pressuring have to be incorporated in Singapore and the with huge losses stemming from the delivery them to make profits but would not likely be vessels must be flagged under the Singapore of low-priced ships and a delay in the con- involved in business operations. Registry or licensed for activity in Port of Sin- struction of offshore facilities such as drill gapore for at least five years. The port sought ships. The country’s big three shipbuilders It remains to be seen how this consolidation proposals on LNG bunker supplies in late July — Hyundai Heavy, Daewoo Shipbuilding & would move as currently little information as to complement the country’s profile of itself Marine Engineering, and Samsung Heavy the Chinese regulatory keeps it at a fairly low- as an LNG hub, and as a step towards meet- Industries — racked up a combined loss of profile. (ZW) ll ing its own deadline of supplying the super- 4.7 trillion won (US$4 billion) in the first chilled fuel to ships by 2020. half of 2015. In 2014, Singapore’s bunker industry recorded Editor’s Note: This report has been pro- more than 42 million tonnes in bunker sales Consolidation plans for Chinese ship- duced in co-operation with The Global volumes. The bunker sales comprise different ping conglomerates Initiative Against Transnational Orga- grades of fuel oil, which are considered more COSCO and China Shipping Group, two nized Crime, Hellenic and Seatrade highly polluting than natural gas. of China´s largest shipping conglomerates Maritime. are in talks over a possible merger. Trading

ROUND-UP BULLETIN 2015 VOLUME 110 #4 59 Latest EU policy and regulation news

Review of EU White Paper for Transport EU Port Reception Facilities Directive – The European Commission is currently conduct- able Shipping Forum (ESSF): one dealing with revision process ing the mid-term review of its 2011 White Paper verification and accreditation and a second one The development of adequate port reception through a public consultation. The results of the dealing with monitoring of cargo and fuel con- facilities (PRF) for ship-generated waste and consultation will be presented at a conference in sumption. European Member States and Euro- cargo residues, together with the establishment Brussels, scheduled to be held on 12 November. pean/international experts from the shipping of systems which provide incentives for ships industry will be involved in this process towards to use these facilities, are major elements in the On 9 September, the European Parliament spring 2016. process to avoid ships’ discharges into the sea. adopted an initiative report on the mid-term The MARPOL Convention not only contains review of the White Paper. The Parliament calls BIMCO is participating in the ESSF subgroup regulations and requirements defining which for measures to reduce administrative formali- on monitoring of cargo and fuel established to wastes can be discharged into the marine envi- ties from ships in EU ports, better coordination advise the Executive Committee (EC) on rele- ronment but also imposes an obligation on the between national customs authorities, measures vant aspects still needed to be developed as part State Parties to provide facilities for the recep- to develop safe and sustainable shipping and of the delegated acts / implementing acts in the tion of ship-generated residues and garbage (that open maritime markets, an assurance that core EU Regulation on MRV. cannot be discharged into the sea). These recep- EU ports will be connected to the TEN-T net- tion facilities must be adequate to meet the needs work by 2030 and making progress on the Com- The purpose of the delegated acts is to allow the of ships using the port, without causing undue mission proposal to liberalise market access to EC to develop the remaining missing details on delay for ships. port services. what the metrics shall be for various non-speci- fied ship types. Only for a few mainstream ship With well over 600 individual EU ports handling The report also focuses on the environmental types are these details laid out in the Regulation around 90% of EU external trade, with around aspects of shipping by calling for a global binding text as adopted. 40% of trade between EU countries, waste man- target in the International Maritime Organiza- agement is a serious matter in the EU. With this tion (IMO). An aim to reach at least 40% reduc- The implementing acts will also specify the pre- in mind, Directive 2000/59/EC on port recep- tion in CO2 emissions from maritime bunker cision that measurements shall comply with tion facilities was adopted, with the aim of sub- fuels by 2050 - to be supported by an EU interme- and how much calibration of tanks and mea- stantially reducing discharges of ship-generated diate target for 2030. It also calls for the enhance- suring devices are needed. This latter point is waste and cargo residues into the sea. However, ment of the negotiations within the IMO on the very important for shipowners and one that can European shipowners report that there is a lack development of a global market-based mecha- potentially impose high cost for compliance. of adequate PRFs and the capacity to meet cur- nism addressing international maritime emis- rent requirements targeted at ships. sions. Adding that in the event of an international The work is progressing slowly, and several agreement on a global monitoring, reporting and meetings in the large ESSF Subgroup is foreseen Therefore, a revision process of the EU PRF verification (MRV) system for greenhouse gas before the work is finalised sometime next year. Directive has started which is to align the Direc- emissions or on global measures to reduce green- tive with the revised MARPOL Annex V “Pre- house gas emissions from maritime transport Ship recycling vention of Pollution by Garbage from Ships” is reached, the Commission should review the The European Commission (DG ENV) has which introduces a stricter garbage manage- MRV Regulation. If appropriate, propose amend- commissioned a study “on the feasibility of a ment plan and generally prohibits the discharge ments to this regulation in order to ensure align- financial instrument to facilitate safe and sound of garbage into the sea. A separate subgroup ment with the international agreement. ship recycling” as required by the EU Regulation under the umbrella of the European Sustainable on Ship Recycling in order to assess the feasibil- Shipping Forum (ESSF) has been established MRV ity of establishing a mechanism (e.g. financial or to provide input and facilitate the revision pro- The formal implementation of EU Regulation alternate incentives for compliance and avoid re- cess. With proper enforcement and appropriate 2015/757 on the monitoring, reporting and ver- flagging of ships) to incentivise shipowners to improvements of the EU PRF Directive allowing ification (MRV) of carbon dioxide emissions recycle their ships in facilities on the EU list. The the fulfilment of the MARPOL requirements, from maritime transport is now being con- shipping industry is concerned about the com- all necessary measures will be in place to better sidered through the establishment of two EU plex and legally challenging process of establish- manage ship generated waste and cargo residues MRV subgroups within the European Sustain- ing such a financial mechanism. in the EU.

60 BULLETIN 2015 VOLUME 110 #4 ROUND-UP Places of Refuge Cyber security The European Maritime Safety Agency (EMSA) both reports seem to take into account the need The discussion at the EU level regarding the arranged a table top exercise on Places of Refuge to allow the IMO to continue its work on ship Network and Information Security Directive (PoR) on 1-2 September, which BIMCO attended. GHG emissions. The process will be finalised (NIS Directive), which addresses cybersecurity The purpose of the exercise was to test the draft before the end of 2015. and which includes maritime carriers in its EU operational guidelines - PoR on a hypothet- scope, are still ongoing. For reasons unrelated ical tanker collision. The operational guidelines International Ocean Governance to maritime considerations the process has been have been developed by the European Commis- The European Commission has launched a pub- delayed considerably. The shipping industry sion, and the industry has provided comments lic consultation in order to gather feedback on continues to underline that the rules in the NIS to them at stakeholder meetings and in a public how the EU could contribute to achieving bet- Directive are not fit for the maritime sector consultation. During the course of the exercise, ter international governance of oceans and seas. (hence potentially will have a serious negative the necessity of coastal states providing a reason On the basis of the results, the Commission will impact on shipowners in terms of administrative when redirecting a ship was stressed. This was consider how best to develop an EU policy on burden, costs, liability, and implementation) and one of the points BIMCO has raised on several improving the international ocean governance hence this industry should be excluded from the occasions. The plan is to hold a similar exercise framework. Directive. This does not mean that the shipping in two years’ time to measure the effectiveness. industry would not see the risk of cybercrime, The shipping industry has been engaged with the to the contrary, individual companies are EU Energy Union global discussions on Ocean Governance since taking measures to prevent cyber attacks and One of the key political priorities of the Juncker their early stages and has provided comments the industry is jointly developing guidelines on Commission is the recently adopted “Energy to the consultation. In its response, BIMCO cyber security, which will be submitted to the Union package”. The Package consists of a focused on key issues for the industry by high- IMO for consideration. framework strategy on a climate change policy lighting the importance of upholding the rights that sets the goals of the Energy Union and the of innocent passage, transit passage and freedom Iran detailed steps the Juncker Commission will take of navigation enshrined in UNCLOS, maintain- On 14 July 2015 international partners came to to achieve it. As well as a communication relat- ing an international approach through the IMO, an agreement on the Iranian nuclear issue. As ing to the EU contribution to the UN Framework ensuring swift and uniform implementation, follow up to the agreement of the Council of the Convention on Climate Change (UNFCCC) and carrying out proper impact assessment. EU ministers of foreign affairs, the suspension is conference in Paris in December 2015 (COP 21). prolonged until 14 January 2016. This is in rela- It is with the aim of limiting the global average Status of seafarers under EU social Directives tion to the EU restrictive measures agreed in the temperature (2°C objective) by 2020. In July 2015, the European Parliament’s ple- Joint Plan of Action with Iran dated 24 Novem- nary session endorsed the compromise agree- ber 2013. The Energy Union aims at improving the ment reached with the Council of Ministers on energy security and supply, and promoting the the Commission’s Directive on social exclusions. If the agreed steps are respected, the large major- development of innovative technologies with The Council of Ministers is expected to do like- ity of EU (and other international) sanctions the help of European research and innovation wise soonest. The compromise text is fully in applying to Iran will cease as of mid-January measures. In addition, a 40% reduction in CO2 line with the expectations and joint agreement 2016. ll emissions by 2030 is envisaged, with the devel- of the European Community Shipowners’ Asso- opment of renewable energy in the EU’s energy ciations and the European Transport Workers’ mix and actions to increase energy efficiency, Federation. especially in the building and transport sectors, to be taken. Following the endorsement of the compromise agreement between the Council of Ministers and The European Parliament is currently in the the European Parliament, and the publication of Editor’s Note: This report has been process of producing reports on both constitut- the text in the Official Journal of the EU, Mem- produced in co-operation with the ing elements of the Energy Union Package: the ber States will have two years to transpose the European Community Shipowners’ Energy Union strategy and the communication directive into their national law. Associations (ECSA). towards a new climate agreement in Paris. So far

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BY JONATHAN LUX The interplay between mediation and arbitration

– I am indebted to Keith Heard and Mike Walsh of Burke & Parsons, New York whose diligent research on US law has been

incorporated into this article. ([email protected])

Introduction 31 January 1997. This served to replace in the tribunal have a duty to order a stay London stands at the pinnacle for the reso- a single statute the plethora of provisions where the interests of justice clearly point in lution of international commercial disputes. which had been littered around a number that direction?a English law, thanks to the calibre of English of statutes referred to collectively as “The commercial judges, achieves more certainty Arbitration Acts 1950 - 1979”. The thinking The starting point is the Arbitration Act than any other system of which I am aware. appears to be very similar to that behind the 1996, S. 33: This is indeed a key factor for many busi- Civil Procedure Rules (CPR). Thus, Sec 1 (a) ness people and disputants – to have a con- of the 1996 Act provides: “(1) The tribunal shall – tract which achieves certainty and a legal regime with as much certainty of outcome “the object of arbitration is to obtain the fair (a) act fairly and impartially as between as can be achieved. resolution of disputes by an impartial tribu- the parties, giving each party a rea- nal without unnecessary delay or expense”. sonable opportunity of putting his English jurisdiction, whether high court or case and dealing with that of his arbitration, is also the most popular interna- Subject only to the overriding duty of the opponent, and tionally – thanks to the highly sophisticated tribunal as set out in S. 33 of the Act to act infrastructure including judges, arbitrators, fairly and impartially and to adopt proce- (b) adopt procedures suitable to the mediators, barristers, solicitors,insurers, dures suitable to the circumstances of the circumstances of the particular bankers, industry and traders – in short, all case and avoiding unnecessary delay or case, avoiding unnecessary delay of those who may be party to or assisting expense, so as to provide a fair means for or expense, so as to provide a fair parties in resolving disputes. resolution of the matters in dispute, the Act means for the resolution of the mat- is silent regarding the precise procedure for ters falling to be determined. Whether London’s dominance in interna- an arbitration and party autonomy applies. tional commercial dispute resolution will (2) The tribunal shall comply with that gen- continue turns at least partly on its atti- So, the ‘overriding objective’ of the CPR is to eral duty in conducting the arbitral pro- tude to some of the factors discussed in deal with cases ‘justly’ and the ‘overriding ceedings, in its decisions on matters of this article. duty’ of the Arbitration Tribunal is to act procedure and evidence and in the exer- ‘fairly and impartially’. It may be thought cise of all other powers conferred on it.” There are also valuable lessons to be learned that court and arbitration tribunal are start- from dispute resolution practice and proce- ing from the same or a similar place. There are of course powerful arguments dure in New York and Singapore. which have been raised against there Mediation in Arbitration being such a power (let alone duty). It is Arbitration Does an arbitration tribunal have the same pointed out that the arbitration tribu- Arbitration has a long history as the pre- power as the Court – namely, to stay pro- nal’s jurisdiction derives from the arbitra- ferred means of dispute resolution in some ceedings so as to enable mediation to take tion agreement between the parties and the industries (for example, shipping). place where one party so applies or where arbitrators’ duty is to proceed to an award. the tribunal considers it just and reasonable “Delegatus non potet delegare”. If the arbi- The same winds of change which were to do so – for example, where the costs of trator is mandated to proceed to an arbitra- blowing through English Court procedure the arbitration are likely to become dispro- tion award then he has no right to shirk that also affected arbitration.The Government’s portionate to the amount in issue? responsibility and in effect sub-delegate Departmental Advisory Committee (DAC) to someone new, the mediator, the task of under the chairmanship of Saville J pub- Further, if the arbitrators can direct a stay, resolving the dispute. lished its report in February 1996 and this can they also impose costs sanctions on a resulted in the Arbitration Act 1996 which party who fails to engage or refuses to medi- A case cited for the proposition that the applies to all arbitrations commenced after ate? Finally, if there is such a power, might arbitrators’ duty is to proceed to an award

64 BULLETIN 2015 VOLUME 110 #4 SHIPPING LAW Jonathan Lux

and that he has no power to stay the arbi- other words, the court held that ‘friendly •• Firstly, friendly discussions within a tration to enable mediation to take place discussions’ were a precondition to either specified timescale is Hussman (Europe) Ltd v Pharaon (for- party’s right to refer the dispute to arbitra- •• Secondly, mediation within a specified merly trading as Al Ameen Development tion. In so doing the courts have stressed timescale & Trade Establishment) (2003) EWCA Civ the public good in encouraging parties to •• Thirdly, arbitration or court 266. However, is this case really authority talk and/or mediate. for this proposition? I suggest not. However, as I indicated earlier, there may In many fields of international commer- well be advantages in holding mediation The judge’s duty is to proceed to judgement cial law (and shipping is a key example) sometime after court or arbitration pro- and the arbitrator’s duty is to proceed to an disputes are often referred to arbitration ceedings have been commenced and this is award. The judge’s powers, so it is said, are rather than court. It would be perverse if simply not catered for by such a hybrid or statutory and so the judge in discharging the acknowledged public good ceases to multi-tier dispute resolution clause. the ‘overriding objective’ of dealing with a apply when arbitration rather than court is particular case ‘justly’ may order a stay to the chosen forum. So, what is really called for is a court / medi- give Mediation a chance. The arbitrator, on ation / court or arbitration / mediation / the other hand, derives his powers from the The Future arbitration procedure. We know that the contract and his duty is to proceed straight I submit that arbitrators in England have the courts offer this and I have suggested that to and only to an award. But, is this right? power and duty to stay arbitration to enable arbitrators also have the power to do so. If I The arbitration reference may owe its life to mediation (suspending an arbitration pro- am wrong in this then what about the arbi- the arbitration agreement but the arbitra- cess while a mediation is conducted) to tration rules of the major arbitration bodies. tors’ powers, duties and obligations derive take place either when both parties agree or I have reviewed the rules of the Interna- largely from the arbitration act. where one party applies or it appears to the tional Chamber of Commerce (ICC), Lon- arbitrators to be in the interests of justice to don Court of International Arbitration The ‘overriding objective’ of the CPR is the do so. Further, if one party fails to engage (LCIA), Singapore International Arbitra- ‘overriding duty’ of the arbitration act – a with a mediation proposal or unreasonably tion Centre (SIAC), HongKong Interna- duty which is to include that to: “adopt pro- refuses to mediate then the Arbitration Tri- tional Arbitration Centre (HKIAC) and cedures suitable to the circumstances of the bunal should have the same power as the London Maritime Arbitration Association particular case, avoiding unnecessary delay court to make an adverse costs order. (LMAA). So far as I can see, only the ICC or expense, so as to provide a fair means for and SIAC have anything express to say on the resolution of the matters falling to be It may be said that even without such a this subject. determined.” power it is open to the parties to agree a hybrid or multi-tier dispute resolution The new ICC mediation rules (2014) are This talks in terms of a fair means for the clause providing for: designed to work in conjunction with the resolution of the matters falling to be deter- ICC arbitration rules. The mediation guid- mined and resolution can of course encom- •• Friendly discussions between the parties ance notes issued in conjunction with the pass settlement between the parties, a •• Mediation new rules actively encourage arbitrators to mediated settlement as well as an arbitra- •• Arbitration or court proceedings. consider the use of ‘mediation windows’ – tion award. staying the arbitration to allow mediation It is perfectly correct that, on the lat- to take place. The courts have regularly upheld Alterna- est authorities, the provisions calling for tive Dispute Resolution (ADR) mediation friendly discussions and/or mediation Secondly, there is Singapore which has clauses and, very recently,have upheld the are enforceable. The problem is that such been very innovative in the area of dispute section of a multi-tier dispute resolution clauses deal with matters in a sequential resolution. There is a brand-new Singapore clause calling for ‘friendly discussions’ - in manner – i.e.: International Mediation Centre launched

SHIPPING LAW BULLETIN 2015 VOLUME 110 #4 65 in November 2014.The SIAC, working in the power to order parties before them to Conclusion conjunction with the SIMC, proposes the mediate their disputes. On the view I take, arbitrators have the ‘Singapore Arb-Med-Arb Clause’ whereby power (and indeed the duty in appropriate SIAC arbitration is started and the parties I raised the question at the beginning of cases) to stay the arbitration so as to offer a then commit to Singapore International this article: will London stay at the pin- ‘mediation window’. It follows that, in exer- Mediation Centre (SIMC) mediation and nacle of international dispute resolution? cising their discretion on costs, the arbi- the resulting mediation settlement agree- The answer when it comes to arbitration trators should be entitled to ‘sanction’ the ment then goes back to SIAC and forms the is largely in the hands of the LMAA. Cer- successful party & deprive him of some or subject of a consent award (which can then tainly it would be open to the LMAA to all of his costs by reason of his failure to be enforced if necessary in upwards of 150 amend its rules so as to provide expressly engage with a mediation proposal and/ or states parties to the New York Convention). for the power which I have suggested arbi- refusal to mediate. trators anyway have under the 1996 Act. Turning to the USA, let me quote from two The new rule need only stipulate that at Of course, to put the matter beyond doubt, cases decided by the Second Circuit Court any time after commencement of the arbi- it would be preferable for the LMAA to of Appeals, sitting in New York, which tration either party could apply or the tri- amend its rules so as to provide expressly appear to support the view that arbitrators bunal itself could direct that proceedings for such powers. may have the power to order parties before be stayed to enable mediation to take place them to take time out from the arbitral pro- and that the tribunal should be entitled to If I am correct in the proposition I have cess and to mediate their dispute. Firstly, in take into account a party’s refusal to medi- advanced and/or the LMAA makes the rule Banco de Seguros-v-Mutual Marine Office, ate when dealing with the costs of the arbi- change suggested then London may con- Inc.,344 F.3d 255,262 (2d Cir.2003): tration. tinue as a leading international dispute res- olution centre for many years to come. In “Where an arbitration clause is broad, If the LMAA ignores this then it may hence- the meantime, there is nothing to prevent as here, arbitrators have the discretion to forth be operating at a disadvantage to Sin- parties from putting the matter to the test order remedies they determine appropri- gapore which is now offering a joined up by applying to their arbitration tribunal for ate, so long as they do not exceed the power dispute resolution system embracing both an appropriate order. When sitting as arbi- granted to them by the contract itself.” arbitration and mediation. It would appear trator I will give most careful consideration that the USA may also offer such flexibility, to such an application! ll Secondly, in Benihana Inc-v-Benihana of although this is less clear-cut. Tokyo, LLC 784 F.3d 887, 902 (2d Cir. 2015):

I said at the outset that I would be making Editor’s Note: Jonathan practised for “The benefit of having the arbitrators deci- further reference to Lord Woolf. In 2009 over 37 years as Solicitor, more than 30 sion is particularly important given that Lord Woolf gave a talk to the Chartered of which as Partner at International City arbitrators are generally afforded greater Institute of Arbitrators entitled: “Mediation Lawfirm Ince & Co. In 2013 he was called flexibility in fashioning remedies than are in arbitration in the pursuit of justice”. He to the English Bar and now practices courts.” said this: from Stone Chambers as Mediator, Arbi- trator and Barrister (legal advisory work). Whilst these two cases do not specifically “My thesis tonight is that litigation in the He was awarded Global Shipping and Maritime Lawyer of the Year for both state that arbitrators have the power to courts is very similar to litigation through 2010 and 2011 by Who’s Who Legal. In order a party before them to mediate the the process of arbitration. They both have December 2011 he featured in Lloyds dispute as part of the arbitration, the cases the same objective of obtaining a deci- List Top 10 Legal Personalities and was do show that US Federal Courts view sion which resolves a dispute and brings it a finalist for the Lloyds List Global Ship- arbitrators as having wide and extensive to an end. It is an imposed decision but, ping and Maritime Lawyer of the Year powers, provided the arbitrators do not whereas now judges will regularly con- award 2012. In 2015 he was elected a titulary member of the CMI. He is also a exceed the power granted by the arbitra- sider whether they can assist parties by member of the International Mediation tion clause. At state level there is judicial suggesting some form of ADR, that just Institute (http://imimediation.org/jona- authority that arbitrators have the power does not happen in arbitration. My argu- than-lux). to order parties to mediation but, thus far, ment is that it should, and it is indeed my Jonathan has received regular appoint- support for that proposition appears in the belief that it will, and that arbitrators will ments as Arbitrator and Mediator both common law of only one state, Texas. It is have to recognise the importance of their in relation to Maritime disputes and of course open to argument in other states matching the courts by offering the same international commercial disputes more or a Federal court that the Texas courts are sort of services.” widely. right and that arbitrators do indeed have

66 BULLETIN 2015 VOLUME 110 #4 SHIPPING LAW THE BIMCO HEAVY LIFT CONTRACTS WORKSHOP NOVEMBER 20th, 2015 I SUNTEC SINGAPORE

The BIMCO Heavy Lift It provides practical reviewing and negotiating Contracts Workshop is taking guidance on the most key clauses of the important place at Suntec Conven- relevant project charter project charter parties. Over- tion & Exhibition Centre, contracts. The participants all, participating will help to Singapore on November will be educated about the avoid costly mistakes by 20. Good news is that every three main contracts with managing risks in a profes- BIMCO member receives a regards to project chartering: sional manner. A certificate special discount of 10% The will be awarded to at the end workshop will be part of • HEAVYLIFTVOY of the workshop. PowerLogistics Asia 2015 – (mid-sized project cargo) Are you interested? the main even for the project • PROJECTCON logistics sector in Singapore (used when conducting projects Please visit http://powerlogis- www.powerlogisticsasia.com by tug and barge) ticsasia.com/HeavyLiftCon- • HEAVYCON 2007 tractsWorkshop.php or The “BIMCO Heavy Lift (super heavy lift market) contact PowerLift staff directly Contracts Workshop” is one to reserve your seat via email: of the most important Heavy Participants will learn evalu- [email protected] Lift Contracts workshops of ating and choosing the right 2015. It is officially supported charter contract, drafting and Don’t wait up - Book your seat by BIMCO and presented by specifying key deliverables. and we’ll see you there! the organizer PowerLift Events. Real life examples will help

SHIPPING LAW BULLETIN 2015 VOLUME 110 #4 67 Bankruptcy of bunker supplier

PST Energy 7 Shipping LLC and Another v O W Bunker Malta Ltd and Another (The “Res Cogitans”) - QBD (Comm Ct) (Males J) [2015] EWHC 2022 (Comm) - 14 July 2015 Contract – Supply of bunkers – Retention of title clause – Whether bunker supply contract wasa contract of sale within meaning of Sale of Goods Act 1979

On 31 October 2014 the owners of the ves- In the circumstances, payment from OWBAS contract, with the consequence sel Res Cogitans placed an order for the sup- OWBAS to Rosneft in the sum of that OWBM never had such property and ply of bunkers with OW Bunker Malta Ltd US$416,000 was due by 4 December 2014 was not in a position to transfer property (OWBM) at a price of US$443,800. The (30 days after delivery) while payment to the owners. They submitted that the order was confirmed by OWBM’s Sales from the owners to ING was due by 3 Jan- contract was a contract of sale of goods to Order Confirmation of the same date, uary 2015 (60 days after delivery). Neither which the Sale of Goods Act 1979 applied, which named OWBM as “Seller” and gave payment was made, although Rosneft paid and that ING could not maintain a claim a delivery date of 3 or 4 November 2014. RN-Bunker on 18 November 2014. for the price because the conditions in sec- tion 49 of the Act were not satisfied. The It provided that the physical supplier of On 6 November 2014 OWBAS announced property in the goods had not passed to the bunkers would be “Rosneft” and that that it was commencing insolvency pro- the buyer, and the price was not payable payment would be made within 60 days ceedings. OWBM was not currently in “on a day certain irrespective of delivery”. from the date of delivery upon presenta- insolvency proceedings. OWBAS’s failure to pay Rosneft meant tion of OWBM’s invoice. OWBM assigned that OWBM was in breach of the implied its right to payment to its bank, ING Bank ING brought arbitration proceedings term in section 12 of the Sale of Goods Act NV (ING). Notice of the assignment was against the owners claiming payment that the seller had a right to sell the goods duly given. of the US$443,800 due under the con- or would have such a right at the date when tract between OWBM and the owners in property was to pass. On the same day OWBM contracted with its capacity as assignee of OWBM’s rights its Danish parent company, OW Bun- under that contract. ING’s case was that The arbitrators held that the bunker sup- ker & Trading AS (OWBAS) to supply the sum fell due for payment on 3 January ply contract was not a contract of sale to the bunkers. OWBAS in turn contracted 2015 and was recoverable as a debt. Ros- which the Sale of Goods Act applied. ING’s with Rosneft Marine (UK) Ltd (Rosneft), neft had also demanded payment for the claim to payment was a straightforward a UK company. The OWBAS/Rosneft bunkers from the owners and had asserted claim in debt which was not subject to any contract required OWBAS to make pay- that it retained property in them. However, requirement as to the passing of property ment in the sum of US$416,000 within it was not a party to the arbitration. The in the bunkers to the owners at the time of 30 days of delivery. Rosneft in turn con- owners denied liability to OWBM or ING. payment. If, contrary to their conclusion, tracted with its Russian subsidiary, They did not object to paying for the bun- the contract had been a contract of sale to RN-Bunker Ltd, and it was the latter kers, but do not want to have to pay both which the Sale of Goods Act applied, the company which supplied the bunkers to ING and Rosneft. conditions in section 49 of the Act were the vessel at Tuapse in the Black Sea on not satisfied because the provision for pay- 4 November 2014. As was usual in the The owners disputed liability to pay ING ment to be made within a fixed period bunker supply trade, all the transactions on the ground that because OWBAS did after delivery did not satisfy the require- included retention of title clauses, and gave not pay Rosneft for the bunkers, Rosneft ment that “the price is payable on a day permission for the shipowner to consume retained the property in them pursuant to certain”. the bunkers in the meanwhile. the retention of title clause in the Rosneft/

68 BULLETIN 2015 VOLUME 110 #4 SHIPPING LAW The owners appealed to the High Court. would cease to exist, meant that the par- might be consumed straight away, Ros- ties must be taken to have understood that neft gave permission to the owners for that Held, that the consumption of the bunkers it was likely that title would never be trans- to happen and was content to look exclu- extinguished any property in them (Bor- ferred to the owners. It was possible that it sively to OWBAS as its contractual coun- den (UK) Ltd v Scottish Timber Products Ltd would be, but not likely. It was not an essen- terparty for payment. There was no breach [1980] 1 Lloyd’s Rep 160; [1981] 1 Ch 25). If tial part of the transaction that it should be by OWBM of its contract with the owners. the bunkers were consumed before the date (Rowland v Divall [1923] 2 KB 500 consid- for payment fell due in accordance with the ered). The combination of those features Accordingly, the contract in the pres- relevant credit terms, title to the bunkers meant that it could not have been the object ent case was not one to which the Sale of would by then have ceased to exist. of the contract to transfer property from Goods Act applied. If a label to the con- OWBM to the owners. Both parties knew tract was sought, “bunker supply contract” The question whether the contract was a that that was unlikely ever to happen. Even would be perfectly adequate. In any event, sale of goods depended not on the labels if it did, because some bunkers remained it was not a contract of sale within the defi- which the parties had used in the contract, unconsumed after 60 days, that was not nition in section 2 of the Sale of Goods Act but on an analysis of the obligations which fundamental to the transaction. 1979 (The Saetta [1993] 2 Lloyd’s Rep 268 they had undertaken. and The Fesco Angara [2011] 1 Lloyd’s Rep In those circumstances it was difficult to 61 considered). Had there been no retention of title clause conclude that OWBM undertook an obli- there was no doubt that the contract in gation to transfer the property in the bun- The appeal would be dismissed. ING the present case would have been a con- kers to the owners. There was no good did not need to bring its claim within the tract of sale to which the Sale of Goods Act reason why it should undertake an obli- requirements of section 49 of the Act. Its 1979 applied (Glencore International AG v gation which both parties knew that it claim to payment was a straightforward Metro Trading International Inc [2001] 1 was unlikely to be able to perform. It was claim in debt not subject to any requirement Lloyd’s Rep 284). equally difficult to conclude that what the as to the passing of property in the bunkers owners were paying for was the transfer of to the owners at the time of payment. It was common ground that the con- title to them, when both parties knew that tract when concluded was not a “sale”; the that was unlikely ever to happen. What If, contrary to its conclusion, the contract question was whether it was an “agree- the owners were paying for was not a title had been a contract of sale to which the ment to sell” within the meaning of the which they were never going to get but Act applied, the court would have accepted Act, and the issue was whether the con- something else. ING’s alternative submission (disagreeing tract between OWBM and the owners was with the arbitrators on that point) that a “a contract by which the seller transfers or The true nature of the bargain was that provision for payment to be made within agrees to transfer the property in goods to OWBM would deliver or arrange for deliv- a fixed period after delivery was sufficient the buyer for a money consideration, called ery of the bunkers, which the owners to satisfy the requirement in section 49(2) the price”. would be immediately entitled to use for that “the price is payable on a day certain the propulsion of the vessel. The permis- irrespective of delivery” (Stein Forbes & In order to qualify as a contract of sale sion to use the bunkers necessarily meant Co v County Tailoring Co (1916) 86 LJKB within the scope of the Act, four condi- not only that OWBM itself gave such per- 448, Colley v Overseas Exporters [1921] 3 tions had to be satisfied. First, the con- mission, but that OWBM was or would be KB 302, Shell-Mex Ltd v Elton Cop Dye- tract had to be for “goods”. Secondly, the in a position to give such permission to ing Co Ltd (1928) 34 Com Cas 39, Hen- seller had to undertake an obligation to the owners on behalf of whichever entity derson & Keay Ltd v A M Carmichael Ltd transfer the property in the goods (ie good in the supply chain was or would become 1956 SLT 58, Workman, Clark & Co Ltd v title to them) to the buyer. Thirdly, there the owner of the bunkers. What the own- Lloyd Brazileno [1908] 1 KB 968, Hyundai had to be a money consideration payable ers were paying for was the right to con- Heavy Industries Co v Papadopoulos [1980] by the buyer to the seller. Fourthly, there sume the bunkers and not an unlawful 2 Lloyd’s Rep 1 and Caterpillar (NI) Ltd had to be a link between the transfer of possession which exposed them to the risk v John Holt & Co (Liverpool) Ltd [2014] 1 title and the money consideration, such of an action at the suit of the true owner. At Lloyd’s Rep 180 considered). that the consideration for the payment was the date when the bunkers were delivered the transfer of title to the buyer as distinct the true owner was RN-Bunker, but when Stephen Cogley QC and Jeremy Richmond from some other benefit: in other words, Rosneft paid RN-Bunker on 18 November (Ince & Co LLP) for the owners; Robert what the buyer was paying for was title to it became the owner of whatever bunkers Bright QC and Marcus Mander (Allen & the goods. then remained unconsumed. Such per- Overy) for ING. ll mission given by the owner of the bunkers The issue in the present case was as to would be an effective defence to any claim the second and fourth conditions. In the against the owners for conversion. court’s view, the combined effect of: (1) the Editor’s Note: The above is a summary retention of title clause; (2) the period of On the facts, OWBM did obtain the nec- of a London judgement which appeared credit before payment fell due; (3) the per- essary permission from the owner of in Lloyd’s Maritime Law Newsletter No. mission given to the owners to consume the the bunkers so as to afford the owners a 931 of 7 August 2015, and which is bunkers; and (4) the fact that some or all of defence as a matter of English law to any the bunkers supplied were likely to be con- claim against them. By delivering the bun- reproduced by kind permission of the sumed before the expiry of the credit period kers to the vessel (or causing them to be publishers, Informa Law. with the consequence that property therein delivered) knowing that they would or

SHIPPING LAW BULLETIN 2015 VOLUME 110 #4 69 Pumping warranty

Charterparty – Discharge pumping warranty – Whether warranty of performance or capability – Effect of breach on demurrage liability – Shellvoy 5 form

The subject vessel was chartered for the manifold and Owners guarantee such the ship’s representative.” carriage of a cargo of crude oil from the minimum performance provided shore Middle Eastern Gulf to an Indian port. The facilities permit.” The owners submitted that the pumping charterparty was concluded by a fixture warranty related to the vessel’s capability, recap and incorporated the Shellvoy 5 form Part II Clause 20 not its actual performance, and that the with Shell 1999 Amendments/Additions vessel had maintained 100 psi back pres- /Deletions plus Shell February 1999 Addi- “If the vessel is equipped for crude oil sure at times during discharge. The char- tional Clauses 1–43 and Reliance Clauses washing Charterers shall have the right terers said that the warranty was not one 1–18. to require the vessel to crude oil wash, of capability but actual performance. They concurrently with discharge, those tanks accepted that there were times when the Disputes arose as to the time used at the in which Charterers’ cargo is carried. If vessel met the 100 psi back pressure, but discharge port and in particular the time crude oil washing is required by Charter- said that the average back pressure was less. said to have been lost for an alleged breach ers or any competent authority, any addi- They relied on the wording of Part I and of the charter pumping warranty. tional discharge time thereby incurred, clause 20 of Part II of the Shellvoy 5 form. always subject to the next succeeding sen- The charterers paid US$319,223.09 by way tences, shall count against laytime or, if In response, the owners said that the provi- of demurrage. The owners now claimed the vessel is on demurrage, for demur- sion in the penultimate sentence of clause a further US$29,213.55 by way of fur- rage. The number of hours specified 20 was a penalty clause and thus unen- ther demurrage, alternatively as damages, in Part I (a) I (vii) as amended shall be forceable. together with interest and costs. The char- increased by 0.6 hours per cargo tank terers denied that any further sum was washed, always subject to a maximum Held, that the pumping warranty was due to the owners and sought a refund of increase of 8 hours. If the vessel fails to clearly one of performance, not capabil- US$617.19 because of an alleged overpay- maintain 100 PSI throughout the dis- ity. The penultimate sentence of clause 20 ment, together with interest and costs. charge then any time over 24 hours, plus was not a penalty clause. A number of arbi- the additional discharge performance tration decisions were referred to in Scho- The clauses relevant to the pumping war- allowance under this clause, shall not field, Laytime and Demurrage, 6th Edition, ranty dispute, as amended by Shell Feb- count as laytime or demurrage, if on starting at para 6.137 but in none of those ruary 1999 amendments, and the fixture demurrage. This does not reduce Owners’ was it apparently argued that the common recap, were as follows: liability for vessel to perform her service form of pumping warranty was a penalty with utmost despatch.” provision. Given the many thousands of Shellvoy 5 Part I cases there had been involving pumping Shell February 1999 Additional Clauses warranties, it would be extremely startling “Owners guarantee that at the date hereof Clause 38 were it now to be decided that such war- and from the time when the obligation to ranties were unenforceable as penalties. proceed to the loadport(s) attaches, the “India Clause. (A) In assessing the pump- vessel discharges a full cargo (whether ing efficiency under this Charter at ports The problem, however, was the relation- homogeneous or multi grade) within 24 in India, Owners agree to accept the ship between the penultimate sentence of hours or can maintain a back pressure record of pressure maintained as stated clause 20 and the provision at Part I of the of an average of 100 PSI at the vessel’s in receiver’s statement of facts signed by Shellvoy 5 form of charter. The warranty

70 BULLETIN 2015 VOLUME 110 #4 SHIPPING LAW was in two parts. In the first part, either It followed that the total time allowed their failure to meet the first part in respect the vessel could and did discharge within under the first part of the warranty was of which they guaranteed they could and 24 hours (to which must be added time not 24 hours but 29 hours 59 minutes, and would discharge in 24 hours. Having allowed for crude oil washing, for stop- therefore since the actual discharge time failed to do that, it followed that the own- pages or reduced pumping) or, in the sec- was 42 hours the excess discharge time was ers could not claim demurrage beyond ond part, it had to maintain an average 12 hours one minute. the 24-hour period, extended by crude oil back pressure of 100 psi at the manifold. If washing, stoppages and reduced pressure. the vessel could meet either branch of the As discharge actually took some 42 hours That was also why the provision was not a warranty there was no breach. The diffi- it was clear that the vessel failed to meet penalty. The compensation the charterers cult question, and the real crux of the case, the 24 hours part of the warranty, even received by not having to pay demurrage was just what was the excess time. extended to 29 hours 59 minutes. was not related to the average back pres- sure achieved, but to the time the 24-hour In relation to the first part of the warranty To determine whether there was a breach of period, as extended, was exceeded, which the start point was that the time allowed the second part of the warranty it was nec- was certainly not penal. was 24 hours plus whatever additional essary to compare the average back pres- time was allowed. The tribunal had been sure achieved with that required. On the The tribunal would accept the charter- given two documents, one from each side, evidence 5.22 kg/cm was the achieved fig- ers’ broad approach of taking the actual showing how discharge had progressed. ure. That was clearly less than the required period of discharge of 42 hours and sub- From the vessel’s side, there was a docu- pressure of 7.03 kg/cm (100 psi) and there tracting from that the allowed period of ment called Cargo Pumping Performance was therefore also a breach of the second 24 hours plus the further time allowed for Data and from the charterers’ side there part of the warranty. crude oil washing and stoppages. On the was the Terminal Pumping Performance tribunal’s figures the excess time was 12 Report. Both documents had been signed In the tribunal’s view the measure set out hours one minute. At the demurrage rate by both the Terminal and the master. in the penultimate sentence of clause 20 of of US$50,000 per day, that represented reducing the total laytime used/time on a reduction of US$25,034.72 from the The former document showed that there demurrage applied as the measure of dam- demurrage otherwise due. were five periods when discharge was ages to the first part of the warranty. Such a stopped at the Terminal’s request and failure simply resulted in excess time over If the time lost due to the alleged breach four further periods when the vessel was that allowed not counting against laytime of the pumping warranty was excluded, ordered to reduce discharge pressure. In or demurrage if the vessel was on demur- the vessel was on demurrage for seven the following table, “Stop” were the peri- rage. Thus, the second half of the pumping days one hour 29 minutes. At the demur- ods when the vessel stopped discharge and warranty provided a defence for a failure rage rate of US$50,000 per day, that repre- “Reduce” were the periods when the vessel to meet the first part if the vessel main- sented demurrage of US$353,090.27 gross was ordered to reduce or one occasion, fur- tained an average back pressure of 100 psi. of address commission. If the reduction ther reduce, discharge pressure. That was the only significance of the sec- of US$25,034.72 referred to in the pre- ond part. What it did not do in the Shellvoy vious paragraph was taken off, the total The tribunal accepted, on the basis of Part I 5 wording was, as the owners had asserted, gross demurrage was US$328,055.55, or of the Shellvoy 5 form, that both obligations to create a separate cause of action or mea- US$319,854.16 net. If the sum already paid on the owners, ie to discharge within 24 sure of damages for a failure to meet the by the charterers of US$319,223.09 was hours or to maintain 100 psi, were only for required back pressure. Therefore there deducted, the further balance due to the such periods as “shore facilities permit” and was no point in ascertaining the addi- owners became US$631.07. that periods when the Terminal ordered tional time actually taken compared with discharge to stop or discharge pressure to the time that would have been taken had The owners would accordingly be awarded be reduced were not such periods. the vessel achieved the required back pres- US$631.07 together with interest. ll sure. There was a breach of the second part The tribunal further accepted that before of the warranty because the vessel failed to and after such periods time would be lost maintain an average discharge pressure of either reducing from or achieving the 7.03 kg/cm (100 psi). desired pressure. For such consequential loss of time the tribunal would be prepared Accordingly, the owners had failed to meet Editor’s Note: The above is a summary of to allow a total of one hour, bringing the the requirement of either part of the war- a London Arbitration Award (No. 13/15) total additional time allowed to four hours ranty. Had they met the second part, they which appeared in Lloyd’s Maritime Law 47 minutes. In addition, the tribunal had to would have had a defence for their failure Newsletter No. 932 of 21 August 2015 take account of the crude oil washing allow- to meet the first. It did not matter how far and which is reproduced by the kind ance of 1.2 hours (one hour 12 minutes), off they were from meeting the require- based on 0.6 x the 2 tanks washed at the ment of the second part of the warranty, or permission of the publishers, Informa behest of the vessel. That brought the total what loss flowed from it; the consequence Law. of additional time to five hours 59 minutes. was that they did not have a defence for

SHIPPING LAW BULLETIN 2015 VOLUME 110 #4 71

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Order now via [email protected] REVIEWED BY MICHAEL GREY New books On the importance of medical examinations

“Fit for Life” is the latest loss-preven- tance in the mind of a seafarer to be prop- are a risk to yourself and others” is empha- tion DVD from Steamship Mutual, which erly screened. But it addresses the value of sised throughout the film. addresses the problem of a persistently high a really thorough medical examination to level of claims for crew illnesses, which have the individual and his or her family. Largely It is also pointed out that illness can be very cost the P&I Club some USD 94m over a filmed in the Philippines using experts unpredictable and strike where few medi- five-year timespan. Many of these illnesses, from local PEME clinics, the production cal resources are available, such as far from which sometimes involved medical evacu- provides a convincing case for the process, land aboard a ship with no doctor anywhere ation and included tragedies for the indi- but stresses the need of using high-quality near. To screen and possibly detect such an viduals and their families, should have been medical examinations, which have them- illness could be literally lifesaving. Espe- picked up by a proper medical examination selves been approved by the P&I Club. Issu- cially after proper treatment, an individual before the seafarer joined a ship. ing certificates really do provide evidence of is restored to health, because of the “early a thorough examination. warning” of a proper PEME. This DVD, which is a highly professional production by Callisto Productions, the Some sad examples are given of people who The DVD touches on other crucial con- same team which produced earlier films on took short cuts with less thorough examina- cerns, not the least that of an ageing work- piracy and grounding, is presented by the tions, which were a precursor to tragedies, force and the precautionary principle of broadcaster Edward Stourton, who empha- with illnesses striking where it was diffi- making healthy lifestyle choices. With less sises the importance of pre-employment cult to deal with efficiently. “What if the physical activity in a modern merchant medical examinations (PEMEs). checks aren’t reliable?” is a vital question ship, a more sedentary life and the tempta- that is properly addressed. The production tions of unhealthy eating, there are many This is made for both ship operators and points out that the quality of medical exam- snares and pitfalls for the modern seafarer. seafarers. The script acknowledges the fears inations varies tremendously around the The film points to the consequences of obe- and negativity that may be behind the reluc- world. The message “if you are unfit, you sity and the need for good, balanced diets and properly prepared food, along with the connections obesity can have with diabetes, heart problems and other seri- ous illnesses.

The film acknowledges that the health of ships’ crews has become much more centre stage than previously and wel- comes the work of others in this respect. Links are provided to other sources of information in the DVD’s supporting liter- ature.

The 30-minute DVD is pro- vided at no charge, both to the club’s members and others who feel that it will be beneficial for them. See www.steamshipmu- tual.com for further informa- tion. ll

74 BULLETIN 2015 VOLUME 110 #4 BOOK REVIEWS Milestones in marine engineering

One of the exciting features of marine tech- The arrival of the marine diesel is recog- nology is the willingness of ship operators nised as a significant milestone, as is the to embrace it with enthusiasm. True, it leads development of the turbocharger and die- people down some blind alleys, should the sel-electric propulsion. Transmitting all claims of the technologists prove unjustified this power into propulsion takes the author in the marine environment. But technical into the consideration of paddles, propel- progress in engineering tends to disprove lers, water jets and ultimately pods. There the suggestion that the shipping industry is are chapters on fuels and the arrival of auto- “conservative”. A good idea, even one that is mation, while due recognition is given to the radical and revolutionary, will usually find role of navies in driving along machinery commercial interest available, which must development, with their particular require- be an encouragement to all working at the ments for speed and operational range, sub- frontiers of progress. mersible developments and nuclear power.

“Oceans of Power – 125 years of Marine The book diverts the reader into some of Engineering Milestones” goes rather fur- the peripheral problems with which marine ther back than its title suggests, to the very engineers found themselves engaged, such beginnings of marine mechanical propul- as ship stability, the development of hybrid sion more than 200 years ago. Written by propulsion and the way in which tragedies maritime journalist and professional naval would play a part in design changes. The ing to reflect that some ideas never entirely architect John Barnes, it is published by the more alert reader can trace the role of geo- go away, and although they might fail in Institute of Marine Engineering, Science politics in this story, as apparently won- one generation, they will make a comeback, and Technology (IMarEST) to commemo- derful developments in very fast ships or perhaps even decades later as the technol- rate 125 years since the establishment of the revolutionary projects involving gas tur- ogy evolves. A final section is devoted to institute. bines are confounded by huge fuel price the publisher – the IMarEST: its develop- rises, with ships having to be re-engined or ments over the past 125 years and where this It is a delightful and very readable account prematurely scrapped. dynamic professional organisation might be of marine engineering and the often quite headed in the future. curious developments that emerged as engi- The “internationalism” of engineering neers and designers struggled to produce developments are properly recognised It is very well illustrated, not least with some more powerful, more efficient and more with engineering innovation being spread of the lovely engineering drawings which commercially viable ways of propelling perhaps not evenly, but certainly widely, emerge from the IMarEST archives. One ships. Here are to be found their triumphs around the world. This is an enormous sub- does not have to be a marine engineer to and disappointments. ject to compress into a single volume, and appreciate this book. A final chapter consid- the author does this well, although obvi- ers the future, leaving the reader to make up Part One of the book takes the reader past ously developments which some might their mind about the prospects for hybrid the various marine engineering milestones, think of importance might be minimised propulsion, a nuclear revival, the possibil- from the earliest steam engines to the more or fail to make their appearance. Some, for ities of fuel cells, alternative fuels – LNG, speculative ventures that promises today’s instance, might query the failure to give CNG, bio, glycerine – battery developments shipping industry machinery will mini- Alfred Holt due recognition for his rev- and other areas, which may provide adven- mise environmental footprints. Triple and olutionary steamships which made their turous ship-operating readers with consid- quadruple expansion machinery gives way appearance in 1866, heralding the arrival erable food for thought. to the steam turbine, with range, speed and of long-range and economic steam propul- economy driven by developments down the sion. But the book does not pretend to be 100 years of shipping on the River Clyde, by years in boilers, with higher steam pres- all-encompassing, and the author clearly George C.O’Hara is published by the Scottish sures and coal firing giving way to oil. has had to be selective. It is an interesting Shipowners Benevolent Association, ISBN facet of this tour through marine engineer- 978-0-9930793-0-6. ll

BOOK REVIEWS BULLETIN 2015 VOLUME 110 #4 75 The first BIMCO eLearning diplomas awarded to two participants

BIMCO eLearning Diploma Programme awarded its first eLearning diplomas to two participants who successfully completed three or more eLearning courses. Clara Liu of Canpotex Shipping Services Limited, Canada completed five eLearning courses and Roberto Jorge Venuti of Fluvial Dry Cargo Operations Manager for Compañia Naviera Horamar, Argentina completed three courses.

“The knowledge I gained from the courses have benefited my daily work and sharp- ened my skills in dealing with various situations that I encounter in bulk shipping,” said Clara, who works as Vessel Operator for Canpotex. “The most impressive thing is I can access the eLearning course whenever and wherever I want. The information and case studies are very practical and the tutors are very experienced and professional in the different shipping fields. I would say BIMCO eLearning is a one-of-a-kind learning experience - absolutely worth the time and money,” said Clara.

According to Roberto Jorge Venuti, one of the most attractive aspects of eLearning is that participants can study wherever they may be located in the world, and are exposed to global perspectives on maritime subjects.

“Living in South America, it’s very difficult to participate in seminars or training on specific topics such as maritime contractual issues, as these types of courses are almost non-existent in the southern hemisphere,” said Roberto, who is Fluvial Dry Cargo Oper- ations Manager for Compañia Naviera Horamar.

“BIMCO has come to fill this void and Roberto Jorge Venuti gave me the opportunity to attend online courses covering all the main legal issues that might arise between parties in a shipping contract. Even though I have experience in these top- ics, the courses gave me a more global insight on the problems and solu- tions when things go wrong in the real world,” said Roberto.

BIMCO eLearning courses com- bine self-learning and virtual class-

room teaching with both theory and Editor’s Note: For more information, real case studies at a reasonable fee. A please contact: [email protected] number of courses eLearning and live courses are conducted throughout the or call (+45) 44 36 68 00. Clara Liu year – for the full list of courses. ll

76 BULLETIN 2015 VOLUME 110 #4 ANNUAL CONFERENCE & AWARDS CEREMONY HAMBURG 18 NOVEMBER 2015 UPCOMING COURSES

BIMCO COURSES, SEMINARS & WORKSHOPS 9-11 November 2015 ROTTERDAM Masterclass Workshop - Laytime & Demurrage 23-25 November 2015 ANTWERP Masterclass Workshop - Time Chartering 4-5 December 2015 BEIJING Masterclass Workshop - Project & HeavyLift BIMCO’s Annual Conference presents a rare opportunity to see the fallout of DYNAMIC SESSIONS on 14-15 December 2015 BEIJING Seminar - Voyage Chartering a maritime casualty and the real potential for cyber attacks on ships. 14-16 December 2015 ISTANBUL Charter Party Workshop CRISIS MANAGEMENT and CYBER SECURITY 17-18This December event 2015 is for allSHANGHAI decision-makersSeminar in - Voyageshipping Chartering who wish to hear the latest expert advice on the prevention and handling of BIMCO SHIPPING AWARDS and NETWORKING RECEPTION 8-10 December 2015 two DUBAImajor business Masterclassthreats Workshopfor shipping. - Bills of Lading 19-20 January 2016 DUBAI Seminar - Using SUPPLYTIME

SESSION 1: FROM CRISIS TO CLEAN-UP SESSIONBIMCO 2: eCYBERLEARNING ATTACK DIPLOMA PROGRAMME This interactive and multimedia event shows how a maritime casualty situation 11 Nov. 2015Is -your 25 Feb. company 2016 MODULE prepared 5 for a cyberTanker attack?Laytime and BIMCO Demurrage will share its latest can spiral out of control and the importance of crisis management. Hear from 14 Jan. - 7 Apr.evidence 2016 on howMODULE ships 2can be vulnerableBills of Lading to cyber attacks. Hear from experts salvage, pollution clean-up and media experts on the best way to handle these on prevention and how to protect your business against an emerging threat situations, see the outcomes – and ask those all-important questions. 28 Jan. - 31that Mar. 2016is becomingMODULE increasingly 1 importantIntroduction for to decision-makers Shipping in shipping. 11 Feb. - 3 May 2016 MODULE 6 Voyage Chartering 25 Feb. - 19 May 2016 MODULE 4 Dry Cargo Laytime and Demurrage BIMCO AWARDS DINNER SPONSORS:11 Mar. - 2 Jun. 2016 MODULE 3 Time Chartering Winners of the BIMCO awards will be announced at the dinner. Award nominations celebrate shipping 14 Apr. - 25 Aug. 2016 MODULE 5 Tanker Laytime and Demurrage companies and individuals who have excelled in key areas and are based on industry recommendations: 13 May - 26 Aug. 2016 MODULE 6 Voyage Chartering 1. BIMCO Regional Shipping Personality of the Year 9 Jun. - 1 Sep. 2016 MODULE 3 Time Chartering 2. BIMCO Shipping Company of the Year 3. BIMCO Education & Training Award 18 Aug. - 11 Nov. 2016 MODULE 2 Bills of Lading 4. BIMCO Contracts & Clause Award 5. BIMCO President’s Award 2 Sep. - 4 Nov. 2016 MODULE 1 Introduction to Shipping 15 Sep. - 8 Dec. 2016 MODULE 4 Dry Cargo Laytime and Demurrage CORPORATE PACKAGES 29 Sep. 2016 - 12 Jan. 2017 MODULE 3 Time Chartering BIMCO members will be able to register 10 persons as part of an attractive corporate package deal. This 7 Oct. 2016 - 19 Jan. 2017 MODULE 6 Voyage Chartering includes 10 conference passes and awards dinner seats including table logo placement. 27 Oct. 2016 - 2 Feb. 2017 MODULE 5 Tanker Laytime and Demurrage hamburg2015.bimco.org/registration 10 Nov. 2016 - 16 Feb. 2017 MODULE 4 Dry Cargo Laytime and Demurrage

ATTENDING: BIMCO committee members • board members • industry experts • maritime journalists • shipping professionals

BIMCO Education schedule available at: Web: www.bimco.org hamburg2015.bimco.orgTel: +45 4436 6800 Fax: +45 4436 6868 E-mail: [email protected] REGISTER ONLINE NOW! HOTEL ATLANTIC KEMPINSKI, HAMBURG

4 VOLUME 110 NOVEMBER 2015 for the RoRo sector RoRo the for

ROPAXTIME – new niche contract contract niche – new ROPAXTIME NYPE – major revision launched • Under banner the BIMCO future the in and • Today Shipping KPIs

BIMCO BULLETINBIMCO BULLETIN VOLUME 110103 NO.· NO. 4 6· NOVEMBER· DECEMBER 20152008 The BIMCO House, October 2015 to our global membership – to our global membership BIMCO is the world’s largest world’s BIMCO is the managers, brokers and agents. managers, brokers and agents. international shipping association, international We provide a wide range of services provide a wide range We which includes shipowners, operators, which includes shipowners, with 2,300 members in around 130 countries. in around 130 countries. with 2,300 members BIMCO 161 Bagsvaerdvej 2880 Bagsvaerd Denmark www.bimco.org