Friday August 21, 2020 Daily Briefing Leading maritime commerce since 1734 LEAD STORY: Shipmanagers slam Singapore over Shipmanagers slam Singapore seafarer repatriation restrictions over seafarer repatriation WHAT TO WATCH: Maersk’s strategy U-turn since the restrictions 2009 financial crash pays dividends during pandemic crisis US bonds source of liquidity for selected owners State must help bankroll Greek ferry sector, says analyst OPINION: New appointments reveal Ocean Technologies’ strategy ANALYSIS: Yard Talk | Shiprecycling recovery gains momentum Rising retail sales boost US west coast throughput MARKETS: SINGAPORE HAS RECEIVED stinging criticism from shipmanager A dismal winter forecast for LNG lobby group InterManager for tougher quarantine and immigration shipping policies that it claims prevent most owners and managers from Höegh LNG seeks long-term FSRU undertaking seafarer repatriation and changeovers at the crucial contract coverage maritime hub, worsening the global crewing crisis. Navios posts second-quarter loss as dry bulk rates shrink Singapore’s Maritime and Port Authority introduced changes on July 24 that allow applications for crew sign-offs only, prioritise Singapore- IN OTHER NEWS: flagged ships, and limit approvals to those without contract extensions US retaliation challenges Hong Kong or compassionate grounds. maritime hub prospects A total of 14 seafarers missing after InterManager said restrictions imposed on non-Singapore ships ships collide “creates myriad issues to the safety of seafarers and presents a significant breach of seafarers’ humanitarian rights”. Malta urged to resolve stuck Maersk tanker with 27 rescued migrants “Their approach is everything but human-centric,” said InterManager’s Iran-UAE vessel seizures likely a ‘local director-general Kuba Szymanski. dispute’, security observers caution “Officials in Singapore have less than concrete action to help crew Saudi Arabia ports prohibit open-loop repatriation in these troubling times. scrubbers “Recommendations suggested by the MPA are not practical, and InterManager is encouraging anyone who did manage to carry out crew changes in Singapore to get in touch in order to keep a good record of the scale of the problem.” InterManager represents shipmanagers that provide third-party management of some 5,000 vessels employing some 250,000 of the world’s estimated 1.5m seafearers. Lloyd’s List | Daily Briefing Friday 21st August Page 1 The international association has been among the MPA response most vocal in condemning government immigration A spokeswoman for the MPA said in a statement to and quarantine policies and rules imposed worldwide Lloyd’s List: “It is incorrect to state that the ability of to control the spread of the coronavirus epidemic. non-Singapore flagged vessels to sign on and off crew has been ‘severely hampered’.” Some two thirds of crew changes have been unable to go ahead since March, leaving some 300,000 The July 24 regulation “does not mean that crew seafarers stranded on vessels worldwide, repeatedly changes for foreign-flagged ships are not allowed. extending contracts and unable to sign-off ships. For that matter, the vast majority of crew change carried out in Singapore were for foreign-flagged Capt Szymanski’s criticism formed part of an open ships. letter to International Maritime Organization secretary-general Kitack Lim, urging more support “Singapore continues to facilitate crew change to deal with the Singapore repatriation problems. daily.” “If the same rules issued by the MPA of Singapore The MPA declined to provide updated information were applied to all flag states, it would pose a very about current crew change numbers after Lloyd’s dangerous narrative, as ships of other flag states List asked for the figures twice over a 24-hour would not be allowed to perform crew changes period. anywhere in the world. Since March 27 Singapore had approved 31,000 “We — shipmanagers — would be unable to change crew changes, according to an emailed statement off-signing crew because they would immediately be from the MPA on July 13. in breach of safe manning regulations,” InterManager said. The Singapore Shipping Association was approached for comment on August 19 but has not responded. “We completely understand the concerns that Singapore has, and we support their efforts to look Singapore as well as Hong Kong reimposed tougher after their citizens. However, no ships means no crew change rules are a resurgence in local Covid-19 supplies, so a collaboration between the shipping cases and positive tests for signing-on crew, as well sector and local administration is of paramount as concern in Singapore about falsified tests for importance, and needs to be a two-way street.” some seafarers. WHAT TO WATCH Maersk’s strategy U-turn since the 2009 financial crash pays dividends during pandemic crisis WHAT a difference a decade makes. depreciation and amortisation of $6bn–$7bn, having suspended guidance a few months ago. At the start of 2020, as the coronavirus pandemic spread and countries around the world went into That compares with a group deficit of $1bn in 2009, lockdown, most pundits were predicting a bleak year as AP Moller-Maersk was dragged down by Maersk for container shipping, reminiscent of the meltdown Line which lost $2.1bn. The whole industry, which that engulfed the industry during the 2009 financial had only ever seen year-on-year growth, was crash. suddenly hit by a 10% collapse in demand, a situation which was exacerbated by a large Instead, ocean carriers have proved to be orderbook at the time. remarkably resilient, with market leader Maersk posting a healthy profit in the second quarter of the Although the decline in liftings has not been quite so year when the cargo slump was at its worst, and now severe this year, container lines were nevertheless forecasting full year earnings before interest, tax, expected to struggle to make money. Instead, the Lloyd’s List | Daily Briefing Friday 21st August Page 2 opposite seems to be the case, as Maersk and other Structural change has undoubtedly helped the carriers such as Hapag-Lloyd and Zim have Danish heavyweight navigate the unprecedented demonstrated. conditions that suddenly confronted the container trades in the first half of this year, and Mr Skou is Maersk group chief executive Søren Skou says that confident that there will be no going back to the bad much has happened over the intervening period, old days. with new tools at carriers’ disposal to cope with changes to both supply and demand, and a change of Supply/demand balance attitude at the top. Speaking to analysts after the release of second quarter of the year results that saw the group’s ocean In 2009, lines responded to the contraction in division post a 26% increase in ebitda to $1.4bn demand by cutting freight rates, behaviour that despite a volume drop of 16%, and revenue decline of left the whole industry deep in the red. Yet price 6.5%, Mr Skou said he was “frankly quite proud of wars continued to plague the container shipping the continued progress over the past two years when industry for many more years, made worse by we have not had the wind on our backs”. the tendency to order new tonnage almost at the first sign that market conditions could be Despite difficult market conditions, continued trade recovering. tensions, implementation of the IMO 2020 low- sulphur rules, and now a sharp reduction in demand In the run up to 2009, shipowners had embarked on caused by the pandemic, Maersk has remained in a huge spending spree, with the orderbook peaking the black. at more than 60% of the existing fleet at the time. And despite the subsequent banking crisis, the Indeed, while shipping is considered a cyclical ordering lull was brief. business, Maersk’s recent financial results have been counter-cyclical, “and shown that agility in Maersk led the way in returning to the shipyards, balancing supply and demand… means we can meet signing a $1.9bn contract in February 2011 for 10 customer needs and positively impact our Triple-E giants, the world’s first 18,000 teu-class performance at the same time,” said Mr Skou. ships, with options for another 20. As demand slowed in the early months of 2020 to a The decision to order new vessels so soon after massive slump of 20% in April compared with 12 container shipping’s worst year on record reflected months earlier, Maersk and other carriers avoided the fact the volumes picked up rapidly in 2010 as the usual knee-jerk response of price cutting. depleted inventories were replenished. But in a Instead, sailings were cancelled, and ships left idle. highly competitive industry, it was not long before most other global lines had followed Maersk by “In 2009 the thinking in Maersk and the rest of the ordering ultra large containerships. The outcome industry was that, if you had a network, you had to was a business that has progressively destroyed keep sailing and fill up the ships at all cost,” Mr Skou shareholder value over the years. said. In the case of AP Moller-Maersk, as Mr Skou pointed “That approach has completely changed, and we are out in an interview with Lloyd’s List a year ago, it now operating our network in a fashion that is very had gone from a $60bn company in 2011 to a $35bn similar to what the courier express and package guys company five years later. such as UPS and Fedex are doing,” he continued. But since then, the entire industry has been “They deploy their flights where there is a demand, dramatically reshaped through a series of largescale and that is what we have been doing through this mergers and acquisitions, while the Maersk group crisis, and that will be our approach going forward.