NEWSLETTER International Maritime Association of the Mediterranean www.imamhomepage.org June 2011 EDITORIAL FEATURE ARTICLES Shipping Companies and Shipbuilders between the Bulk-Carrier and the Iron C. Guedes Soares IMAM Newsletter Editor Ore Cargo Market Instituto Superior Técnico, Lisbon, Portugal Ivo Tijardovi ć Independent shipping expert, Split, Croatia ć Rajko Grubiši Faculty of Mechanical Engineering & Naval This second Newsletter continues the objective of Architecture, Zagreb, providing an overview of the situation in various Croatia member countries of IMAM and being a platform for announcing initiatives being promoted by our members. It is depending much from the initiative of Many bulk-carrier owners are paying much attention the Editorial Board but I hope that with time members to the steel production, particularly in China and will start contributing more frequently. India, because this is a strong argument on which depends the decision of investing (or not) in new During the last months the preparation of the next ships. In this year in China the demand for steel will IMAM Conference has been ongoing and this has increase for 5% so that in year 2012 China will use coincided with the start of the organization of the 635 million tons of steel. If in this year the entire IMAM Technical Committees who will be part of the world steel production will be about 1360 million Conference Program committee and have the tons of steel, then it is quite clear what amount of responsibility of a major part of the paper reviewing steel needs the Chinese economy. tasks. We hope that these committees will be consolidated with time and will be able to contribute The need for steel in India is about 10% of the actively to various initiatives. Chinese one, but in this year the demand will grow for about 13%, what is the greatest demand gradient The initial response to the conference has been very among the biggest steel consumers, and this trend is good and thus it is expected to have a well attended also expected in the following year. meeting. Even the USA is a dwarf in comparison to the Some applications of membership have been accepted Chinese consumption, because in this year the steel and, I am happy to announce four new members from consumption in the USA will be one seventh of the Spain, two from Portugal, one from Morocco, one Chinese one. Also, the steel consumption in the EU from Greece and one from Romania, and one and USA together makes only about 40% of the associate member from Iran. This increases the total Chinese one. It should be known that only fifteen number of members and of countries represented in years ago the world steel production made about 750 IMAM, reflecting steps in the direction of million tons, and that in the next nine years it consolidating the organization. increased for 400 million tons. Only in March of this We hope to be able to keep the publication of the year the world steel production was more than 130 Newsletters and I leave an open invitation for million tons. Approximately, one fourth of the world contributions to be sent to me or to any member of steel production is assigned for export. Therefore, all the Editorial Board. those who intend to survive in the shipping business, must know what in happening on this market. IMAM Newsletter June 2011 1 Here the banking institutions that are financially the ship owners of medium size bulk carriers (about supporting the shipping and shipbuilding have a 60 000 to 120 000 dwt) will experience the greatest particular interest. Therefore, they are at the moment losses due to such a reduction. Namely, this ship size hiring the best analytical experts on the market on a was very much demanded on the route India – China short- or long-term basis. It is not known to us, due to a relatively shorter distance in comparison to whether any Croatian bank seriously monitors the the trans-oceanic distances and because of various state on this market and according to it supports limitations and restrictions in the Indian ports. Such financially the shipping and the shipbuilding. The ships, once without the planned cargo, will move in Croatian banks are mainly in foreign ownership, so seeking for cargo to the already over-booked markets, that they prefer to support these activities in their what will surely have a negative effect on the country and not the Croatian ones. Even, if there is transportation fees. Thirdly, the biggest competitions some banking interest to finance some project in this for the shipping companies are the cargo owners field that is mainly a non-professional approach themselves, which purchase (and even build) ships yielding in adequate final results. It is known from the regardless of the suitable moment for investments, present experience that the bank owners in Croatia because they base their interest exclusively on the base their profits mainly on the needs of the citizens cargo amount that can be transported. In such a way, at solving their existential problems and not in on one side they purchase the ships very often financing the projects that could help more seriously expensively, but on the other side they are saving on to the recovery of the Croatian economy. the transportation fees. For them this is a short term loss but a long term gain. And finally, the most cruel Lower transportation fees than expected in the and unexpected danger for the shipping companies transport of iron ore and coke, the two essential raw (and shipbuilders) is the policy of the banking materials for the existence of the steel industry, are institutions and investment corporations, which have the reason that the offer of bulk carriers is greater one common interest: to make a big profit as quickly than the demand for them. As in this year about 30 as possible. Therefore, they jump into the shipping million dwt of these kind of ships is expected to market in the period of extremely high transportation terminate in breaker’s yard, this could simplify the fees (for example, 300 000 USD per day for a big position of the shipping companies, so better times bulk carrier) with exaggerating orders of new ships, are expected regardless of the number of new ships regardless of the fact that maybe already in one year that are continuously being included into the transport the fees for this same ship will drop on 0.7% of this business. extreme fee. In spite of significant oscillations at delivering the iron ore to Chine, because in April of this year China has imported 10% less than one month before, the optimism of many shipping companies is also based on the expected increase of the car production in OBITUARIES China, which could be soon doubled, and in year 2015 about 30 million of cars per year would be produced. The shipping companies also hope that China will preserve its own reserve of iron ore, which is of lower quality than the imported one, for a future time and that it will be oriented for a longer period to the higher quality imported iron ore, which profitable production with respect to the quality is about 50% lower than the one based on the Chinese iron ore. With other words, for China the steel production from domestic sources in only profitable when the price of the iron ore is about 180 USD per ton and more. PETER ATANASSOV BOGDANOV China has already imported about 230 million tons of Dr. Peter Bogdanov, original initiator, founder and iron ore in the first four months of this year, what is first Director of the Bulgarian Ship Hydrodynamics almost 60 million tons per month. Centre -Varna, passed away on 20 th July 2010 at the In spite of all this, there are several other aspects that age of 76. could unexpectedly influence in a negative way the Dr. Bogdanov received his MSc. degree in Naval shipping and shipbuilding on the bulk-carriers Architecture at the Naval Academy in St. Petersburg, market. Firstly, it must not be forgotten that the big Russia, in 1957 and was appointed at Varna Shipyard Chinamax bulk carriers of 400 000 dwt will surely afterwards. overtake the cargo from many shipping companies. Secondly, India, as one of the great iron ore exporters, He has been one of the founders and, later on, Deputy intends to reduce the export of its iron ore (about 90 R&D Director of the newly created in 1962 Bulgarian million tons the last year) in the next years due to its Ship Research Institute. own needs for the domestic iron ore. In such a way IMAM Newsletter June 2011 2 In 1972 he received his PhD degree. as a master in hull shop at the ship repair yard No 490 of Maritime ministry. The same year he went to work Peter Bogdanov had a strong personality, exceptional at Odessa Institute of Marine Fleet Engineers at the working capacity, believe and ambitions. Since 1966 Ship Theory department and he didn’t change his he concentrated his professional activities toward workplace anymore. Yuriy Vorobyov worked as an creating of the Bulgarian Ship Hydrodynamics Centre engineer, then researcher and instructor . In 1966 he by involving UNDP, IMO and Bulgarian Government defended his PhD thesis titled “ Analytical into the financial and technical support of Centre investigation and calculation methods for wave creation and staff training. He stimulated the creation resistance on deep and shallow water ”. In 1968 and growth of the BSHC team of scientists and Yuriy Vorobyov received an academic rank – specialists, which in very short terms brought it into associate professor of the Ship theory department and an Institution of national as well as international in 1976 he was made the head of the department.