How I SMI - Ship Management International

Transcription

ISSUE 31 MAY-JUNE 2011
THE MAGAZINE OF THE WORLD’S SHIPMANAGEMENT COMMUNITY
COVER STORY
FIRST PERSON
14 Torben Janholt
At first sight, Denmark’s
J. Lauritzen looks like many
other tramp-trading shipping
companies. But closer
inspection reveals that it is
unusual, if not exceptional
Round Table debate
p66 Putting
shipping back
in order
SHIPMANAGEMENT FEATURES
18 How I Work
SMI talks to industry achievers
and asks the question: How do
you keep up with the rigours of
the shipping industry?
35 Insider
8 STRAIGHT TALK -
Dr Hermann J. Klein, Member
of the Supervisory Board at
Germanischer Lloyd
Are we getting the balance right?
58 On The Record
NOTEBOOK
10 Shipping leaders concerned
over ‘supply problems’
12 CISM to gain 12 specialised
vessels
The heads of the leading shipping
associations have raised concerns over the
growing tonnage oversupply problem with
2013 being the earliest time some think a
market turnaround can be seen
V.Ships and China Shipping Group (CSG)
have announced the development of their
joint venture company, China International
Ship Management (CISM), which will take
delivery of 12 specialised vessels in this
coming year
11 Seafarers shun fixed contracts
Seafarers are reluctant to enter into fixed
employment contracts mainly because they
believe they can still shop around for
higher wage levels
11 DNV head in safety warning
The head of one of the world’s largest
classification societies has thrown the
spotlight on the growing concerns over
crew competence by calling on shipping to
focus more on the human element as
opposed to the environment
11 Safety in numbers
Dobson Fleet Management has devised the
Convoy Escort Program (CEP)
12 Braemar announces ‘robust’
set of results
Braemar Shipping Services plc has
reported a robust set of financials for the
year to the end of February backed up by a
strong recovery in the Asian market and a
7% rise in shipbroking earnings
12 Last days of a captured
ship’s master
A disturbing account of the barbaric
actions of the Somali pirates towards
seafarers kept hostage has emerged with
the master of one vessel losing his life due
to prolonged torture and neglect by his
captors
SMI talks exclusively to John
Fredriksen about surviving the
crisis, acquiring new companies
and a spot of salmon fishing
MARKET SECTOR
38 Safety is as important
as the environment
The most significant warning yet that safety levels
onboard ship are suffering at the hands of the global
drive towards a cleaner environment has been given
40 Cloud computing
ClassNKand IBM Japan have
announced a new joint project
to develop the world’s first
archive centre
Cloud
computing
42 Coatings
A next generation tank coating has been unveiled
in the chemical tanker market which promises to
cut cleaning times and costs and increase the
flexibility and volume of cargoes
74 Open your eyes to
piracy’s special challenge
NEWBUILDING
79 Competitive Prices, Bold Strategies Fuel Continuing Order Flow
After the global market slump of 2008, Greek principals re-emerged as prime movers
in newbuild contracting during 2010
Maritime piracy – it is hardly
surprising to hear that this
scourge is cited at the top of
the list of urgent concerns for
ship operators and their
insurance providers
MAY/JUNE 2011 ISSUE 31
SHIP MANAGEMENT INTERNATIONAL
5
REGIONAL FOCUS
DISPATCHES
24 Strong nerves mean strong reserves
76 Ship owners warned over ailing coral reefs
Officials from the International Monetary Fund and the European
Union couldn’t have picked a worse day to travel to Greece to
discuss emergency bailout plans for the country
Ship owners are facing mounting pressure to move their
trade routes away from the coral reefs following a study
just published by more than 20 specialist organisations
32 I will not tax Greek ship owners
80 Iran struggles to hang onto the shipping lanes
In an exclusive interview with SMI, Yiannis Diamantidis, Greek
Minister of Maritime Affairs, Islands and Fisheries assures Greek
owners that their current tax status will not be compromised
48 Planning a sound path
Agreement by the big reinsurance companies to refrain
from providing cover for ships doing business with Iran
has unleashed a sea-change in the effectiveness of the
United Nations sanctions mounted against the
Islamic Republic
Dubai-based Polarcus is a pure play marine
geophysical company with a pioneering
environmental agenda
LIVE
52 Operating under difficult conditions
Iraq is one of the world’s most difficult theatres in which to
operate but according to Inchcape Shipping Services, the need for
shipping is proving more crucial...
85 Objects of Desire Things that make you go oooh!
REVIEW
53 ITM looks for growth
88 Books
A combination of the after-effects of the imposition of sanctions
against Iran, increased vessel deliveries and a growth in third
party shipmanagement consultancy services could spell a year of
growth ahead for the V. Ships acquired International Tanker
Management (ITM)
TRADE ANALYSIS
A Fifth Witness by Michael Connelly
Haynes RSM Titanic by David
F.Hutchings & Richard de Kerbrech
Starman: the truth behind the legend Yuri
Gagarin by Jamie Doran and Piers Bizony
Spanish Gold: Captin Woodes Rogers and
the Pirates of the Caribbean
90 Music
54 A harrowing break in convention
Efforts to contain the piracy crisis have come to a political head
with the continued detention of seven Indian seafarers in Somalia,
despite the payment of a ransom
Songs for Japan
Paul Simon: So Beautiful Or So What
Vancouver International Jazz Festival
90 Film
Edinburgh International Film Festival. Film-lovers will be
flocking to the Scottish capital later this month for the
Edinburgh International Film Festival
56 Ensuring the best
form of defence
Understanding the threat of terrorism, violent
crime and anti-social behaviour within a
maritime context takes years of frontline
experience
60 Floater projects give LNG sector fresh impetus
Floating LNG solutions are giving substantially wider commercial
and technological dimension to the LNG sector
91 Theatre
Premiering at New York’s Radio City Music Hall this month is
Cirque du Soleil’s breath-taking new production, Zarkana
91 Art
Watercolour A history of watercolour painting in Britain from
the Middle Ages through to the present day is delighting
visitors to the Tate Britain in London
91 Dining
BUSINESS OF SHIPPING
36 Rotterdam mounts steel challenge
Frantzén/Lindeberg Recently picking up the award for
‘The One to Watch’ in the S. Pellegrino World’s 50
Best Restaurants 2011, this small, intimate restaurant
in Stockholm delivers a feast of surprises to its diners
A subtle change in European importing patterns is having a major
impact on the breakbulk business carried out at Europe’s leading port.
63 AdHoc
LIFESTYLE
Taking the tension out of travel
Wikborg Rein expands capabilities with Brazil alliance
Watching out for the hazards
Plant a tree for the environment
ISSA is all at sea
My View: Nikolay Khovrin, ILEA Chairman
6
ISSUE 31 MAY/JUNE 2011
92 1940 TO 1970
A fine vintage
An appreciation for the style and vehicles
of times past is stirring up an inspiring new
fashion scene and some truly original days
out
STRAIGHT TALK
Welcome to
Ship Management International
May/June 2011
Issue No. 31
www.shipmanagementinternational.com
The shipping business magazine
today’s owners and managers
have been waiting for
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(InterManager)
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Nigel Cleave
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(Columbia Shipmanagement)
(Elaborate Communications)
Sean Moloney
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8
Are we getting
the balance right?
A
t a time when the crew element sits
firmly on top of the shipping industry’s
most important ‘to do’ list, it seems an
anathema to even contemplate that training
should be forced to reappear on the shopping
list of ship owner things to remember.
After all, the industry has just emerged from
a concerted period of wage inflation and crew
member poaching and concerns were raised two
years ago that rapid promotion policies
implemented by some ship owners and ship
managers were threatening to place in positions
of responsibility, some officers who were just
not up to the task. So it comes as a surprise that
shipping heavyweights such as DNV’s Tor
Svensen should start hoisting the ‘safety risk’
flag in a warning to the industry to stop moving
the public focus towards environmental risk and
away from human safety and personnel risk.
And he has a point, especially when you
consider that not only are there more ships
coming out of the world’s shipyards, but they
are bigger and more sophisticated. So greater
attention needs to be placed on training
standards and competency levels onboard ship!
Year-on-year improvements in ship safety were
now turning into a negative trend, he claimed,
with statistics showing that the accident
frequency has started to rise from an historic
low. “Technology, rules and compliance will
never bring us to the expected level of safety
without focusing more strongly on the human
element,” he said.
An airline Captain friend of mine remarked
to me the other day over a quiet pint that a
Boeing 777 pilot would not be qualified to fly an
Airbus equivalent – indeed, he would not even
recognise the controls in the cockpit. The only
similarity between the two aircraft he claimed,
was that they “both have wings”. So why is
there not this level of stringent checking of
competency when Captains and senior officers
move from ship to ship, or from older ship to
newer ship? Seafarer training is not just about
certification but has to be about pure
competency and this has to be checked, and
checked.
Claims that much of today’s training is of
poor quality has to set alarm bells ringing in the
shipping offices and practitioners have to start
spending more time on actual training as well as
start to measure the effects of their training.
Regular assessment of competency levels is
therefore crucial but managers and owners need
to think beyond compliance. Regulations
address safety management systems but there is
no guarantee for human performance.
But the industry is facing a dilemma, we all
know that. Its invisible image is doing very little
to attract quality recruits into the industry and as
we are hearing, wage levels are not dropping as
it is still a sellers’ market out there. But just
when the industry needs to start treating its
seagoing staff as valued company members
rather than just a commodity, there is still a
reluctance by seafarers to enter into fixed
employment contracts as they continue to chase
what they believe is a rising wage dollar.
Maybe the time has come to reignite the
zero tolerance perspectives that were laid out in
the much heralded, but now little heard of,
Poseidon Challenge. Their goals of zero
fatalities, zero pollution and zero detentions
were admirable aspirations and maybe they
should be visited once again. Zero tolerance of
inferior vessel safety should also be a key
performance indicator on every crew manager’s
operational dashboard.
Happy reading
Sean Moloney
NOTEBOOK
SHIPMANAGEMENT NEWS AND REPORTS FROM AROUND THE WORLD
Shipping leaders concerned
over ‘supply problems’
T
he heads of the leading shipping
associations have raised concerns
over
the
growing
tonnage
oversupply problem with 2013 being the
earliest time some think a market
turnaround can be seen.
Talking as part of a trade association
Round Table debate for SMI, Spyros
Polemis, Chairman of the International
Chamber of Shipping and President of the
International Shipping Federation, said
oversupply of tonnage was still a problem
together with the contraction in demand
because of the financial crisis. “Two things
now have to happen: ship owners have to
avoid ordering more ships and the world’s
economies need to improve. Because of
globalisation, economies have to improve
together rather than individually. In the past
we used to say that the US economy was the
driver. I don’t think this is the case anymore.
Because of globalisation we need to move
together in order to generate the necessary
demand,” he said.
Rob Lomas, Secretary General of
Intercargo, added: “We haven’t really seen
the volatile nature of the shipping industry
for some time and in the dry bulk sector in
particular, we have witnessed steady demand
and reasonably steady supply. But now we
are back to the traditional function of the
market which is a reaction to volatility.
“Although we have some cautious
grounds for optimism in the future – we have
China still powering ahead and India not too
far behind in terms of demand for dry bulk
shipping – the effects of this may take a little
time to come through. But until it does, we
are seeing operating costs and revenues in
disarray and we are just going to have to ride
out that particular storm. It should get better
in the next few months,” he told the Round
Table.
Robert Lorenz-Meyer, President of
BIMCO, said that while globalisation was
here to stay, there are some trends towards
re-regionalisation as well. “A lot of this has
to do with the environmental concerns of
consumers who are just not prepared to
accept a much larger carbon footprint for
products they buy. This will change the look
of shipping as well. There is a lot of product
sourcing which might be re-regionalised
later on.
10
“With regard to the order book, we are
looking at the youngest fleet we have ever
had and that is also positive but it is not the
most modern fleet and that is something we
have to take into consideration as well. A lot
of these ships were built based on
construction standards that are 10 to 15 years
old, These ships will last another 20 to 25
years and we all know what kind of
regulations are coming into the market; a lot
of these ships that have been ordered are not
fit to meet them.
Graham, Westgarth, President of
INTERTANKO, added: “In shipowning
terms, cautious optimism is positive. I think
that the supply/demand dynamic will resolve
itself. Our view is that we will typically have
another two trying years – it may be 2013
before we see a turnaround but the one thing
that hasn’t been mentioned and which
is significant, is the global shipbuilding
capacity, and in China specifically. Because
if ship owners stop building ships and China
decides that no matter what, its shipyards
should be building ships then the outcome
has nothing to do with supply/demand
dynamics, that is a political decision.”
NOTEBOOK
Seafarers shun
fixed contracts
DNV head in
vessel warning
T
S
eafarers are reluctant to enter into
fixed employment contracts mainly
because they believe they can still
shop around for higher wage levels, the
head of a leading tanker management
company has warned.
Lars Modin, President and CEO of
International Tanker Management in
Dubai, said efforts by the company to
install fixed employment contracts had not
really taken off because many seafarers
believed the employment market was still
operating in their favour and in so doing,
were waiting to see how it would develop
for them.
The company told this magazine in
November 2009 that it was looking at
introducing fixed contracts for officers on
its managed vessels as a way of boosting
crew loyalty and ensuring the recruitment
and retention of the best officers available.
The plan at the time was to target around
20% of officers for the fixed contracts.
he head of one of the world’s largest
classification societies has thrown
the spotlight on the growing
concerns over crew competence by calling
on shipping to focus more on the human
element as opposed to the environment.
“A downward trend in safety statics
creates concerns and it is now time to
reinstall the balance between safety and
environmental risk,” said Tor Svensen,
President of DNV.
The positive trend in which the accident
rate was decreasing has now stopped, he
told reporters at the recent Nor-Shipping
show in Oslo. “In fact, it has been reversed,
and navigational errors still play a dominant
role. In addition, we are facing a future of
more sea transportation, more ships and
more technologically advanced ships,” he
said.
Due to the combined efforts of the
industry, including owners, charterers,
classification societies and port state
authorities, the accident rate decreased year
by year for more than 20 years. This trend
stopped almost a decade ago, and over the
past few years an increased rate has been
reported, DNV said.
“The shipping industry is facing
different challenges. There is now a high
focus on the environment, and this is
leading to major changes. In my mind, it is
now time to reinstall the balance between
safety and environmental risk. Zero
tolerance for loss of life is equally as
important as zero environmental damage,”
Mr Svensen said.
“The industry will always have to
balance safety and other priorities, but the
negative trend in accident rates indicates
that we are no longer managing to get the
balance right,” he added.
DNV has for years collected and
analysed data related to all aspects of safety
at sea. Thousands of feedback forms have
been addressed to major shipowners, and
these have been completed and returned by
all levels of these organisations – both
onshore and onboard vessels.
“We cannot design ourselves away
from the human elements. Safety can never
be completely regulated. Individual
competence and behaviour will always be
key elements in managing safety,” he
stressed.
Safety in numbers
D
obson Fleet Management has
devised the Convoy Escort Program
(CEP) – a unique venture in
assisting ships traversing the Gulf of Aden to
avoid hijackings.
Bob Maxwell, Managing Director, said
the plan is to provide a non-military escort
service with a fleet of 18 patrol boats
(including two spares), meaning eight
conveys of two boats each will be in action
simultaneously.
Dobson, which plans to provide the
sailing crew and technical management of the
patrol vessels, is in talks with flag states
interested in taking on the service. Mr
Maxwell said the CEP would be underwritten
by Lloyd’s and would also provide hull
breach and kidnap and ransom insurance
simultaneously.
He said: “Whatever flag state you are
with, there’s no firing from your ship. The
Captain doesn’t have to fear criminalisation.”
11
NOTEBOOK
CISM to gain
12 specialised vessels
V
.Ships and China Shipping Group
(CSG) have announced the
development of their joint venture
company, China International Ship
Management (CISM), which will take
delivery of 12 specialised vessels in this
coming year.
According to V.Ships President
Roberto Giorgi, this expansion is in line
with his initial vision for CISM, which was
founded in 2005: “The original idea was to
run eight 9,600teu containerships but
naturally, during the crisis, we postponed
our newbuildings to run four ships only.
Only recently, we have seen the market
improving so CISM has now expanded
with eight 14,100teu units.”
Following a recent meeting between
Mr Giorgi and Li Shaode, President of the
China Shipping Group, management of
these vessels will be the responsibility of
the JV, in addition to the operations of two
VLCCs and two VLOCs, which will be
ordered by CISM.
Describing the significance of this
move to V.Ships, Mr Giorgi said he expects
to see a surge of activity within the Chinese
shipowning and chartering, and “Shanghai
will become one of the biggest clusters,
such as has happened for Hong Kong and
Singapore”.
Praising the approach of his Far Eastern
colleagues, Mr Giorgi added: “The reality
is an extremely dynamic market with real
people, who are fast, intelligent and smart.
The dynamic in a market like China, is
difficult to find in Europe or the US and
younger generations are coming closer to
the shipping sector which is another plus.”
With strategically located offices in
China, India, Brazil and Australia – four
regions which Mr Giorgi cited as the main
drivers of the shipping economy, CISM is
well positioned to create a footprint in other
sectors, and has stated its intentions to
expand the Sydney office to deal with
cruise vessels and offshore. Mr Giorgi
concluded that there is ‘major potential’ to
expand the JV to offer services to third
party owners in China.
Braemar announces
‘robust’ set of results
B
raemar Shipping Services plc has
reported a robust set of financials
for the year to the end of February
backed up by a strong recovery in the
Asian market and a 7% rise in shipbroking
earnings.
Revenue rose to £126.1 million from
£119m previously while pre-tax profits
before amortisation came in at £14.8m
against £15m 12 months ago. The company
reported an estimated forward order book
deliverable in 2011/12 of £23m ($36m)
(2010/11: £28m).
Chief Executive Alan Marsh attributed
these results to a high quantity of
transactions on a lower level: “When you
12
look at the figures of the requirements for
steel, for ore and for oil, these are all
increasing. Yes, there are more ships on the
Last days
of a captured
ship’s master
A
disturbing account of the barbaric
actions of the Somali pirates
towards seafarers kept hostage has
emerged with the master of one vessel
losing his life due to prolonged torture and
neglect by his captors.
According to communication sent by
one of his fellow crew and received by this
magazine, Captain Prem Kumar suffered
regular beatings at the hands of his captors.
Even though he was reported to have
suffered a couple of strokes he allegedly
received no medical assistance during his
captivity.
“At one point, he was so disabled that
he was paralysed in the left side of his body
and chose to lay motionless in his cabin for
a period of 12 days. And then (I guess the
blood clot had moved further away) and he
discovered he could move again. However,
his shipmates noted that the Master was
now stumbling in the passageways and on
the staircases, for no reason at all, and his
speech was sometimes slurred; he would
twitch for no reason,” his batch mate said..
“His nervous system was getting shot
and, I think, whenever the blood clot
moved, different symptoms were seen.
After 11 months the vessel was released
along with the crew of 34 and the Master.
He came home to New Delhi, to be with his
family but within the next two weeks he
was rushed to hospital as the euphoria of
reunion was quickly marred by the distinct
symptoms of stroke.
He was diagnosed as having suffered a
stroke and given no more than a few weeks
to live. He died within four days of being
admitted to hospital.
water now than we would like – freight
rates and prices will be under pressure but
there are more deals out there for us to be
doing.”
James Kidwell, Finance Director, said
Far Eastern growth was ‘driving shipping’:
“Imports of crude oil into China are
growing at 15% per annum at the moment
– the principal trade out of the Gulf is East
not West and the same is true on the dry
bulk side with iron ore.”
Braemar also announced its acquisition
of BMT Marine and Offshore Surveys
Limited; a provider of Hull and Machinery,
P&I and Marine Warranty survey services,
from the administrator, Deloitte.
Torben Janholt
President and CEO of J. Lauritzen
Since the sale of its 50% holding in reefer pool
NYK Lauritzen Cool in 2007, Denmark’s J
Lauritzen has diversified, grown and made
money. Now the company is considering
further expansion in the offshore sector
A
t first sight, Denmark’s J. Lauritzen looks
like many other tramp-trading shipping
companies. But closer inspection reveals that
it is unusual, if not exceptional.
It has weathered the downturn and stayed firmly in
the black throughout. As other companies have
hunkered down to brave out some of the industry’s most
difficult years in decades, Lauritzen has diversified,
investing in new shipping sectors and, today, continues
to grow at a cracking pace.
Though he has a strong team behind him, President
and CEO Torben Janholt has been the steady hand on
the corporate tiller. And he is the principal architect
behind the company’s moves out of reefers and into
product tankers, expansion in LPG tankers and, more
recently, significant investment in the offshore sector.
He has also been a prime mover in the company’s
strategy to build up its Asian presence out of a base in
Singapore – “a hell of a nice place to do business”.
Meanwhile, confounding many sceptics, he has
overseen the company’s wooing of heavy-hitters in the
energy industry with a virtually unique accommodation
service vessel, the Dan Swift, which could well form a
blueprint for a purpose-built unit or units, in due course.
And the 44,865dwt product-to-shuttle tanker
conversion Dan Eagle is now 18 months into a five
year with Petrobras and will soon be joined by two
new 59,000 dwt shuttle tankers which are nearing
completion at Cosco Nantong in China.
The company, originally established in 1884
by the Lauritzen family is owned today by the JL
Foundation. “It’s not a stock-listed company,”
explains Janholt, “but it is a shipping company
with lots of power – commercially, financially
– and it is one of the fastest growing
shipping companies in Denmark. Our
business is concentrated in four areas –
bulk, tankers, gas and our latest
activity, offshore.”
14
FIRST PERSON
“We are 150 vessels – I’m not happy
with 150 vessels on an average annual basis,
I believe it’s 180 – but it depends a little on
where you cut it. Here, we don’t take shorterterm time-charters into consideration – if we
did that, it would be closer to 200.”
There is still a chunky orderbook, with
29 bulkers at various stages of construction.
These include owned and part-owned
tonnage, slightly more than half; nine timechartered vessels, with the balance
comprising vessels committed to the
company’s handysize pool, currently ranking
number five amongst global operators.
Janholt is not that concerned about dry
bulk rates despite poor earnings and the
significant volume of tonnage on order.
Apart from good contract coverage, the
company is adept at trading ships in the
market, he points out. And apart from nine
Capesize and four Panamax units, the
company’s fleet comprises handysize and
handymax vessels where demand is still
relatively buoyant.
Lauritzen’s financials demonstrate
continuing solid performance. EBITDA in
the three years from 2008 has been $252m,
$135m and $159m yielding profit margins
of 26%, 16% and 26% respectively.
Meanwhile solvency in the three years has
remained in the 50-60% range,
demonstrating the company’s judicious
approach to financing.
“During the crisis years, Lauritzen came
out with positive results on the bottom line
all the way through. On Friday we have our
annual general meeting,” he commented
recently. “As you can imagine – with one
shareholder – it’s actually a very nice event.
There are not that many questions!”
The company’s bulk division is by far
the largest activity, with invested capital of
$920m and EBITDA of $156m; investment
in gas totals about $460m with an EBITDA
of $31m; tankers, a relatively new activity
taken up after the move out of reefers,
focuses on product and chemical tankers and
accounts for investment of around $150m
and an EBITDA, admittedly in a pretty poor
market, of $12m; and offshore, with $416m
invested and revenue of $61m. These
offshore numbers will increase significantly
when finance is drawn down on delivery of
the two new shuttle tankers later this year.
Long-established shipping companies
can often get stuck in a rut and, in doing so,
lose the ability to compete effectively on a
global stage. Not so in the case of Lauritzen,
however, which operates very effectively
from a high-cost capital city in northern
Europe. Of course, the Danes are pretty good
at shipping, but few of Lauritzen’s
compatriots have the depth or spread of this
agile and entrepreneurial set-up.
Janholt is keen to stress the corporate
priorities that have brought the company
successfully through recent testing times.
“We introduced a new vision, new values,”
he says. “And that has actually guided and
helped us quite a lot, especially in the crisis
years from 2008.”
He stands behind the move out of
reefers. “We’ve been pleased with the
decision … because a lot of the cargo is now
transported by a smaller company down the
road,” he jokes, referring to the steady drain
of conventional reefer cargoes into
refrigerated containers. But the reefer exit
has actually laid the ground for much of the
company’s successful diversification since.
“To be a little proud, through the crisis,
we had one of the biggest newbuilding
programmes in Lauritzen’s history. We were
financing our ships as we have been doing
all the time – self-financing until the day of
delivery when the normal bank finance
would kick in. So, in a world where money
disappeared overnight and nobody was
willing to do anything, we continued. We
changed our strategy. We looked at risk
factors and the most important elements in
our strategy.”
He describes the company’s five “Must
Win” battles, introduced in 2009: financial
independence, which involved getting out of
some
newbuilding
contracts
and
restructuring others; establishing a presence
in Brazil, considered essential for the
company’s new offshore business;
safeguarding the highest standards in ship
management – safety, security, environment
and training of the right staff; a sound Asian
base; and what he describes as corporate
advantages – “that’s our DNA – that’s why
people are proud to work here. When we
need to hire people, they are there. That’s
fantastic!”
“But the markets go up, and the markets
go down,” Janholt says pragmatically, “and
that’s where we make a lot of money. We are
not a liner company, we don’t have ships
sailing from A to B on a regular basis, not
necessarily … we have cargo contracts, but
we trade a lot of our ships in the marketplace.”
It has certainly not all been plain sailing.
And this year, the company will take a
significant hit to its bottom line as a result of
the Korea Line collapse and renegotiated
charters on capsize units with other parties
which Janholt will not name.
“Some of the major risks we have been
presented with over the crisis years have
actually been customers who have not been
able to perform the contracts which they
have made with us. And that is extremely
unfortunate. Whenever we do a contract, it
says 28, Sankt Annae Plads, Copenhagen.
We are not hiding behind some kind of funny
addresses in The Bahamas or Monrovia.”
“We are here and we hope to do
business with people who have the same
standing as us. But we have realised that the
world has changed somewhat over the crisis
years. The old saying ‘my word is my bond’
does not necessarily exist so much in
shipping today as it did just a couple years
ago.”
Pressed further on the likely impact on
Lauritzen’s bottom line, Janholt concedes
that the Korea Line collapse has involved
five ships – four handysize vessels and a
Capesize still under construction. The total
hit, involving these ships and a couple of
other Capesize charter renegotiated with
other parties, will not be far off $50m
although losses will be mitigated by reletting the ships in the market. The handysize
vessels are less of a worry, he says, because
rates for such units are still relatively healthy.
But the collapse of the Capesize deal will
leave a large hole, at least for the moment.
Janholt has strong words on standards of
behaviour and, as reports emerge of other
Korean shipping firms running into
difficulty, he says that some companies have
been too aggressive and have lacked
sufficient depth of funding. In the case of
Korea Line, he does not mince his words.
“They are now using a low market to
renegotiate and if they survive, we have a
competitor with cheap ships,” he declares.
But Janholt is eager to talk about more
positive developments – the company’s
successful entry into the offshore sector, for
example, and specifically the performance
of the Dan Swift, a ro-ro hull, ex Kraka,
bought for virtually nothing and converted
into an accommodation service vessel at
Blohm & Voss. She is a self-propelled
monohull with accommodation for around
250 charterer’s personnel and a crew of
around 40.
The DP2 unit, which Lauritzen
describes as a floating hotel, airport and
shipyard, underwent model tests at the Marin
Institute, has full station-keeping ability on
just half of her thruster capacity and has two
Marine Aluminium-built active heave
compensated telescopic gangways, the
longest installations of their type on any
vessel in operation today. Comfort on board
is enhanced by a Rolls-Royce anti-heeling
tank stability system and a 100-tonne active
heave compensated knuckleboom crane
serving a 600 square metre work deck,
supported by 250 square metres of
workshops.
Janholt admits that the conversion met
with plenty of scepticism in the market. Few
charterers believed that a dynamicallypositioned monohull, as compared with
semi-submersibles, would have the
necessary station-keeping performance in
hostile sea conditions offshore, and could be
liable to significant downtime. Now, based
on the Dan Swift’s success since delivery in
December 2009, Lauritzen is considering
placing an order for a purpose-built
accommodation service vessel or, in due
course, possibly several.
15
FIRST PERSON
To be fair, the Dan Swift conversion
project was fraught with headaches – it ran
some 30% over budget and took months
longer than expected. But Janholt says this is
common in the offshore market, with many
projects taking longer and costing more than
expected.
“You have to get used to it. I have a
Board that showed us a lot of trust and
confidence.”
Then, although the redesigned vessel had
been converted with a Petrobras-suitable
specification in mind, the timing didn’t quite
work and the Brazilian state major had
no requirement when the vessel finally
delivered. However, in a Statoil charter off
the Brazilian coast lasting from December
2009 to February of this year, the Dan Swift
has blazed a highly successful trail and, since
then, has now completed a second twomonth charter for Shell on the Bonga field,
off the Nigerian coast, where the Bonga
FPSO has been shut down for routine
maintenance.
Janholt cannot disguise his pleasure at
receiving a thank-you letter from the oil
major, commending the vessel’s performance
in West Africa. She has now performed well,
with no downtime, on both contracts and that,
he says, has proven the critics wrong and
given the monohull accommodation service
vessel lots of credibility. Hook-up takes
minutes and the gangways disconnect in
seconds, should an emergency arise.
“We don’t have to prove to oil
companies that this is a ship that can do the
job. I’m not completely off if I say that they
are calling us to find out when it’s available.”
And he points out that, unlike semisubmersibles, the vessel is instantly mobile
and could be deployed next in another
contract off the West African coast – in
Angola, for example – or just as easily head
back for Brazil. And gross rates of $150$160,000 a day, equivalent to a bareboat rate
of around $100,000, means “earnings are
higher than expected, even though costs were
higher”.
If the company goes ahead and contracts
for another similar vessel, it would be
larger, with capacity for 5-600 personnel.
Conversions are certainly possible, but based
on the company’s past experience, a
newbuilding would be more likely, possibly
from Korea.
“Yes,
there
are
conversion
opportunities,” says Janholt, “but the
question is whether it would be easier to build
a new ship. It’s always difficult to convert
ships, especially when they are so highly
complicated.” But with a price tag of around
$200m apiece, such investment decisions
cannot be taken lightly. “Maybe we will have
a new contract within this year,” Janholt says,
“but we would prefer to order against a
charter.”
There are a number of potential charterers
in Brazil, he says, including BG, Petrobras
and Statoil. A joint venture is another
possibility and Janholt says discussions with
possible partners are under way.
Certainly, Lauritzen’s projections indicate
that such units will be in heavy demand over
the next few years as energy exploration
moves further offshore and floating
technology in both oil and gas requires
ongoing support, and accommodation
services for personnel. Moreover, much of
the existing fleet of semi-submersible
accommodation units is relatively old,
expensive to re-position and not necessarily
suited to remote locations in deep water and
hostile conditions.
There has been talk of spinning off
Lauritzen Offshore as a separate company but
Janholt dismisses this possibility for the
moment. It would need to be at least twice the
size for a listing to make sense, he says.
However, this could be a possible transaction
to watch closely – an initial public offering
would be one way for the company to fund a
series of new accommodation service units as
well as enabling investors to buy into a slice
of the J Lauritzen action. On the basis of
recent performance, this could be a sound
move. ■
SHIPMANAGEMENT
HOW I WORK
work
How I
SMI talks to industry leaders and asks the question
How do you keep up with the rigours of the shipping industry?
ith a desire to see the world but
no family roots in shipping, you
might presume that as a young
man, Bjørn Højgaard spent his days
studying the conventional route to sea as a
cadet but in fact, the Danish national began
his career as a deckhand at a variety of small
shipping companies and gradually worked
his way up, learning as he progressed.
For Mr Højgaard, who joined Thome
Ship Management as Managing Director in
2008, early experiences within industry
included work onboard dredgers removing
sand in preparation for construction of the
Great Belt Bridge, in addition to time spent
on passenger vessels. These encounters with
seafarer life inspired Mr Højgaard to join the
Danish Navy where he became an officer,
prior to participating in the Maersk Advanced
Education Scheme for the training of officers.
Having completed his education with a
Ship’s Masters’ degree from the Svendborg
Navigationsskole in Denmark, Mr
Højgaard’s background includes high profile
roles at the AP Moller Group, which he
joined in 1993, including Managing Director
of AP Moller Singapore between 2000 and
2002, then Managing Director of a wholly
owned subsidiary of AP Moller in Hong
Kong.
In his current role at Thome, Mr
Højgaard specialises in the management of a
wide variety of vessels, particularly oil
tankers and gas carriers, and the company is
responsible for 140 fully-managed vessels.
As he told SMI, the company is enjoying a
particularly successful time, despite the
challenges posed to industry by low freight
rates: “Things are going well and our product
has been successful. It’s a continuous
improvement process for Thome with slow
but steady growth. There are many ships out
there so we can be quite selective.”
A notable strength of Thome is the
company’s ‘multi-national’ approach and
focus on the job satisfaction of its employees:
“As well as wanting to be the preferred ship
manager to our customer base, we also want
to be the preferred employer for those
working for us. We have good working
conditions and a management style that is
quite Scandinavian with an open door policy
and an approach which is not as ‘top down’
as perhaps some of our competitors in
industry. We are multi-national and interact
with our staff. We have over 20 different
passports in this office alone and embrace
diversity.” Mr Højgaard is fluent in Danish
and English and also practices conversational
German, French and Chinese.
However even having a head office in
the celebrated multi-national Republic of
Singapore can present some challenges for
ship management players: “If you have, as
we do, 95% of your operations in-store and
pay your staff in Singapore dollars, and the
exchange rate with the $US changes by 10%,
then it’s like losing 10% of your fleet, from
18
BJØRN HØJGAARD
Managing Director at Thome Ship
Managment, Singapore
W
say, 140 ships to 126. In terms of revenue, it’s
challenging because you still have to take
care of the ships” Mr Højgaard explained.
He added that the Singapore dollar has
been strong and so, the country is looked
upon as a safe haven as the economy
continues to grow. However, he warned there
could be repercussions for ship management
companies if the exchange rate between the
S$ and US$ slides to below 1.15, as the sector
may experience difficulties when competing
with the fixed exchange rate of regions such
as Hong Kong. He warned this could also
encourage companies to relocate to lower
cost countries such as Kuala Lumpur, Jakarta
or Bangkok and said European staff such as
superintendents may be encouraged to move
away from Singapore in line with this.
Mr Højgaard explained that it can be
difficult to foresee such market conditions
long-term and so, planning for the immediate
future is especially important for Thome. The
company has adopted some cost-saving
measures, including setting up an office in
Manila which has created 100 jobs and deals
with business essentials such as accounting
and payroll. Mr Højgaard praised the
Philippines as a nation with great expertise,
particularly in offering high quality staff
with a keen understanding of process
management, though Thome’s frontline staff,
including superintendents and crew
managers, remain based in Singapore.
In the day-to-day activities of Thome, Mr
Højgaard noted there is a definite empathy
between staff members and said he is happy
to change his mind and take on the ideas of
colleagues: “Every morning I meet with my
five closest employees and we speak for half
an hour to an hour – it’s an open discussion
and we share opinions but if I have a different
opinion to the others, we go with the majority.
I don’t think things are right or wrong in that
HOW I WORK
“
I am a hands-on ‘doer’
and am opposed to the ‘pie
in the sky’ view. I don’t think
that strategising is effective – I
like to get on the ground and
get things done. In terms of
my style, I believe my
employees would say I’m
clear on where we’re going
but I don’t over involve
myself in how we get there as
I don’t think you should
micro-manage. It’s important
to agree on directions and
plans upfront
“
sense as it’s all about the choices you make
and how you develop from these.”
“I am a hands-on ‘doer’ and am opposed
to the ‘pie in the sky’ view. I don’t think that
strategising is effective – I like to get on the
ground and get things done. In terms of my
style, I believe my employees would say I’m
clear on where we’re going but I don’t overinvolve myself in how we get there as I don’t
think you should micro-manage. It’s
important to agree on directions and plans
upfront.”
This dedicated and straight forward
approach also stems into Mr Højgaard’s
relationship with his customers, whom he
prides himself on visiting in person regularly,
leading to a busy travel schedule of 150 days
per year. A recent four week trip saw this
globetrotting Managing Director visit the
UK, Scandinavia, Turkey, Greece and
Croatia in one go, for business meetings with
customers and conferences. Noting that
regular travel and hearing customers’ views
has helped him to view company activities
from the ‘outside in’ rather than ‘inside out’,
Mr Højgaard said: “You must be present in
situations in order to make meaningful
changes to your company and product – you
must try and see what the customers’ see, as
opposed to just sitting in a company and
looking out.”
SHIPMANAGEMENT
A fan of the great outdoors, Mr Højgaard
is a keen runner and hiker for whom regular
exercise is a way of life. Making use of his
gym membership every day and taking
efforts to find alternative facilities when
travelling, he has taken part in a number of
hiking expeditions, including the 100 km
long and 4,700m high Maclehose mountain
trail in Hong Kong, on which he spent 28
hours in 2006 and the 5,895m Mt. Kilimajaro
in Tanzania during 2007. Mr Højgaard also
makes time for weight lifting within his gym
schedule and is a keen golfer.
Having combined his love of health and
fitness with charitable causes, Mr Højgaard
most recently took part in a hike in aid of The
Sailors’ Society – a charity offering practical
assistance, emotional and spiritual support for
seafarers, in addition to financial assistance
and family liaison if necessary. Between 8th
and 11th April 2011, shipping industry teams
climbed high Mount Kinabalu in Borneo
which at 4,032m was no simple feat, but Mr
Højgaard confirmed that his team, which
consisted of Thome Ship Management
President Claes Eek Thorstensen and the
company’s Technical Director Carsten
Ostenfeldt, raised an impressive $16,000. A
total of 41 teams participated and raised
$600,000 overall.
Mr Højgaard described the hike as “a
great bonding experience” for his team, who
successfully climbed to the Laban Rata rest
house 3,314m up the mountain where they
stayed overnight before setting off at 3am on
Sunday morning for the summit, which
they reached by sunrise to enjoy breath
taking views of the mountain’s surrounding
landscapes. Mr Højgaard said that during the
hike, his team spotted wildlife including
brown squirrels, colourful birds and even a
monkey but luckily, no snakes!
Describing why Thome chose to support
this event, he told SMI: “The Sailors’ Society
makes a valuable contribution for seafarers.
Sometimes, crew may have personal
problems and someone’s got to be there for
them, to listen to them and help them. It’s a
worthwhile cause.” ■
19
SHIPMANAGEMENT
HOW I WORK
wouldn’t like to tell you what we do but
what I can tell you is we don’t use armed
guards, although as an ex-seafarer and as an
owner I would like, at times, to have used
them or to have been able to use them but
it’s a legal minefield if any of the crew get
hurt. The Greek Flag and Malta Flag don’t
allow armed guards so it’s a major
problem.”
NICHOLAS PAPPADAKIS
Chairman, Intercargo
S
ince his successful election to the
role of Chairman at the 2005 Annual
General Meeting of the International
Association of Dry Cargo Shipowners
(Intercargo) in Athens, Nicholas ‘Nicky’
Pappadakis has worked diligently to
promote and ensure safe, efficient and
profitable shipping operations but his
primary concern rests with seafarer
welfare. “Our main priority remains the
safety of the seafarer – clearly without
seafarers there is no shipping,” he said
when describing the inseparable issues of
seafarer well being and piracy – an
accelerating problem which, according to
Mr Pappadakis, is “the most important
challenge facing shipping today”.
Through his emphasis on ‘seafarercentric’ solutions available to industry
in tackling piracy, Mr Pappadakis has
highlighted the need for owners to retain a
keen focus on the human element within
their operations – an approach which no
doubt stems from his varied experience
within industry.
Mr Pappadakis began his shipping
career as an apprentice at sea prior to
working in London as a Management
Trainee at his family’s company, A.G.
PAPPADAKIS & CO., before heading
up the firms chartering and operations
activities. Now at the helm of his family’s
aviation and maritime interests, Mr
Pappadakis also serves as a Member of
the Board of Directors on numerous
organisations and bodies including the
Union of Greek Shipowners and the
Hellenic Committees of Germanischer
Lloyd, Lloyd’s Register and Det Norske
Veritas.
Whether raising the profile of
environmental issues, working with the
International Maritime Organization to
develop legislation or building on
relationships with other shipping
associations and regulators, Intercargo
plays a vital yet vast role in the maritime
world. Describing which issues he deems
especially pertinent for 2011, Mr
Pappadakis cited the industry’s excessive
order book for new vessels as an area of
concern and said: “The overhang of ships
on order is incredible and the competition
the industry is going to have from the Far
East is inevitable. Something people should
realise is that the number of Chinese
shipping companies increased in the last
year by one third.”
So, how does Mr Pappadakis intend to
build on his company’s assets during this
time of fresh competition from Far Eastern
players? “In Greece we have a good saying
which states: ‘He who has the watermelon
and the knife decrees which size the slice is’.
It’s inevitable – they have the transfer
requirements, they have the shipyards in
large numbers. That’s why I have been
saying for example, in my own organisation
– I hope the next chairman will be from the
Far East. We have around 870 members and
many of our members are from the Far
East.”
Commenting on his own firm,
Mr Pappadakis explained that vessels
commissioned in China and the Far East
have proven ‘fantastic’ as the quality has
been of a high standard. He added that
“building ships requires a good inspection
team during the course of construction” and
said his company has obtained such services
without issue.
But what hopes does this shrewd owner
and maritime personality have for 2011? Mr
Pappadakis simply stated: “I would hope for
peace because we live in trying times.”
Indeed, the issue of whether to place armed
guards onboard is of particular concern to
Mr Pappadakis and his competitors, as he
confirmed: “This is a topic which is fraught
with difficulties, legal and otherwise, so I
20
In Greece we have a
good saying which states: ‘He
who has the watermelon and
the knife decrees which size
the slice is
“
“
At my age – I’m 72,
shipping is a way of life for me,
it’s not just a way of making
money
“
“
Also committed to his responsibilities
as President of the Malta International
Shipping Council and Vice President of the
Greek Chamber of Commerce (to name just
a selection of his roles), Mr Pappadakis
holds a passion for shipping which is as
intense as he is prolific and, as he told SMI,
maritime affairs now play a dominant force
in his world: “At my age – I’m 72, shipping
is a way of life for me, it’s not just a way of
making money.”
By the nature of his role at Intercargo,
Mr Pappadakis also travels extensively but
he described this aspect of his working life
as a necessity “for the greater good of
shipping” and added that travel has assisted
in broadening his outlook through meeting
new people: “By nature I like to share my
own experience but I like to learn from
others and maybe some of them can learn
from me.” But how does Mr Pappadakis
manage to successfully work within the
confines of such a hectic schedule? Simply
put: “Somebody once said, for the bee to
make honey, it’s got to go to all the flowers
– and I try to!” ■
MORTEN ARNTZEN
President and Chief Executive Officer,
Overseas Shipholding Group
S
teering a respected ship owning firm
through acquisitions totalling almost
$2 billion is no mean feat but as
President and Chief Executive Officer of
the Overseas Shipholding Group, Morten
Arntzen has used his broad knowledge of
the markets to ensure this impressive
growth since his appointment in January
2004.
With a disciplined approach to financial
and investment opportunities and a strict
focus on balanced rather than excessive
growth, Mr Arntzen has drawn much from
his previous experience as Chief Executive
of US merchant banking firm American
Marine Advisors, where a focus on
“
All those things in our business which
we can control, we’re being extra vigilant
about but the things we can’t influence,
such as spot market levels – all we can do
is try to outperform the average market
based on our contract portfolio
“
corporate restructuring, in addition to advisory services for
mergers and acquisitions, allowed him to further enhance
his knowledge of the markets.
Previous appointments also include heading up the
Global Shipping Group for the now consolidated bank
holding firm Manufacturers Hanover Trust Company and
Mr Arntzen has also worked at the helm of the Global
Transportation Group on behalf of Chase Manhattan Bank
and Chemical Bank.
Since his appointment at OSG, the fleet has expanded
significantly from 53 ships to almost 100 vessels dealing
with the transportation of products, petroleum and gas and
the company has expanded these core business areas. In
addition, OSG also owns 25 ships which are currently
employed in US Flag operations under the Jones Act, with
a fleet comprised of articulated tug barges and handysize
and lightering product carriers.
So it would appear that positive times abound for OSG,
but when SMI asked Mr Arntzen how the markets have
faired for his company in recent times, he frankly described
the period as ‘terrible’ and added: “The crude markets have
been very weak for January and February. March was much
better and April will be a little better – our US Flag business
has improved. The tanker market was better the first quarter
HOW I WORK
SHIPMANAGEMENT
“
We’ve been very careful
with our money and will
continue to be patient and
wait – we don’t need to add
ships as we’re big enough... we
would be delighted to be able
to stand in front of millions to
announce a ship purchase deal
which will be accretive... Only
when I can do that will we be
back in the game!
“
of this year than in the fourth quarter of last
year and will be materially better in the
second quarter so that’s a good job! But the
crude markets have continued to be weak –
they’re now better than the last six months
of 2010 but not good enough yet!”
Despite this testing outlook, Mr Arntzen
appeared upbeat and added that the industry
and markets are most likely “heading in the
right direction” for the near future. But what
is OSG’s strategy for progression during
these uncertain times? He confirmed that his
company has adopted a strict approach of
ensuring those aspects of business which
can be controlled in-house are kept well incheck: “Our strategy has been this – there
are a lot of parts of our business which we
can influence ourselves, such as controlling
costs. We also ensure at sea, that when we
have those fixed contracts and difficult
projects to complete, we’ve done that.” He
added that elements of business which
needed to be renewed have also been
invested in as appropriate.
Concerning those aspects of OSG’s
business which do not lie in-house, Mr
Arntzen explained: This approach has paid
off for OSG, which has seen equity market
transactions of $1.04bn since Mr Arntzen’s
appointment.
The company has also acted wisely by
not getting drawn into the excessive vessel
purchasing which has proven so irresistible
to some competitors in the past and the firm
has not bought a ship for around four years.
As Mr Arntzen confirmed, OSG has no
plans to purchase vessels in the near future:
“We’ve been very careful with our money
and will continue to be patient and wait –
we don’t need to add ships as we’re big
enough.” He added that he would be
“delighted” to be able to “stand in front of
millions” to announce a ship purchase deal
which will be ‘accretive’ but added: “Only
when I can do that will we be back in the
game!”
The need to keep a careful eye on such
a wide variety of business components
might strike worry into the hearts of less
experienced players, but Mr Arntzen, who
gained a Masters degree in International
Affairs from Columbia University, is also
committed to a whole range of other
responsibilities and appointments. This
includes his role as a board member of the
New York and New Jersey based Seaman's
Church Institute and of Royal Caribbean
Cruises (where he is active on a committee
dedicated to the environment, safety and
security). Mr Arntzen also sits on the Board
of Trustees of New Canaan Country School
and Maine Maritime Academy.
With his working life split into such a
variety of components, how does Mr
Arntzen relax? Describing his experience at
the Sea Asia 2011 conference, he told SMI:
“Coming to Asia is relaxing – you get a
sense of adrenaline and people are upbeat
and optimistic. The US is depressed about
things but this is great!” He added that the
enjoyable aspect of travelling remains true
for him and said his wife travels with him,
so distance from family is never an issue for
Mr Arntzen, whose passion for all things
maritime shows no sign of decreasing, as he
concluded: “Shipping is fun – that’s why
we’re in it!” ■
REGIONAL FOCUS
GREECE
Strong nerves
mean
strong reserves
O
fficials from the International
Monetary Fund and the European
Union couldn’t have picked a
worse day to travel to Greece to discuss
emergency bailout plans for the country. A
planned national strike against the Greek
government’s austerity measures in early
May brought to a halt all road, rail and air
travel for the day and demonstrated in no
uncertain terms, the scale of the task facing
Greece’s politicians as they struggle to
wade through what is fast becoming an
economic quagmire.
The Greek economy is at a critical
point because the government denies it
needs to restructure its debt to avoid a
default, while a sceptical bond market has
pushed up Greece's borrowing costs to
unaffordable levels.
A year after being granted €110bn
(£97bn) in rescue loans in return for a
radical overhaul of its economy, Greece
remains struck in recession and looks
unlikely to be able to stand on its own feet
again by 2013, when the current bail-out
programme runs out.
To give Greece some breathing space,
eurozone nations were debating additional
support measures to keep the country from
having to default on part of its massive debt
– a step that officials warn would rattle
banks across Europe and could hurt the
continent's recovery.
Drastic times call for drastic measures,
believes StealthGas CEO Harry Vafias and
some measures have been taken to tackle
the crisis, but as he told SMI: “In reality,
serious measures still need to be taken to
resolve the crisis but no one has the guts to
do it. They need to sack more public
servants, reduce government costs by 50%
and sell state-owned business. In a country
with 10 million people and one million
public servants, the numbers don’t add up.”
Strong words indeed, but a viewpoint
backed up by Michael Bodouroglou, CEO
and Chairman of Paragon Shipping, who
pointed to the inflexible nature of the Greek
governmental system as being behind the
current crisis and potentially forming a
barrier to its future resolution.
“I am less optimistic today than I was a
year ago and that is because the necessary
reforms for the economy are not taking place
at the pace they should be taking place. I
would like to see happen, whatever has been
agreed under the loan agreement between
Greece, the EU and the IMF. I would also
like to see a reduction in the size of the cost
of the state because this is what caused the
problems in the Greek economy. Greece’s
economic problems were due to the
24
Harry Vafias, CEO, StealthGas
government and the Greek banking sector is
in turmoil because of the government.
“The public sector is too big and too
costly for the economy. There are also a lot
of inflexibilities built into the economic
model; we have a lot of closed professions
and a very inflexible labour law. People are
not changing their ways because they are
adopting a populist mentality. It will
definitely prolong the recovery and it may
put many things we have for granted at
risk,” warned Mr Bodouroglou.
He added: “I have no answer to the
theoretical question of what happens if
Greece refuses to comply with the
obligations it has under its Memorandum of
Understanding. What will the lenders do
and what is the cost? They can say they will
not give Greece the next instalment of the
finance package which would mean the
GREECE
REGIONAL FOCUS
25
GREECE
“
Shipping represents 6%
of the country’s GDP and at
a time when Greece’s GDP
is reducing, you can see
shipping’s importance. You
are also talking about tens
of thousands of people
employed in the sector and
you have a few hundred
high net worth individuals
who live and spend their
money here...
Michael Bodouroglou,
CEO and Chairman, Paragon
Shipping
“
country lacks the liquidity to pay salaries.”
Is pressure being brought to bear on
the government to sort it out? Michael
Bodouroglou again: “In my view not
enough. There are too many ifs and buts
and too many complexities. Public transport
for instance should be opened up to new
entrants; pharmacists should be allowed to
open up for more competition and even as
we speak, law firms are not allowed and no
one can set up a collective of law firms.
University students also have free meals
and accommodation irrespective of a
family’s income.”
Evangelos Pistiolis, CEO of Nasdaqquoted Top Ships, added to the debate: “If
the question is, could more be done to
improve the situation, then the answer is
yes, there are hundreds more things that
could be done. But talking far away from
the elected chair is always easier than
talking when you are in the elected chair.
There are definitely more things to be done;
one line of action would be to cut the
number of civil servants or at least cut their
benefits and bonuses. Some staff receive
bonuses for turning up on time when you
would have thought that this was part of
their agreement with their employer,” he
said.
“We might be hard critics of the
government sometimes, but I guess they are
trying to clean up the ‘30 year’ mess which
isn’t easy,” he added.
Two years ago Greece’s new centre
left administration wasted no time in
introducing radical proposals to reform and
administrate the shipping sector. In what
was seen by many as meddling, the former
shipping ministry was broken down into
two separate components. The major part
was amalgamated into a new Ministry of
Economy, Competitiveness and Shipping,
the balance, largely concerning ports and
security, including the coastguard service
was attached to a new department within
the Ministry of the Interior. This change had
a limited timeframe with the government
performing an about face just under a year
later and forming the Ministry for Maritime
Affairs, Islands and Fisheries.
This initial decision to do away with
the Ministry of Mercantile Marine caused
consternation among the country’s owners
with many asking why the government
chose to mess with the one area of the
country that was performing well. Coupled
with concerns that the government may
change the current taxation system for ship
owners raised the possibility that some
Greek owners could relocate from Greece
in favour of more sympathetic fiscal
clusters.
Harry Vafias again: “I think that the
government has realised that Greek ship
owners are the only segment that brings
money into the country, the only segment
REGIONAL FOCUS
that invests in the country and the only
segment that does charitable work in the
country. I think, and it is my own opinion,
that it realises that if it annoys the ship
owners, then it will hang itself. On the
shipping side we do not think anything
drastic will happen when it comes to
regulation and taxes. However, there have
been a lot of changes, different taxes on
other businesses and on real estate. This is
important because a lot of ship owners are
also into real estate. If the trust is lost, we
will see in the next two years if shipowners
will decide to invest further in Greece or
stop and look abroad.”
But how has this uncertainty affected
the way Greek owners operate their fleets.
Not a lot, according to a number of owners
interviewed, especially when you consider
the international nature of the industry.
“Everyone is on the fence,” said
Basil Mavroleon, Managing Director of
WeberSeas (Hellas) and Project Group
Manager at Charles Weber in Greenwich,
Connecticut. There is money still to be had
and everyone is looking out there but if you
look at the inventory of tankers, this is very
small and prices have come off this year –
but not significantly enough to interest
certain people. There are a lot of sellers and
few buyers. So what will give here? I am
inclined to say the price will give. If you
buy a ship today, you are buying it for the
future because the current market does not
support the current prices.
“The container sector is another
story because they are buying future
newbuildings and fixing them out ahead as
there are operators who want these efficient
newer ships. As far as tankers and bulkers
are concerned, it will be a real challenge for
owners moving forward to maintain their
current position and to take advantage of
opportunities that may come along,” he
said.
“Owners are taxed in a number of ways
through other investments and activities
other than their international shipping
activities,” stressed Michael Bodouroglou.
It is my firm belief that a great part of the
success of Greek shipping is due to its
institutional status. Law 89, which was set
up in Greece a few decades ago, was the
cornerstone for the growth and success of
the shipping business. Not only is there no
reason to change that but I am very pleased
27
GREECE
to see that Law 89 has been adopted by
most European countries through their own
tonnage taxes.
“Shipping is an international business
and in order for people to be successful in it
they have to be competitive. In order to be
competitive they have to be taxed in the
same way as they are taxed elsewhere in the
world. If Greek ship owners were to be
taxed any differently then they would be
forced out of business. Even though they
may want to be patriotic and not move out
of Greece, they would eventually be driven
out of Greece through their lack of
competitiveness. They have to continue to
enjoy the current status as we have been
very successful as a result. Shipping
represents 6% of the country’s GDP and at
a time when Greece’s GDP is reducing, you
can see shipping’s importance. You are also
talking about tens of thousands of people
employed in the sector and you have a few
hundred high net worth individuals who
live and spend their money here and invest
in the country in many other ways. If
Greece lost that it would inflict a big blow
on its economy,” Mr Bodouroglou said.
While Greece’s economic problems
may not directly impinge on its ship
owners’ ability to trade internationally,
sentiment is important – not only when it
comes to motivation of their office based
staff but also the, motivation of
international investors who some believe
may be losing interest in what was once
considered an attractive alternative to
traditional investment opportunities like
pharmaceuticals and real estate.
“I just came back from the US a few
days ago and it is really about convincing
people that when something bad happens
something good generally comes out of it,”
said Top’s Evangelos Pistiolis. “So when
ship owners lost market capitalisation and
shipping shares dropped, what is the good
thing that can come out of the situation?
Well we can buy ships for 50% less than we
bought for years and years,” he said.
28
“
The container sector is
another story because
it is buying future
newbuildings and fixing
them out ahead as there are
operators who want these
efficient newer ships. As far
as tankers and bulkers are
concerned, it will be a real
challenge for owners moving
forward to maintain their
current position and to take
advantage of opportunities
that may come along
Basil Mavroleon, Managing
Director, WeberSeas (Hellas)
and Project Group Manager,
Charles Weber
“
REGIONAL FOCUS
“When you buy ships today you will
make money in one, two or three years, it
doesn’t really matter. You will make money.
It is all about being financially healthy
otherwise you can’t take advantage of the
low prices. What matters is you have to
prepare your company properly for when
the upturn comes and when the market
changes.“
Three days after interviewing
Evangelos Pistiolis, Nasdaq-listed Top
Ships announced it was looking to raise
over $100m from its first equity issue since
the onset of the financial crisis. It said it
would use the cash from the fundraiser to
pay down debt and fund ship purchases,
potentially in the containership sector. The
company said it would issue stock worth
$115m, but just over $13m would be eaten
up by registration fees.
When asked by SMI what his fleet
strategy would be, Evangelos Pistiolis said:
“We did not raise money after Lehman and
this was a significant achievement when
you think that most of the other companies
if not all of them, raised a lot of money, not
for future healthy market investment but to
cover investments from the past. It is not
about criticising others but it is about the
facts of what happened at the end of 2008.
I was the only one who sold 18 big ships in
the first part of 2008 and I was the only one
who chartered the remaining 13 to 14 ships
out for five to 10 years, a month before
Lehman. Everyone else was ordering when
I was selling. We even reported profits in
2010 without raising money and without
restructuring, again one of very few
companies who didn’t restructure our
loans.”
But how are the public markets
viewing shipping? Is there still the interest
and excitement in the sector? “No the vast
majority, more than 90% of investors, hate
it said Harry Vafias. Some companies need
to raise money to bridge loan covenants and
if you need the money you have to sell your
shares at any price. If they don’t need the
REGIONAL FOCUS
GREECE
“
If the question is, could
more be done to improve the
situation, then the answer is
yes, there are hundreds more
things that could be done. But
talking far away from the
elected chair is always easier
than talking when you are in
the elected chair
Evangelos Pistiolis, CEO,
Nasdaq-quoted Top Ships
money they wait for better times to raise
capital. Raising money now is not a good
idea. You have to have a very serious reason
to raise money because ship values are low;
investor confidence is low and there is a
worldwide crisis in the majority of shipping
segments so why would you want to raise
money now.
“We are the only Greek group with 72
vessels and 90% period coverage which is
very important. It shows we don’t like to
gamble and that we like guaranteed inflow
of money so the shareholders of both our
private and public companies know what is
coming in. The banks are happy because
they know that whatever happens we are
going to make ‘x’ amount of money and we
are happy as managers and owners that we
can sleep well at night: we know our
obligations to the banks and suppliers are
taken care of. You may miss the peaks but
you also miss the troughs such as the ones
we are seeing now.
“There is no big strategy because no
one knows when we will be out of this
misery. I am very pessimistic about the dry
side which is why we sold 14 of our vessels
during the last three years. We are only
down to two new capes, again both on
period. On the tanker side all of our 21
crude and products tankers are on long-term
three to eight year bareboat charters. On the
gas side we have 70% period coverage. In
StealthGas’ case we never issued cheap
equity, we do not have to raise money as we
have a very low debt to values ratio and the
important thing is that StealthGas’ segment
is the only segment with a negative
orderbook which means that more ships are
reaching 20 years of age than are being
delivered, therefore the fleet has a negative
growth. In effect, more ships are being
scrapped than are being delivered.
John Phostiropoulos, Vice Chairman of
Almi Tankers, also commented on his
company’s strategy during the tough times:
“What was key to us was my father’s
decision not to order during the boom times
and not to buy second hand tonnage during
the boom. So when the crisis hit, we didn’t
owe anything to anyone or have any
expensive newbuildings to service. It is
all about timing. From an operational
perspective, it is all about quality and
reliability because shipping is really a
commodity.”
Mr Mavroleon added: “The public
companies exist for a reason and that is to
have access to capital. Pubic companies
will withstand difficulties longer because if
it is your personal wealth you will make a
decision at a certain point to cut and run, if
“
GREECE
things are that bad. Public companies have no
choice. The Greeks are the cleverest. You
have to ask yourselves, why did the Greeks
re-establish their dominance of the world
of shipping in tankers and dry cargo in
particular; they were the first to recognise in
the late 1990s that the price of newbuildings
had never been cheaper and that the price of
money had also never been cheaper.
“Greece’s control of the dry cargo fleets
is the biggest they have ever had and they are
the best placed to survive what is coming,
there is no question about that. Times ahead
will be tough but it is not as if shipping has
not experienced this before. The difference
this time was the unprecedented length of the
good market. If you look at 2000 to 2008, we
had two blips in eight years; the rest of the
time ship owners were making a very good
return. Normally in shipping owners would
struggle for 10 years and then have six
months or 12 months of good times to get
them through the next 10 years. And that was
the challenge. The Greeks are survivors.
They backed away from the business in the
1990s because there was a 5% return on
business maybe at a huge risk but when those
things came into balance in their view – price
and price of money – they went in head first
and hence they were taking delivery of cheap
ships,” Mr Mavroleon said. ■
Captain Panayiotis Drosos,
CEO, Almi Tankers
A
thens-based tanker manager
Almi Tankers has underlined
its commitment to quality
management of its fleet by employing
double crew complements of its senior
sea-going staff on its ships at an
investment cost of $3 million so its
senior officers are sufficiently trained to
take over command of its fleet of 12
newbuildings when they are delivered
from DSME in Korea.
Almi currently has two modern
LR2s trading on the water and is due to
take delivery of at least five of its
newbuildings in 2012.
REGIONAL FOCUS
“We have double complements
onboard our vessels,” said Capt
Panayiotis Drosos, CEO of Almi
Tankers “which means we have two
captains, two chief engineers, two chief
officers, etc. As a result the crew will
have had one year with us before taking
over control of the newbuilding. This is
a strategy of ours and we are proud to
invest about $3m but you cannot enter a
new industry and run a fleet of 14
tankers without having people. It is not
only the salary that counts, it is how you
treat people and how you communicate
with people and how you respect people
which is why I believe we have a very
good team. We have developed a team
with the same beliefs,” he said.
Almi employs Ukrainians and
Filipinos and will use Croatian officers
and Filipino ratings on the newbuildings.
It has also followed a certain industry
trend by installing total broadband
communication on the first of its 14
vessels. At the time of writing, the
Almi Spirit was being fitted with the
appropriate equipment to allow its crew
to use Facebook and to web chat with
their families at home.
31
REGIONAL FOCUS
GREECE
I will not
tax Greek ship owners
In an exclusive interview with SMI, Yiannis Diamantidis, Greek Minister of Maritime Affairs, Islands
and Fisheries assures Greek owners that their current tax status will not be compromised
W
ith the inauguration of the new
Ministry for Maritime Affairs,
Islands and Fisheries in autumn
2010, the Greek government was keen to
emphasise its commitment to the maritime
sector and pledged a renewed focus on port
modernisation, expansion of the Greek ship
registry and cruise market growth, in
addition to defending the income of Greek
fishermen and efforts to improve naval
education. This broad focus is in line with
the EU blueprint for shipping, apart from the
‘islands’ aspect, which is quite unique to
Greece, particularly as the archipelago
consists of 6,000 islands (227 of which are
inhabited).
With such a strong yet extensive remit
for maritime causes, Greek stakeholders may
worry that the government has placed all of
its nautical eggs in one basket with this new
Ministry. Ship owners have expressed
concerns that by accompanying commercial
shipping matters with a broader sphere of
responsibility, their interests may be
overlooked.
However, according to the Minister for
Maritime Affairs, Islands and Fisheries
Yiannis Diamantidis, owners are a distinct
focus of his concerns and need not fret that
their current tax privileges could be revoked:
“In the Greek shipping industry, we have a
specific tax situation. Greek shipping brings
in over $18 billion every year. We realise this
revenue is from international exchange and
if we taxed ship owners like other citizens,
this would not enforce the economy but
create a reverse situation. That’s why there is
no consideration about changing their tax
situation – there will be no change.”
Mr Diamantidis may have only been in
the job for nine months but he has been a
member of Parliament since 1989 and is a
member of the socialist PASOK party. As he
told SMI, he understands the importance of
the Greek shipping industry and is keen to
solve relevant problems: “The Greek industry
is powerful and the goal of the government
is for it to maintain this status. The
government, in co-operation with the Greek
union, ship owners and organisations
connected to the industry, are in co-operation
with the International Maritime Organization
and are trying to work out issues such as
climate change, pollution and piracy. This
effort will enforce the Greek maritime
industry and lead to development for the
cluster.”
32
If we taxed ship owners
like other citizens, this would
not enforce the economy but
create a reverse situation.
That’s why there is no
consideration about changing
their tax situation
“
“
Describing the importance of working
to solve the problem of piracy, Mr
Diamantidis added that regarding the ships
held in Somalia, many belong to Greek
owners or are Greek flagged. He said that
considering the Greek flag’s position on not
allowing arms onboard, his favoured
solution would involve more support from
navies of the world and said: “Ministers are
concerned we should not bring a situation
of war but unfortunately, navies may not be
effective in too large an area. Unfortunately,
the alternative solution of not passing
around Africa is too expensive.”
When asked about his plans to
encourage more young Greeks to take up
shipping as a career, Mr Diamantidis said
that although shipping is the most powerful
industry in Greece, young people need to be
more aware of the maritime sector. He
noted that to ensure the continued success
of industry “we don’t just need iron to build
ships but we must build the numbers of our
people too”. In order to ensure a high
quality naval education is available for
young people wanting to take on a career in
shipping, the Ministry is planning a new
law to “emphasise economic growth in
schools for seafarers”.
He added that if the Union of Greek
Shipowners would like to assist with these
plans, the Ministry may create private
schools for seafarers where a high level of
competition would be enforced. This law,
which is currently in its first phase has still
not yet been named, but may be referred to
as an ‘upgrade of naval education’. It is
expected to come into force in the summer.
Describing his focus on growing the
Greek fleet, the Minister added: “The Greek
flag is powerful but is not a flag of
convenience. We would like to enforce our
flag and retain this situation – all decisions
of the Ministry are helping to do that in
agreement with the unions. There is a
peaceful cooperation with the unions and if
GREECE
there is a disagreement, we will look for the
best solution together.”
He also noted the importance of
boosting the cruise market at this time:
“Now with the cruise industry we have a
huge perspective – we grow and enlarge our
ports. Greece has thousands of islands
which are tourist destinations and require
cruise vessels to take people there. My
personal goal is to make the Greek shipping
cluster the largest in the Mediterranean,
with focus on laws, education, ports,
etcetera. We are also working to find all
possible ways for Piraeus to become the
largest port in the Mediterranean.” A bold
statement indeed!
When asked how he intends to build on
the port’s status in this manner, he
explained that a new law focused on the
dynamic between the government and
Greek ports will assist in putting port
growth to the front of the Ministry’s
agenda.
He added that following an agreement
with the Chinese Government-owned
shipping line COSCO, new port
developments will also form a major aspect
of the Greek Government’s strategy: “On
one side of Piraeus there is a large
commercial space which in cooperation
with COSCO, will be developed and
upgraded. An agreement has been signed
with COSCO and there is the possibility to
make other significant agreements with
them in other locations and for other
activities.”
This agreement follows an official visit
to China where Mr Diamantidis met with
Weng Mengyong, Deputy Minister at the
Chinese Ministry of Transport, with the
aim of forging closer transport links
between the two nations.
Both parties also made a commitment
to strengthen the Memorandum of
Understanding concerning maritime affairs
which both governments signed in June
2010. With an action plan focused on state
and non-state shipping for both nations, in
addition to cargo handling, both countries
will improve their hub/port cooperation
and will work to obtain funding for the
construction of more Greek vessels in
China. The creation of a $5bn (€3.6bn)
development fund to assist with the finance
of these vessels has also been part of
China’s agreement with Greece.
Noting the reaction of Greek unions
to this agreement, Mr Diamantidis
acknowledged there had been some initial
objections but he confirmed that at this
time, the unions are on the Ministry’s
side: “When it was first announced, there
REGIONAL FOCUS
were of course some reactions from the
unions but now everybody understands that
this decision will assist in creating new
jobs and in building on the Greek
economy.”
Mr Diamantidis added that so far,
his time in the role has been a valuable
experience and concluded that the
wellbeing of the Greek shipping industry
is his first priority: “I enjoy finding
solutions and building relationships with
maritime quarters. I hope by the end of
my tenure, I will have done the best by my
people.” ■
33
INSIDER
SHIPMANAGEMENT
Dr Hermann J. Klein
Member of the Supervisory Board at
Germanischer Lloyd
A different class
W
ith almost 7,000 staff worldwide with far-reaching
responsibilities, including traditional classification
services, consultancy, advanced engineering, expert
advice and certification, Germanischer Lloyd has retained its
position as one of the top five classification societies since it was
founded as a non-profit association in Hamburg by an assembly of
600 ship builders, owners and insurers in 1867.
Born in the city of Essen, in Germany’s Ruhr Region, Dr
Hermann J. Klein, Member of the Supervisory Board at
Germanischer Lloyd, studied Mechanical Engineering and Marine
Engineering at the Technical University of Hanover and holds a
Doctorate in Engineering from the Technical University of
Hamburg. Prior to joining the Germanischer Lloyd group eight years
ago, his roles included Director of Design at the Bremen Lürssen
shipyard and Chairman of the MWB Shipyard. In addition, Dr Klein
has undertaken positions as a private lecturer at German universities
and is Chairman of the Executive Board of the German Society for
Maritime Technology.
With a specialism in addressing the challenges of contemporary
shipbuilding technology, Dr Klein, who is based at the company’s
head office in Hamburg, told SMI that nowadays, shipping
companies expect an extensive service from classification societies
in line with modern environmental concerns and he noted that
Germanischer Lloyd has evolved to suit this: “The market has
changed. Today it’s not so much about tankers, bunkers and
container vessels, it’s much more about new topics such as energydriven vessels, which is an interesting alternative because LNG is
much cheaper than normal heavy fuel oil today or other kinds of
vessels like wind farm erection vessels. The environment is much
more on the agenda than ever before.”
Dr Klein explained that the US market, where his company
currently has 1,200 employees, has been particularly responsive to
the environmental facets of the Germanischer Lloyd business model
and he said American stakeholders have embraced his company’s
focus on renewable energy and erection vessels for offshore wind
farms: “I think the most important issue is that really, we are a full
service provider and whatever kind of provision you require,
whether it is classification, or a consulting service for vessels,
platforms or wind power stations, we can deliver this. This is most
important. We are also focusing on energy efficiency, especially for
the new, future-orientated vessels and everyone understands that this
is becoming more vital because it has such a great cost incentive.
The heavy fuel oil price has risen to around $600 per tonne now and
then we have the additional cost on the emissions side which is the
issue we are focusing on right now.”
So, as Germanischer Lloyd steadies its focus on environmental
business, what are Dr Klein’s hopes for the second half of 2011? He
noted that his first thoughts are with the Japanese people following
the earthquake crisis and problems caused by the damaged nuclear
power station.
“For Germanischer Lloyd, I hope that the market continues to
recover, especially on the newbuilding side where it has started to
recover already. The market has improved but on the other hand, I
think we have to be realistic. I don’t think we will see the same
market situation which we had in 2007 and we will not see such a
huge amount of newbuilding orders as we did four years ago – it
will be on a lower level but there will be a perceivable difference to
the market,” he added.
Dr Klein concluded by expressing his concerns over the need to
attract more young people to shipping: “My impression is that it’s
not easy to get new, young people into industry. We have to talk
much more about the industry – it’s an interactive industry and
worldwide it’s a maritime family where everyone knows everyone
and there are good opportunities. I think right now there are many
new students of naval architecture, especially in China and South
Korea but not so many in the US or Europe. As an industry, we have
to be much more visible to the public worldwide. We have problems,
including piracy but the general public doesn’t really recognise this
– we have to solve this. We have to be much more aggressive as an
industry but this is something we are not so well-trained in!” ■
35
Rotterdam
mounts steel challenge
A
subtle change in European
importing patterns is having a
major impact on the breakbulk
business carried out at Europe’s leading
port.
Rotterdam’s
container
traffic
dominates its public profile – a fact that is
unlikely to change. However, a shift is
occurring in the less celebrated breakbulk
market, as shippers who previously only
imported raw materials switch to semifinished products, reflecting a sea change
in the world’s manufacturing base.
According to Port of Rotterdam, which
is the leading European port in the steel
production supply chain, there is an
increasing trend among those previously
importing iron ore, for example, to also
bring in semi-finished products such as
slabs and billets.
While overshadowed by larger
container traffic and chemicals logistics
flows, Rotterdam’s breakbulk business has
exhibited remarkable growth in the last two
years, representing an important niche for
the port.
The basis for this success lies in the
major investment program which was
launched four years ago. Over €100
million was spent by the port authority and
stevedoring companies to increase steel
handling capacity; both infrastructure and
handling equipment. This investment
programme is described by Bart-Luc Olde
Hanter, Port of Rotterdam Business
Manager Breakbulk Shipping & Steel, as
the ‘Put your money where your mouth is’
campaign.
“The intention was to increase
capacity from 4.5m t to 12.5m t by 2015,”
said Mr Olde Hanter. “Given these
investments and our strategic location,
there is no reason why we cannot achieve
our ambition of challenging and ultimately
overtaking competing ports when it comes
to steel exports.”
Beyond creating storage and handling
capacity, and investing in hardware to
handle any type of steel in any quantity
(including slabs, billets, plates, pipes, tubes
and stainless steel products), the strategy
is being built on attracting new breakbulk
shipping services and an over-arching
drive to improve the Rotterdam ‘steel
cluster’ for shipping, trading, forwarding
companies, brokers and stevedores.
The fruits of these efforts are tangible:
over the last year alone, seven new
partnerships have been secured with the
world’s leading shipping companies to
set up new (semi) liner services to and
from Rotterdam. Ship operators are also
playing their part in terms of delivery. The
port’s new breakbulk shipping connections
include deep sea services from COSCO
Shipping (China), covering China, the
Middle East, India and the Mediterranean,
while Chipolbrok (China) has brought
services covering China, India, Antwerp,
Rotterdam and Houston. Deep sea
semi -liner services now include BBC
(Germany), covering the Andino service,
and Onego Shipping (Netherlands/Russia),
covering South America, the United States,
northwest Europe and Russia.
Also critical are short sea services that
include SCA Transforest (Sweden) linking
Sweden and Rotterdam, BroIntermed
(Italy), covering Rotterdam, North Africa
and Italy, RMS (Germany) linking
36
Duisburg, Rotterdam and Norway and
Nednor of the Netherlands, covering
Iceland, Norway and Rotterdam.
Further afield, companies in the US,
Russia, China, South Africa, South America
and India are also interested in developing
extra steel services via Rotterdam. The list
includes Fednav, Clipper Steel, Grieg Star
Shipping, Oldendorff, Gearbulk, Spliethoff,
Atlantic Ro-Ro, North Western Shipping
Company, Hanssy Shipping, BBC,, MACS,
Coscol, CCNI and Shipping Corporation of
India.
Furthermore, cooperation is being
sought with world’s largest steel players to
work towards creating more value for steel
business. Exemplary has been the port’s key
role in the new partnership between logistics
specialist C. Steinweg Handelsveem B.V.
and Thyssen Krupp. Thyssen Krupp Brazil
has increased its production capacity for
slabs significantly. For import into Europe,
Rotterdam was selected as the port of call. A
long term commitment has been given by
Thyssen Krupp, which enabled both
Steinweg and the Rotterdam Port Authority
to make dedicated investments in equipment
and facilities.
Now Rotterdam is looking to further
improve competitiveness by implementing
cost efficiency measures, including finding
return cargo, coordinating barge (liner)
connections to Duisburg with Danser,
Rhenus and Interrijn, and enhancing rail
links with Deutsche Bahn. Improved
trucking options with P&O Ferrymasters are
also part of the mix, with 650 coil/steel trailer
moves envisaged by the end of 2011.
Improving the ‘steel cluster’ will
encompass attracting trade offices and
creating a steel service centre. For this
reason, talks are in train with companies
including the large European and Chinese
steel traders.
These may seem idle claims, but today’s
focus of Rotterdam’s overall breakbulk plan
is to improve the port’s steel cluster based on
hard facts related to Rotterdam’s cost
effectiveness for shipping companies, its
competitive stevedoring costs and its port
costs’ comparison with competitors. ■
MARKET SECTOR
CLASSIFICATION
Safety is as important
as the environment
Tor Svensen, President of DNV
T
he most significant warning yet that
safety levels onboard ship are
suffering at the hands of the global
drive towards a cleaner environment, has
been delivered in no uncertain terms by the
head of one of the world’s leading
classification societies.
Indeed, so concerned is DNV President
Tor Svensen that he has called for a
re-establishment of the balance of the
so-called zero tolerance relating to the
environment with a zero tolerance relating
to the loss of life at sea. As if that was not
enough, he also said greater attention
needed to be focused on training standards
and competency levels onboard ship,
claiming that in some instances, training
standards were not good enough and
were proving ineffectual.
“Year
on
year
improvements in ship
safety are now
turning into a
negative
trend.
38
This is extremely worrying and requires a
stronger focus on competence development
both onboard and onshore,” Tor Svensen
claimed.
“Statistics show that the accident
frequency has started rising from a historic
low. This trend is supported by increased
pay-outs from the insurance companies.
Technology, rules and compliance will
never bring us to the expected level of
safety without focusing more strongly on
the human element,” he said.
“Historically, the safety focus on
shipping has been on technical
improvements. Most employees dealing
with the operation of the vessel in a
shipping company have a technical
background. Audits and inspections are
strongly focused on technical compliance.
This technical focus has brought major
improvements to ship safety. Now, is the
time to increase focus on the soft issues.
“The improvement potential is great,”
Mr Svensen claimed. “DNV has made
some observations when performing audit
and projects for shipping companies. These
show that much of the training offered
could be more effective with more time
spent on actual training of higher quality.
Shipping companies struggle to deliver
training on soft skills, and few companies
measure the effects of their training.”
Possible initiatives to improve
safety level include safety
culture
mapping, crew resource management
and
safety
performance
training,
monitoring through leading and lagging
indicators.
“Public and regulatory focus has
moved towards environmental risk and
away from human safety and personnel
risk. We need to re-establish the balance
between safety and environmental risk.
Zero tolerance to loss of human life is
equally important as zero environmental
damage,” Tor Svensen stressed.
“Half of today’s accidents are still
being caused by navigational error and
there have been no improvements on this.
We used to have a tanker accident every 10
years but now it is every 58 years. So while
a tanker used to have an accident twice in
its lifetime, now it is every second ship that
has a single accident in its lifetime. But still
half the accidents are caused by navigation.
When you look at shipping companies,
training is not really good enough and is not
effective. We don’t spend enough time on
training and in delivering the soft skills and
hardly anyone is measuring the effect of
this,” he said.
“You still have to ask the question why
are we having so many accidents
due to mishaps?
CLASSIFICATION
MARKET SECTOR
ON THE
RECORD
Thomas Thune Andersen, Chairman of
Lloyd’s Register of Shipping
Q.
Drawing an analogy with the airline industry,
Mr Svensen said pilots were tested every six
months on a simulator. “But how much
simulator training do we have in shipping? It
is very limited and we need better testing of
competencies onboard ship. But there are
huge variations in the quality of training. We
can also better develop corporate safety
cultures as well as crew and bridge resource
management? We need to develop a safety
dashboard in the company to have leading
and lagging indicators on safety. All these
things will drive towards better quality
training.
“Today, if you are the master or chief
officer of one particular ship type with pretty
basic equipment onboard and you go on to
another more sophisticated vessel with totally
different equipment, there is no requirement
that says you have to go through additional
training. You just have a brief hand over
period. But if you were a pilot you cant jump
from a 737 to an airbus without full training.
So we need to start looking beyond
compliance,” he stressed.
He added: “If you look at everything that
has happened over the last 12 months – we
have gone from disaster to disaster and every
disaster has been worse than the one before
ending up with the Japanese tsunami. Until
the world slows down or stops consuming at
the rate it is consuming, this problem will not
be shipping’s problem; it is the world’s
problem and the only way this will go away is
when globalisation and the development of
the world comes to a pace that shipping can
cope with but in a sustainable manner. And to
me that is the nub of this problem.”
Class societies play an important
role in driving ship safety. Do you think
the time has come for the regulators to
appreciate and understand the true role of
class?
A.
We always need to sell our story
better because corporate memory is
always short. At the same time you need
to be modern in your thinking in order to
do the right thing. We also have to be
humble and be ready to understand what
it is that the authorities want to do. We
need to understand what is their goal.
We can learn from the authorities and the
authorities need to learn from us. Our
goal of impartiality is important because
we do find ourselves in a dialogue with
authorities not as an interested party but
as a party with which the authorities can
actually have a debate.
39
MARKET SECTOR
CLASSIFICATION
Cloud
computing
C
lassNKand IBM Japan
have announced a new
joint project to develop
the world’s first archive centre to meet new
requirements included in the International
Maritime Organization’s (IMO) new Goal
Based Standards (GBS).
The new centre, which will take
advantage of cloud-based infrastructure
developed by IBM Japan, will be designed
to safely store the Ship Construction Files
(SCF) that will be required by the GBS, as
well as meet the rigorous requirements for
both data security and accessibility laid out
by the IMO’s Maritime Safety Committee.
As part of the new GBS, which will
enter into force in 2016, all newly-built
vessels will be required to maintain
copies of a Ship Construction
File (SCF) both onboard and at
an onshore archive centre. As
the SCF will include vital
information related to ship
safety as well as sensitive
intellectual
property
related to the ship’s
design and construction,
ensuring both accessibility
and security of the SCF data
will be paramount in the
development of these new archive
centres.
According to ClassNK Chairman
and President Noboru Ueda, these
requirements mean that classification
societies will have an essential role to play
in the development of the new archives.
“As independent, third-party technical
organisations, we are uniquely suited to
developing and maintaining the archive
centres required by the GBS,” said Mr.
Ueda.
He added: “As part of our electronic
plan approval activities, we have already
developed the procedures and systems
necessary to ensure the security of vessel
plans, and earned the trust of the world’s
shipbuilders. The development of this new
archive centre is the next logical step in our
efforts to better support the wider maritime
industry.”
In line with the GBS, however, new
standards for archive centres will also need
to be established, and a new set of industry
guidelines developed by CESA, ICS,
INTERCARGO, INTERTANKO, BIMCO,
OCIMF, and ICS for the new archive centres
was submitted to the IMO at the 87th session
of the Maritime Safety Committee in
February of 2010. According to Mr. Ueda,
addressing the practical and usability
requirements for the new archive centres was
what led ClassNK to IBM. “Our goal in
developing the world’s first archive centre is
to set a new standard for the entire industry,
and with IBM we have found a partner who
can help us achieve just that.”
In addition to the development of the
new archive centre, ClassNK and IBM Japan
are also working together to develop new
software to support green ship recycling.
By collaborating on these projects,
ClassNK is able to combine its extensive
experience in the maritime industry, with
IBM Japan’s practical experience and
technical know-how in IT infrastructure
and cloud computing. Through its
partnership with ClassNK, IBM Japan
hopes to contribute to the continued
development and growth of the entire
maritime industry. ■
MARKET SECTOR
COATINGS
New coating increases
cargo flexibility
A
next generation tank coating has
been unveiled in the chemical
tanker market which promises to
cut cleaning times and costs and increase
the flexibility and volume of cargoes
which can be carried.
Downtime, as everyone knows,
means loss of income so new products
which enable ships to get back out to
sea quickly are being heralded as an
important investment.
So says International Paint which
recently unveiled its latest chemical
tanker cargo tank coating which enables
ships to carry all of the cargoes that the
standard epoxy phenolic technology can,
plus a further 25% of the large volume
cargoes that it cannot. It also has over
60% fewer cycling restrictions.
“Many cargoes previously classed as
easy chemicals are now classed as high
specification chemicals , so the challenge
is becoming greater,” said Andrew
42
Hopkinson, International Paint’s Business
Development Manager.
The main traditional ‘industry
difficult’ cargoes include ethylene
dichloride, styrene monomer and
benzene.
Up until now, coatings used have
been zinc silicate and the largely popular
epoxy phenolic but both have limitations
in that they absorb and retain cargo
resulting in lost earning potential as
lengthy cleaning processes are needed to
eliminate traces of the previous cargo.
For example, a tanker carrying
methanol from the Middle East to the Far
East and then carrying clean petroleum
products back into the Middle East would
need seven to 10 days of cleaning in
between if it had an epoxy phenolic
coating.
“From a paint company’s perspective
this phenomenon is putting a level of
stress on the coatings so we normally
evoke a recovery period, having carried
one of these cargoes, which usually takes
about 10 days,” explained Mr Hopkinson.
“If you cannot carry another
aggressive chemical for 10 days it clearly
affects the operational flexibility for the
owner.
“Cargo retention causes the cleaning
headache because we have to run the
cleaning machines long enough to
remove that retained material. If we don’t
spend the time and effort and costs,
in terms of bunker fuel we are
burning, we run the risk of contaminating
the subsequent cargo,” stressed Mr
Hopkinson.
Stainless steel tanks, which do not
require coatings, are an alternative option
as they do not absorb or retain cargoes
but they have become extremely
expensive, often to the point where it
is uneconomical for them to be used.
Indeed, stainless steel prices increased
COATINGS
MARKET SECTOR
four-fold from 2002-2007 and have stayed
at that level since.
Mr Hopkinson again: “We have
certainly seen, over the last few years, the
trend back towards coated mild steel
tonnage. Clearly owners and charterers
would like the attributes that stainless steel
offers but they want it as a cost-effective
coating solution.”
“
Many cargoes previously
classed as easy chemicals are
now classed as high
specification chemicals ,
so the challenge is becoming
greater
Andrew Hopkinson,
International Paint’s Business
Development Manager
“
Interline9001, the latest coating
technology from International Paint, is a
bimodal epoxy coating which works with a
special combination of low and high
molecular weight polymers creating a
loosely bound, but highly cross-linked,
flexible network chain on ambient curing.
The result, said Mr Hopkinson, is a highly
chemical resistant film while maintaining
flexibility.
“It eliminates the limitations of zinc
silicates and the Achilles heel of epoxy
technology. You get the best of the epoxy
world without the limitation of absorption,”
he added.
“Flexibility is important because
vessels and their tanks are getting bigger.
Vessels are subject to flexing the bigger
they get and so the ability of the coating to
resist cracking on welds when the vessels
flex is very, very important.”
Along with greatly improving the
downtime, Mr Hopkinson said the actual
costs associated with cleaning are also
significantly reduced with Interline9001.
“The cleaning time is reduced by up to
70%. Because you don’t have to remove the
cargo from within the paint film, the
cleaning process essentially becomes a
surface cleaning prep. We also have a
significantly easier to clean surface.”
The company took the coating to a third
party tester – L & I Maritime (UK), an
industry cleaning consultancy. With one
full cleaning cycle following a styrene
monomer cargo, there was no detection of
the cargo and the same result was achieved
on a tank that had contained ultra low
sulphur diesel. With an epoxy phenolic
coating the cleaning cycles would have to
run many times before no cargo could be
detected.
43
MARKET SECTOR
COATINGS
The savings in fuel costs with the new
coating has been put at around $70,000 per
vessel.
“
If your coating is in good
condition the tanks are very
easy to clean, but if the
coating starts to break
down you get problems.
It is essential that the
coating remains intact
because if it does not cargo
can get trapped. Minute
contamination can wreck
a cargo
Eddie Bucknall, Technical
Director Columbia
Shipmanagement
“
International Paint is already in
contract negotiations for 14 vessels under
seven different companies – six are
newbuildings and the rest are for
maintenance and repair. And with the
chemical carrier market doubling over the
last decade with significant newbuild
activity and larger ships, the company is
hoping to achieve even more growth.
Mr Hopkinson estimates there are
currently about 7,000 chemical carriers in
the market – 4,000 chemical tankers and
3,000 product vessels – with a further 800
to 900 currently in production for each
sector.
He believes the new coating will hit
both newbuild and maintenance and repair
markets as vessels coated with epoxy
phenolic coatings in 2003/04 would now be
due for maintenance and repair.
“We also expect more orders to come
in for newbuilds over the next 12 to 18
months,” he added. “The projected growth
for the chemical market is 6 to 8% year on
year.”
Although Interline9001 comes at a
price – up to three times more than the
selling price of an epoxy phenolic coating –
Mr Hopkinson claimed payback would
come as soon as between six and 12
months.
International Paint also expects the
coating to last twice as long as an epoxy
phenolic coating, which usually has a
lifetime of about seven and a half years.
“It is still extremely competitive
compared to the price of stainless steel,”
he said.
However, Eddie Bucknall, Technical
Director for
Cypus-based Columbia
Shipmanagement said his company still
preferred to use stainless steel tanks for the
more difficult cargoes.
“We do have tankers with coated tanks
for what I class as easy chemicals. All of
our more difficult chemical tankers, of
which there are about 10, have stainless
steel tanks. Stainless steel is the most
expensive but it’s the easiest to clean form
of coating.”
He did agree that tank cleaning can
pose a headache, but only if coatings were
not maintained well.
“If your coating is in good condition
the tanks are very easy to clean, but if the
coating starts to break down you get
problems. It is essential that the coating
remains intact because if it does not cargo
can get trapped. Minute contamination can
wreck a cargo.”
He said Columbia Shipmanagement
did keep an eye on the coatings market and
what was becoming available. However, he
said the company would not want to go
about changing coatings on existing ships.”
“With a cargo coating, once you have
chosen a coating at newbuilding you are
really stuck with that for the rest of the
ship’s life. You don’t want to change the
coating as it becomes too expensive and too
COATINGS
Longer range scenarios also show that
by 2020, in the absence of policies, CO2
emission from international shipping may
grow from 1,120m tonnes in 2007 to
1,457m tonnes.
In response to the financial and
environmental challenges, Sigma Coatings
launched its new coating, Sigmaglide 990,
a third generation fouling-release product.
Sigma says its pure silicone topcoat reduces
frictional resistance to the point where fuel
savings of a guaranteed 5% can be made.
Sijmen Visser, Sigma Coatings’ Global
Segment Manager Marine – Maintenance
and Repair, said it was vital to look at fuel
costs and ways of cutting back on the
amounts used within the shipping industry.
“With conditions improving within the
global economy, and the prospects of
continued growth in global trade, it is
foreseen that fuel consumption will
increase in the coming decade. Carbon
dioxide emissions will also develop at a
comparable pace.”
Since the launch of the Sigmaglide
system, more than 200 vessels have been
coated ranging from static vessels and
shuttle tankers to high speed ferries.
Another company making waves in the
greener coatings market is Gibraltar and
UK-based Brunel Marine Coating Systems.
Its EnviroMarine hull coating has been
around for over a decade now and was
the first and only hull coating to be
approved and certified by DNV as eligible
for a subsidy from the Shipowners’
Environmental Fund, due to its green
credentials.
“
With conditions
improving within the global
economy, and the prospects
of continued growth in global
trade, it is foreseen that fuel
consumption will increase in
the coming decade. Carbon
dioxide emissions will also
develop at a comparable
pace
Sijmen Visser, Global
Segment Manager Marine –
Maintenance and Repair,
Sigma Coatings
“
complicated to blast it all off and start
again.”
He said the cost issue of the stainless
steel was irrelevant as the chemical carriers
were expensive vessels anyway and quality
needed to be invested in.
However, Mr Bucknall did not rule out
the possibility of using Interline9001 in the
future.
He said: “It definitely would be
popular, if it works. We do look at new
coatings and if we were talking about
newbuildings we would look at it.
“If the tanker was carrying easy
chemicals, we already have a very good
experience with International Paint and its
cargo tank coatings – they are excellent and
we have no problems at all – but if the
vessel was going to carry more difficult
chemicals I would seriously have to look at
whether to use a coating or stainless steel.”
The cost of fuel is the largest variable
in the operational budget in the marine
industry and as with Interline9001 cutting
cleaning bunker fuel costs, many
companies are tapping into the ‘greener’
coatings market to reduce fuel and,
subsequently, environmental costs.
Netherlands-based Sigma Coatings
says fuel consumption is set to rise by about
117m tonnes by 2020, meaning a total cost
increase for global shipping of $60bn.
MARKET SECTOR
While the industry is searching for
ways to extend dry-docking intervals and
MARKET SECTOR
COATINGS
others trying to achieve a seven and a
half year docking interval, EnviroMarine
has been singled out as suitable for a
10-year docking interval. This will allow
an owner to apply a full coating of
Enviromarine at the vessel’s five-year
Special Survey and not dry dock again
until she is due for her 15-year Special
Survey and TMON requirements.
David Shreeve, Director and CoFounder of the UK’s Conservation
Foundation, praised the company’s green
credentials: “Whoever we are, wherever
we are, we all have an environmental
footprint. From what I have seen
of Brunel’s EnviroMarine, it certainly
helps the marine industry to reduce its
environmental footprint.”
Soren Valbro, Director of Brunel
MSC, said EnviroMarine was still selling
well and the company was concentrating
on more advances in technology.
46
“We are working on quite a few very
interesting new developments at the
moment – but as always in this business,
we are not at liberty to disclose anything
until the final approvals are in place,” he
said.
Advanced Marine Coatings, from
Norway, claims its products, trade-named
Green Ocean Coatings, could make a
significant difference to a ship’s speed
and fuel consumption.
It says it has harnessed a breakthrough nano-science and a patented
dispersion technology to make a type of
paint with exceptional abrasion resistance
and smoothness. The way it works lies in
the carbon nano tubes (CNT) which are
distributed evenly in a liquid resin,
reducing viscosity and working as a tough
reinforcement to the coating.
These tiny, carbon tubes, AMC says,
will improve abrasion resistance by at
least 100% compared to traditional,
solvent-borne epoxy systems. The
company has partnered Finnish firm
Amroy Oy and has obtained worldwide
exclusivity to use this technology in
marine coatings.
Paal Skybak, Managing Director at
AMC, said: “This is an ideal partnership.
It has formed the foundation for
developing several subsea and topside
marine coatings with properties superior
to those of traditionally reinforced epoxy
coating systems.”
AMC receives sponsorship for Green
Ocean Coatings through a development
programme funded by Innovation Norway
and the Norwegian Research Council.
“Many companies are acutely aware
of the costs to the environment and
looking at ways to reduce these,”
concluded Columbia Shipmanagement’s
Mr Bucknall. ■
REGIONAL FOCUS
DUBAI & MIDDLE EAST
Planning
a sound
path
ubai-based Polarcus is a pure
play marine geophysical company
with a pioneering environmental
agenda, specialising in high-end towed
streamer acquisition from pole to pole.
Its unique seismic fleet is at the
forefront of maritime and seismic
innovation, well positioned to meet the
current and future demands of the industry
and its worldwide service capabilities
encompass conventional 3D surveys,
sophisticated wide and multiazimuth
projects as well as high density 4D
production surveys.
However, it is a new company, borne
out of the after-effects of a hostile takeover
of a company previously set up to exploit
the lucrative seismic sector.
Eastern Echo was founded in 2007 and
listed on the Oslo stock exchange in Oct
2007 but a week or so later was subject to
what the Polarcus management describes as
a hostile takeover bid by oil services
company Schlumberger. “We didn’t have
enough founders’ equity to protect the
company, we only had our employment
contracts so 90% of that team founded
Polarcus,” said Peter Zickerman, Executive
48
Peter Zickerman, Executive
Vice President of Polarcus
D
Vice President of Polarcus and part of the
founding team. “So now we have more
equity from the founding team to protect
the company and to create a seismic
company with a difference and that is what
we have done.”
Schlumberger had offered a per-share
price of NOK11 to NOK12, or $2.04 to
$2.23, with the final price dependent on the
offer's acceptance level. At an offer price of
NOK12, the bid valued Eastern Echo at
about NOK3.67 billion kroners, or $681.1
million.
Eastern Echo said at the time that the
offer price 'does not sufficiently reflect the
value potential of Eastern Echo.' The
company said it was actively seeking
alternative proposals.
Polarcus describes itself as having a
highly experienced senior management
team as well as 100 shore-based staff and
300 personnel offshore. But according to
Peter Zickerman, this could rise to 120 here
DUBAI & MIDDLE EAST
in the office next year “and by 2012 close to
700 offshore. The management team has an
average experience from the industry of
about 25 years.
“We are three years old and during that
period the first thing we did was to order
six vessels that have been built by Dubai
Drydocks. Three have been delivered
and until the end of last year we had 24
months of operating experience of those
vessels. One is in West Africa, two are
down in the Falklands and we have three
still being built in Dubai. We have ordered
an additional two units to be built in
Ulstein yard in Norway. Two of the vessels
under construction will be delivered by the
end of this quarter and one by Q2 and with
the other two out in Q1 and Q2 2012,” he
said.
But why go back to Ulstein? Peter
Zickerman again: “When we ordered
the ships it was at the heyday and everyone
was ordering vessels left, right and centre.
The yards were booked up. Drydocks
Dubai had just developed its newbuilding
yard and we had had previously ordered
two of the Eastern Echo vessels so we had
things on a roll here.
“It is something of a perceived risk to
build high end vessels at a yard that doesn’t
have deckings of experience, however, we
beefed our site up team here to 30 people
and took onboard a project management
and built the six vessels. Now after the
recession, there is capacity at yards around
the world right now and the governments of
Norway and China are supportive to owners
wishing to build – something that is not the
case in Dubai. We got good support from
the Norwegian government on export
finance whereby they give us an interest
loan of 2.85% for 80% of the total vessel
for 12 years so the vessel is then financed
and we brought in the equity overnight and
we had two vessels on our books.”
What lessons have been learned
REGIONAL FOCUS
between the newbuilding projects? “From
the first to the second vessels we saved
about 12% of amount of labour used and
also built in increased efficiencies. We
believe there will be 65 high-end vessels in
the world in 2012 and there aren’t many
yards in the world that have the experience
to build these very compact and complex
$170m vessels.
Delivered in 2009, the Polarcus Nadia
is an ultra-modern 12 streamer 3D/4D
seismic vessel. Built to the ULSTEIN
SX124 design and incorporating the
innovative ULSTEIN X-BOW® hull, this
vessel combines the latest developments in
maritime systems with the most advanced
seismic technology commercially available.
The vessel is also amongst the most
environmentally sound seismic vessels in
the market with diesel-electric propulsion,
high specification catalytic convertors,
double hull, and advanced bilge water
cleaning system. The vessel also complies
49
DUBAI & MIDDLE EAST
with the stringent DNV CLEAN DESIGN
notation.
“The seismic industry involves very
expensive equipment and the vessel itself is
a very unique platform,” said Mr
Zickerman. In Polarcus we want to do
seismic with a difference hence being from
both the maritime and the seismic side we
have combined the two elements together
to create one management team – there are
no bridging documents which improves the
internal learning curves here as well. The
crew is the asset we have and if we take
direct responsibility for them we feel we
have a winning team,” he said.
But as a time of shipping industry
tonnage oversupply, has the lack of
newbuilding berths over the last year or so
benefited what is a very sophisticated vessel
sector? Peter Zickerman, Executive Vice
President of Polarcus and part of the
founding team, believes so.
have a newer vessel for a longer period of
time. Then in your books it is cheaper to
have a brand new vessel with a higher
operating time, Mr Zickerman said.
“The day rates are now indicating there
is a balance in the market. Considering all
these vessels have been delivered in the
recession, there are no more being ordered
and the lead time to build a ship can be
three years. The market fundamentals are
very supportive of what we are doing.
Today’s day rates are $200K for a 10-12
streamer vessel. Good rates, depending on
your operating profile, but we have done
some good jobs in Nigeria and the Black
Sea and the North Sea. The projects can
vary from three weeks to six months. An
average is two to three months so it depends
on the project and the weather windows.
You can pitch the projects either on day
rates or turnkey. We are comfortable with
the way we operate and we are going more
REGIONAL FOCUS
between operating a six streamer when we
could operate a 26 streamer. But you need
to take a step back and look at what we are
actually doing when you are acquiring
seismic data. How do we get the best data?
Also if we have to go back to re-shoot a
field, this type of work doesn’t really cater
for a larger vessel because some surveys are
quite small. Larger vessels are more
expensive and they take longer to deploy,
there is more gear. By the time you have
deployed the larger vessels, the other
vessels have deployed and left. So the
smaller vessels can operate in their own
niche and growing market. However, at
Polarcus we want to cater for the whole
market spectrum.
To complement its marine services
operations, it has formed a partnership with
the data processing company GX
Technology to offer clients a full seismic
data services solution for faster projects
“
The market fundamentals
are very supportive of what
we are doing. Today’s day
rates are $200K for a 10-12
streamer vessel. Good rates,
depending on your operating
profile, but we have done
some good jobs in Nigeria
and the Black Sea and the
North Sea. The projects can
vary from three weeks to six
months
Peter Zickerman, Executive
Vice President of Polarcus
“
“When we founded the company in
2008 and 2009, we were expecting a global
fleet of around 87 of the high-end vessels
by 2012. But we saw the recession as a
blessing in disguise. What happened was
that a lot of the older vessels, the
conversions and upgrades, were then retired
and while there was a building boom in
2007 and 2008, now there is flat growth
because the older vessels are less qualified
and don’t meet the standards that the oil
companies require anymore,” he said.
“It is a risk matrix and the older vessels
aren’t suited for the high end capabilities. It
is very difficult to take a PSV and make it
into a high end vessel because it is a PSV
and you would have to rip everything out
and install new equipment. It then becomes
very expensive – you either have an older
vessel over a shorter period of time or you
into turnkey contracts when they become
available,” he added.
Reporting revenues of $48m and an
EBITDA of $4.6m with three vessels in
operation in the first quarter of 2011, the
company said these results were impacted
by unusually difficult operating conditions
as well as the new vessel transits.
Speaking to SMI a month or so before
the announcement of its Q1 results,
Polarcus said that charter rates when at the
trough were around $200K per day so it
didn’t get much lower than that for a 10-12
streamer vessel. “The first two vessels we
built are 10 streamers and the second two
are 12 streamers while the other two are
eight streamers while the ones we are
building in Norway are 14 streamers.”
Peter Zickerman added: “Many
analysts wonder about the comparison
turnaround. It has also been developing a
Multi Client project business to supplement
its services activity, with the goal of
building a comprehensive data library.
Describing its operations as global, it says
its aims are to be the service provider of
choice in areas of high environmental
sensitivity including the Arctic Ocean.
“The expansion of the industry into
frontier and environmentally sensitive sea
areas is expected to drive a much higher
level of environmental compliance
worldwide as new legislation on emissions
to air and water are developed and
introduced. Our ultra-modern fleet,
investments in “green” technologies within
both maritime and seismic, and our
commitment to a pioneering environmental
agenda will help our clients to work safely
and efficiently within these constraints,” the
company said. ■
51
REGIONAL FOCUS
DUBAI AND MIDDLE EAST
Operating under difficult
conditions
OVER
I
raq is one of the world’s most
difficult theatres in which to operate
but according to Inchcape Shipping
Services, the need for shipping is proving
more crucial that ever to a country that
needs to export oil in order to fund its
reconstruction.
ISS is the only international port
agency operation with its own people in
Iraq and it has been in the country
supporting the troops and the country’s
transport industry since 2003. But
according to Jim Robb, General Manager in
the area, the lack of basic essentials such as
electricity and power and the need for
significant port channel clearance and
wreck removal are hampering growth of the
shipping industry in a country which is still
producing around 2.4 million barrels of oil
per day and could be increasing this to 6m
barrels per day by the end of this
year/beginning of 2012.
“Oil and gas development still
generates a huge amount of revenue for
spending on Iraq’s infrastructure. Most of
the big fields are in southern Iraq and there
are big opportunities to raise large amounts
of revenue,” he told SMI.
“Sanctions have been in place since
1991 and realistically, the infrastructure has
probably gone backwards because of the
war damage. In 2009 security was the focus
and by 2010 attention returned to
regenerating jobs. There is a five year
public and private sector development plan
in place and that is a major driver in
the country,” he said. “But business is
predominately government driven because
there is not a free economy operating
in Iraq. As far as the infrastructure is
concerned, two million government houses
need to be built but power generation is a
major issue with Iraq producing only one
third of what it needs.”
Dredging of the port of Umm Qasr is
important to the continuation of Iraqi trade
and towards the end of last year the
dredging company Jan de Nul succeeded in
increasing the port’s draft to 12 metres,
and, in so doing, ending Iraq’s dependence
on neighbouring countries’ ports. This
compares to a depth of 7.5 metres in 2005
and 8.5 m in 2008. The Iraqi transport
ministry has signed a €52m contract witn
Jan de Nul to rehabilitate Umm Qasr to a
depth of 12.5 m.
“There is a lot of talk about other
dredging projects such as the south port and
the Shatt al-Arab waterway where there are
a lot of wrecks and ordinance that need to
be removed. There is also an $800m
contract to construct three offshore berths
at Basra oil terminal to export crude oil,”
Mr Robb said. ■
52
HEARD
Svein Eloff
Pedersen,
CEO of Noah Ship Management
Q.
Why should shipping companies
consider a start-up shipmanagement
company like Noah in Dubai?
A.
While we are a small operation
we are not exactly newcomers to the
business. But why Dubai and why did
we choose Dubai? Well it is easier to get
qualified labour here. I have been in
Singapore for a number of years and
people there change jobs every second
year. It is something overhanging from
before in Dubai that if you were
employed by one company and left you
could not return for a year. Now the
labour laws have been changed but still
people are reluctant to change jobs. So
when you employ people here they tend
to stay and that is a good asset. It is also
a cost effective place to work and a ship
manager based in Dubai can have easy
access to the ship.
DUBAI & MIDDLE EAST
REGIONAL FOCUS
ITM looks for
growth
ITM boss Lars Modin
A
combination of the after-effects of the imposition of
sanctions against Iran, increased vessel deliveries and a
growth in third party shipmanagement consultancy
services could spell a year of growth ahead for the V. Ships acquired
International Tanker Management (ITM).
Indeed, the winning of a sizeable tanker and VLCC management
contract from Oman after insurers were unable to work with the
original Iranian managers, due to the imposition of US and EU
sanctions against Iran, will mean the inclusion of an additional 15 to
20 VLCCs from Oman this year.
According to the ITM boss Lars Modin, the agreement covers
the management of all of their units. He said fleet growth levels this
year could be as high as 10% to 15%. “We are the same size as we
were a year ago, but we lost some vessels and gained some other.
But we have another number of ships coming in so maybe we will
have a managed fleet of 50 ships by the end of the year,” he added.
“We will not need to change our procedures but they are not
geared up for management of these ships so we have had to step in.
Oman has an agreement with the Iranians to manage the VLCCs but
had to back out at the beginning of the year because insurers were
unable to work with the Iranians because of the sanctions. We were
then asked if we would manage the ships. We have already taken on
management, seven VLCCs and there could be another eight,” he
told SMI.
“Then there is the fact that other owners have ordered more ships
and they are starting to come out of the shipyards so it all looks good
from that perspective,” he added.
One interesting development for ITM has been a growth in the
delivery of shipmanagement consultancy services to ship owners
keen to understand what makes the oil majors tick and how best to
pass oil major vettings and port state control inspections. Lars Modin
again: “We are mainly concentrating this service here in the Arab
world. So we are helping them follow oil majors and port state
control requirements and the owners are picking it up quickly. This
is an area of our competence we believe will grow.”
While business may be growing, it is concerns over the state of
the shipping markets and also competency levels of today’s seafarers
that continue to dominate ship managers’ attentions. Indeed, as Lars
Modin suggests, the poor market outlook could have an adverse
effect on management fee levels just at the time that seafarers are still
expecting to earn high salaries.
“Owners are not making money so our management fee levels are not
going up but going down a bit unfortunately, so here we have to concentrate
on volume. This is a very tricky situation we are in at the moment and we
have to look for smaller markets,” he said.
ITM announced over a year ago, plans to consider introducing fixed
contracts for officers on its managed vessels as a way of boosting crew
loyalty and ensuring the recruitment and retention of the best officers
available. However, when asked about the progress of this initiative, he
said it had not really happened largely because of a reluctance on the part
of the seafarers themselves. “We are still talking with them but the seafarers
are a little bit reluctant to enter into these agreements because they see it
as their market and believe they can still shop around,” he stressed. ■
53
A harrowing
break in convention
E
fforts to contain the piracy crisis
have come to a political head with
the continued detention of seven
Indian seafarers in Somalia, despite the
payment of a ransom writes Helen
Jauregui.
Owners and managers’ hopes for a new
era in the fight against piracy appeared
to be granted on 7th April when in
Washington DC, 39 year old Jama Idle
Ibrahim of Somalia pleaded guilty to
conspiracy to commit piracy under the law
of nations, and conspiracy to use a firearm
during and in relation to a crime of violence.
He was sentenced to 25 years in prison
for committing a violent act of piracy
onboard the Clipper Group-owned cargo
vessel CEC Future – an ordeal which began
in the Gulf of Aden during November 2008
and lasted 71 days. Armed with AK-47s, a
rocket-propelled grenade and handguns,
pirates seized the vessel and held 13 crew
members hostage before receiving a
$1.7million ransom from the Clipper Group
and releasing the vessel on 16th January
2009.
This historic ruling marks the first
conviction in which an individual has
been sentenced for a hijacking, rather
than an attack of piracy alone and was hailed
by US Attorney Ronald C. Machen Jr. (who
announced the sentence) as “a
just punishment for this attack that
threatened international commerce and
human life”. This was a much welcome
development within an area of crime where
a policy of ‘catch and release’ has been
frequently used, owing to a lack of nations
prepared to undertake the diplomatic burden
of holding and prosecuting those individuals
accused of piracy.
However, this notable prosecution
was soon overshadowed by news of the
continued detention of seven Indian
seafarers in Somalia, despite the payment of
a ransom, in a move which represents a
major shift in expected practices between
vessel owners and pirates.
54
The 1991 built asphalt/bitumen tanker
The Asphalt Venture was captured on 28th
September 2010. Following an agreement
in which the full release of the vessel
and all 15 crew was stipulated, the ship
was released on 15th April but the Master
has confirmed that six officers and one
rating were taken off the tanker by the
pirates, who ordered them ashore. At
the time of going to press, the whereabouts
of these seafarers is still unknown.
One theory as to why the pirates chose
not to honour their agreement concerns the
arrest of Somali pirates by the Indian Navy
in the weeks prior to the incident. It is
thought the pirates may have chosen to
extend the incarceration of the seven
hostages in retaliation of these arrests and
this marks a significant change in expected
piracy negotiations, from being simply
between the ship owner and pirates, to
between the government also.
However, some quarters of industry
have expressed their disdain at the
SECURITY AND PIRACY
suggestion that negotiations are
no longer the responsibility of
the vessel owner, but that of the
Government of India solely.
Abdulgani Y. Serang, General
Secretary and Treasurer of the
National Union of Seafarers of
India (NUSI) said the owner
should not make attempts
to
“shirk
away
from
its responsibility” towards
ensuring the safety of its
seafarers.
An organised gathering of
NUSI activists took place on 7th May
outside the Mumbai office of the
vessel’s management company, OMCI
Shipmanagement, as part of the union’s
campaign to ensure the well being of
detained seafarers remains a focal point,
amid fears that in cases where the vessel
and cargo have been returned, the crew
may become a lesser priority.
The NUSI also organised an extensive
protest across India on Wednesday 27th
April, with over 3,000 seafarers taking part
in rallies in Mumbai, Chennai, Diu, Kochi,
Tuticorin, Kolkata, Chiplun and Dehra
Dun. Marking the plight of captured crew
from The Asphalt Venture and beyond,
seafarers in each city handed petitions to
the authorities and marched in solidarity,
holding banners with slogans – one of the
most popular being a call for governments
to ‘wake up’ and make the seas ‘pirate
safe’. The case of The Asphalt Venture has
indeed been a rude awakening for industry
in highlighting how volatile and
unpredictable pirates have now become in
their tactics.
The Shipping Corporation of India
(SCI) has also been a victim of piracy in
recent months, as two vessels owned and
operated by the company had the
misfortune to be attacked. The Suezmax
Tanker Guru Gobind Singh was fired
upon during November
2010
and
sustained damage to
the hull, while on 28th February 2011,
the crude tanker Desh Prem was also
subject to an attempted hijacking. With
around 30 seafarers onboard each vessel,
both Masters followed best management
practices and speeded up/zigzagged the
vessels to successfully foil these attacks.
Capt Sunil Thapar, Director in charge
of the Shipping Corporation of India’s
Bulk Carrier and Tanker Division
acknowledged that his company is ‘on
tenterhooks’ while operating in affected
areas but said the SCI has been active in
protecting its fleet at large by adopting all
safeguarding precautions in line with
compliance circulars from sources such as
the IMO, BIMCO and the Indian Flag
administration.
Commenting on the problem of pirates
taking a ransom then failing to release
hostages, he added: “This is an extremely
unfortunate thing to have happened
because previously, we all thought piracy
was a question of ransom alone but now it
seems there are other angles to it because
the Indian navy has been proactive in
protecting its merchant vessels from piracy
attacks.”
As fears intensify over
such repercussions, the
Indian Flag is now debating
the issue of providing
armed guards onboard
its ships. Noting the
contentious nature of this
issue, Capt Thapar said:
“Personally I am not
sure if this is a good
idea. There is a
possibility that if
innocent merchant
vessels take arms
onboard, this could
encourage pirates
to use more force
in their attacks.
That said, statistics show
that so far, vessels which use armed
guards have not been attacked. Some of the
seafarers are asking for armed guards
onboard because they feel more protected
TRADE ANALYSIS
by this and I don’t blame
them. Tomorrow, any of
our employees could say
‘I’m not sailing through
there!’ Hand on my heart, I
feel for them. Best
management practices and
the assistance of the navies
of India and other countries
are extremely helpful.”
At this time, a vessel
owned by a subsidiary joint
venture company of the
Shipping Corporation of India
but which requested not to be
named, is being held ransom by
pirates. As a spokesperson told
SMI, the pirates are becoming more
unreasonable in their ransom demands:
“We have been upping the offers on this
side but nothing is happening because it
started as $11 million and now it’s stuck on
around $6million on the pirates’ side. Also,
it has to be done in cash.
The owners have been pleading with
the pirates to release the vessel but she is
still held for ransom off the Somali coast.”
There are over 20 seafarers onboard
the captured vessel. Apart from periods
where the crew are allowed access to
the deck in batches to perform ship
maintenance duties, they are under armed
guard on the bridge 24/7. Even if a seafarer
wishes to go to the toilet, he must be
escorted by a pirate.
Though many would presume
ransom negotiators to be Somali-based,
affected companies have described the
transformation of piracy into an organised
occupation which now transcends
conventional patterns.
Capt Thapar again: “I think piracy has
gone beyond the shipping companies and
expected norms to become an organised
business with major players said to be
sitting in London and Ireland. It is
understood that the moment a vessel gets
hijacked, the negotiator is the first person
to call up and he’s usually London-based.
Negotiations might start at something like
$10 million and if you don’t start to
negotiate with at least 35% of that, you will
not even come close.”
Capt Thapar added that countries
where deals are struck should act positively
in bringing ransom negotiators to justice,
while navies from other nations should join
their Indian counterparts under a common,
possibly UN command, in the fight against
hijackings – particularly since the location
of Somali pirate vessels may be readily
available through modern technology such
as satellite imagery.
He concluded that as the affected area
is now vast, the best solution may be to
fight pirates in their local area or to
confront mother ships directly. ■
55
Ensuring the best
form of
defence
U
nderstanding the threat of
terrorism, violent crime and antisocial behaviour within a
maritime context takes years of frontline
experience but with the presence of
professional security staff, shipping
companies can have confidence in their
anti-piracy procedures.
Following a 20-year career in the Royal
Marines, Tim Crossin, Managing Director
of British-based company CS:5 Security, is
well-versed in the practical realities of
maritime security and anti-piracy measures.
Having worked in Afghanistan protecting
the Japanese Ambassador, in addition to
five years in Iraq as a bodyguard for the
Foreign Office, Mr Crossin’s expertise of
frontline security is far-reaching. He told
SMI: “For the last three years, the maritime
threat has increased. It used to be just the
Gulf of Aden but now for the whole of
the Indian Ocean, it is recommended that
best management practices are followed. I
believe that for vessels transiting hostile
waters, it’s unfair to expect a master
mariner and professional crew to fight
pirates.”
Though seafarers may be well-versed
in security protocol, the need to provide
dedicated security personnel onboard is
evident, particularly from a planning point
of view. From his experience in the field,
Mr Crossin said even the best intentioned
security measures can be out-smarted by
pirates and he described a security audit
whereby in order to test procedures, the
56
crew hid in a citadel. A security guard
onboard lifted a hatch and threw a coke can
at the party inside, which in theory could
have been a grenade.
This illustrates how even the most basic
security measures can be overlooked
by inexperienced personnel but as Mr
Crossin explained, the need to educate
and encourage seafarers while providing
expert security is far more effective than
scaremongering them: “Firstly, they have
to have some form of security presence and
it must be someone who understands
navigation, bridge protocol and radar – they
must know port from starboard. I have
seen horror stories in the past where the
security provided are excellent ex-military
personnel but they get onboard a vessel and
SECURITY AND PIRACY
“
They had six grenades
fired at them, which included
a couple of overshoots – the
question is, if my colleague
had had a weapon and fired it
back in response, in a situation
where he had already been
fired on by live rocket
propelled grenades and small
arms fire – how can this really
be escalated?
“
don’t understand even basic health
and safety skills such as fire
fighting. This calls into
question the capabilities and
training of these people.”
He added that CS:5 trains
security professionals in ship
operating procedures, ensuring
a skill set which covers how to
conduct themselves onboard and
to be of benefit to the crew. This
combination of security knowhow and maritime training all adds
up to what Mr Crossin regards to be
“the right pedigree and background”
for a security officer.
Though within industry, security
personnel wanting to work onboard
must be trained as an ISPS Code Ship
Security Officer (SSO), this in itself is
not an anti-piracy course, but does act as
a code of conduct which dictates best
practice. Mr Crossin raised concerns that
those undertaking a three day course to
become an SSO will not receive an
adequate knowledge of anti-piracy
practices and should attend further training
to ensure they fulfil the requirements of an
SSO, in addition to being a capable member
of the crew who can be involved in the
basic running of the ship and provide
security.”
The issue of arms onboard is a
contentious subject in industry at this time,
as maritime authorities debate whether or
not to allow guns onboard, but as Mr
Crossin argued, an experienced security
officer can provide comfort to the crew if
seafarers are aware an individual with
experience of weaponry is onboard: “When
you take weapons into the equation,
shipping companies want security in an
advisory capacity to, as we say, give the
captain a positive feeling by having
someone there who has been shot at and
who has served in a hostile environment.
I wouldn’t say they’re used to it, as no one
ever gets used to being fired at by rocket
propelled grenades, but if you’ve been in
that situation a number of times, you’re
capable of making decisions.”
He added: “The captain is unlikely to
have had those experiences and it’s good to
know somebody onboard has dealt with
those problems in the past. The crew I use
are all ex-marines and have a detailed
knowledge of weapons and procedures but
if you get someone else with no experience
of weapons on an armed ship, it opens
up a whole different kettle of fish. The
procedures, training, recruitment and
vetting for our staff has to be increased.”
Mr Crossin said it is understandable
why some shipping companies and
maritime authorities may not want to take
arms onboard as it is difficult for the
industry to authorise or legislate the use of
guns. However, he warned that the
frequently used argument that bringing
arms onboard might exacerbate hostile
situations may not always apply: “In
security, I work on a field of increased
escalation and as things get worse, you have
to react to this. A colleague of mine who
accompanied me on a number of jobs was
faced with a rocket-propelled grenade.
They had no weapons but were prepared
with ship fortification and drills and that’s
what got them through – preparation,
advanced warning and the correct reaction
at the right time.
“They had six grenades fired at them,
which included a couple of overshoots – the
question is, if my colleague had had a
weapon and fired it back in response, in a
situation where he had already been fired
on by live rocket propelled
grenades and small arms fire – how can
this really be escalated? They
can’t suddenly bring in a
tactical nuclear weapon! It’s not
like the threat is simply paintball guns or a
phrase book of abusive language – they’re
TRADE ANALYSIS
already firing at the vessel.
I disagree that things can escalate from
this point because it’s already become
as big as its going to get.”
Describing a previous contract in
the Seychelles where Mr Crossin and
his team were protecting fishing
boats from pirate attacks, he
explained that in a situation where
barbed wire could not be used
(particularly owing to the need to
drop fishing nets and pull them
onboard), a 24/7 watch system
was put in place with weapons.
Thankfully, Mr Crossin did not
experience any problems but
some of his colleagues were
required to use force in order
to deter pirates. “When you
have no physical defences,
weapons may be necessary. It didn’t
escalate because the moment the pirates
came in and realised the security had guns,
they pulled off and left. They did a couple
of small probing attacks to find out what the
range of the machine gun on a fishing boat
was but when they realised this was about
300m more than their 7.62 AK-47s, they all
disappeared. It didn’t escalate because they
just left,” he said.
When asked about his view on the fear
of retaliation attacks against shipping
companies and navies who take a hard-line
approach against pirates, Mr Crossin
concluded: “I do have a commercial head
but I’m still a Royal Marine at heart. The
idea that if you put up any form of
resistance or make the pirates’ job hard, that
they may retaliate, brings only one option
– to have no security, so when a pirate
vessel appears, you have to stop the vessel
and let them up. You’ve got to make a
decision – if you’re worried about the navy
and security doing their job and protecting
you because if it goes wrong they may not
release hostages or may act in retaliation,
the only thing to do is to do nothing – give
them exactly what they want and then they
will take more vessels. From my experience
of work in Africa, I don’t believe armed
pirates respond to or respect the soft
approach.” ■
57
SHIPMANAGEMENT
ON THE RECORD
Timing is
everything
By Sean Moloney
EXCLUSIVE
A
ccording to this year’s Sunday
Times Rich List, Norway’s John
Fredriksen is Norway’s richest
man and the seventh richest person in the
UK with a personal wealth reckoned to be
in the region of £6.2 billion. Shrewd
investments in oil exploration and seafood
companies saw his family fortune grow by
a huge £3.45bn since the 2010 Rich List. In
a rare and exclusive interview, he told SMI
Editorial Director Sean Moloney about the
opportunities that now exist as the shipping
industry struggles to emerge from its
deepest recession.
Born on Oslo's east side, Etterstad and
the son of a welder, John Fredriksen began
58
his working life as a trainee in a
shipbrokering company. At the age of 27
he started working for himself and quickly
made his fortune during the Iran-Iraq wars
in the 1980s when his tankers picked up oil
at great risk and huge profits. As described
by his biographer, "he was the lifeline to the
Ayatollah”. He is now the world’s largest
ON THE RECORD
tanker owner and has major interests in oil
rigs and fish farming.
There is a well known saying in the
shipping industry that you always learn
more in a bad market but have more fun in
a good market and with 50 years in the
shipping industry, John Fredriksen must feel
he has learnt all he needs to learn about
surviving a shipping crisis. After all, as the
Chinese character for crisis is made up with
two words - danger and opportunity – surely
there are significant opportunities available
for the right investment?
“When you talk about sentiment, it is a
strange feeling because we have had a good
market for almost 10 years. Personally I am
not that bothered about the crisis because we
have seen it coming for the last three years,”
he told SMI. “I would say it is just a question
of time. We are just waiting and I look at this
current situation as a new opportunity.”
Frontline, his company, very recently
delivered a modest net profit of $15.5m in
the first quarter of 2011, with earnings per
share of $0.20, despite the persisting poor
tanker market. It announced a cash dividend
of $0.10 for the quarter. Indeed, Frontline
Management Chief Executive Officer Jens
Martin Jensen said of the results that the
company has positioned itself “to withstand
a bad market for some time.”
This year’s first quarter figures included
a net gain of $13.2m on asset sales and
included a gain of $7.9m on the sale of the
VLCC Front Shanghai. It gained $5.3m in
compensation for the early termination of
two single-hull VLCCs. It also made nonoperating gains of $8.1m, including $8.8m
from an adjustment to a funding agreement
involving Independent Tankers Corp. These
gains were offset by a $3.3m loss on
Frontline’s sale of its shares in Overseas
Shipholding Group. Excluding the gains on
sales, it made a net loss of $6.3m
Press reports suggested there will be
further impacts in the second quarter
including total losses of $17.3m from the
termination of long-term charters for two of
its ore-bulk-oil carriers with Ship Finance.
But it will gain about $4.2m from the sale
of the VLCC Front Eagle, which was
purchased in the first quarter, with further
gains totalling about $13m over the two year
time charter back.
Frontline is looking to trim its fleet with
the disposal of non-core ships later in the
year. It has seven ships on order — five
VLCCs and two suezmaxes. Finance is in
place for two VLCCs but not yet for the
other five ships.
But will the current crisis also be a good
way of weeding out the poorer inefficient
SHIPMANAGEMENT
players in the market? John Fredriksen
again: “The market has been so good and it
is good for all the serious players. I have
been in this industry for 50 years and one of
the few to have survived the crisis. It is very
interesting for me as I am not personally
bothered about the crisis. It is worse for the
new generation of players.”
But as the shipping crisis deepens, there
has been a tendency for some ship owners
to diversify into a variety of different vessel
sectors to chase the buck. But is survival
more about preparing your company for the
good times as well as the bad?
“We have 14 public companies and we
are the biggest in the world in salmon
farming and are active in other things: 15%
of our holding is in shipping at the moment
so we have prepared ourselves for the long
term. In this business, timing of course is
everything and I am patient. I am sure prices
aren’t going to be much lower in 10 months
from now. But we will buy companies; that
is what we are going to do. I am sure there
are going to be a lot of companies for sale,”
he told SMI.
And what of his love for salmon
fishing? Is it an ideal way to escape the
rigours of the industry? As he told SMI:
“Salmon fishing is the most important thing
this year.” ■
TRADE ANALYSIS
LNG/LPG
Floater projects give
LNG sector fresh impetus
By David Tinsley
F
loating LNG solutions are giving
substantially wider commercial and
technological dimension to the LNG
sector, providing platforms for business
development and new trade flows In
addition to LNG storage, offtake, and
regasification, ‘floater’ projects also
include gas liquefaction. Issues of onshore
or offshore resource size and location,
relative costs and planning constraints for
fixed shoreside terminal facilities, and
asset flexibility, all have a bearing on the
current market interest in floating LNG
units.
A gas export project in Papua New
Guinea has provided the first commercial
endorsement of the floating gas liquefaction
and offloading solution developed by
Oslo-listed Flex LNG. Recently signed
agreements with US firm InterOil and
its joint venture partner Pacific LNG
have paved the way to construction and
operation of a production vessel to handle
gas from the onshore Elk and Antelope
fields in Papua New Guinea’s Gulf
Province.
Whether or not this proves to be the
first-ever floating facility to produce LNG
remains to be seen, as Shell is understood
to be at an advanced stage of planning for
its initial investment in its huge FLNG
(floating LNG) production concept.
Flex LNG was incorporated in 2006
with the aim of commercialising floating
natural gas liquefaction units, to provide a
cost-effective means of sourcing gas from
numerous potential offshore or onshore
locations worldwide where it may not be
otherwise desirable or viable to tap those
reserves.
Four LNG producer hulls were ordered
by Flex LNG from Samsung Heavy
Industries several years ago in anticipation
of securing project assignments. Work was
subsequently put on hold in the absence
of charters, and the agreement with the
60
shipyard was restructured. All previous
instalments paid to Samsung on the four
shipbuilding contracts are to be transferred
to the single vessel destined for the Papua
New Guinea project once the final
investment decision has been made,
expected before the end of 2011.
Commencement of LNG production
operations is targeted for 2014. The vessel
will fulfil a 25-year contract, and will be
operated by Flex LNG in conjunction with
Liquid Niugini Gas, a joint venture of
InterOil and Pacific LNG. With a nominal
production capacity of nearly 2m tons of
LNG per annum, the ’floater’ is expected to
be moored alongside a jetty, which will be
shared with Liquid Niugini’s land-based
LNG facilities.
Shell signed a master agreement with a
consortium comprising Samsung and
French engineering contractor Technip for
the design, construction and installation of
multiple FLNG vessels over a period of up
LNG/LPG
to 15 years, intended to monetise stranded
or smaller offshore gas fields. The
conceptual FLNG has main dimensions
of some 450m x 70m, with liquefaction
capacity of 3.5m tons per annum, plus
associated LPG and condensate production.
The first applications could be off
northwestern Australia, and to the north of
Australia in the Timor Sea.
Towards the end of last year, Papua
New Guinea’s executive council approved a
project involving an LNG-FPSO to be
stationed in the Gulf of Papua, to draw on
extensive gas resources. The standalone
scheme is known as the PNG Floating LNG
project, and has been jointly developed by
Petromin PNG Holdings, Hoegh LNG
and Daewoo Shipbuilding & Marine
Engineering.
Over a four-year period, Hoegh LNG
and its partners have prepared the requisite
LNG-FPSO design and technology. The
envisaged vessel and processing systems
would be constructed at Daewoo’s Okpo
yard, and will have an LNG production
capacity of 3m tonnes annually plus storage
for 220,0000m3. The parties are now
hoping to reach agreements with the PNG
Government, and gas suppliers and buyers,
with a view to bringing the unit into
operation by mid 2014.
Following on from the delivery of two
innovative, LNG shuttle and regasification
vessels (SRVs), Hoegh LNG has recently
made a further, major commitment to
the fast growing market for floating
regasification solutions. Utilising the
Norwegian company’s in-house design,
construction of two 170,000m3 floating
storage and regasification units (FSRUs)
has been provisionally awarded to Hyundai
Heavy Industries (HHI). Options appended
to the agreement provide for an ultimate
series of six Hoegh FSRUs from the
Korean yard.
Hoegh LNG believes that the floating
regasification sector will be the LNG
segment affording the strongest growth
over the medium-term, especially so in the
Asia-Pacific region, but also among certain
fast developing economies in the Atlantic
markets. The FSRU option is advocated as
the most cost efficient and quickest way for
a country to import LNG, increasingly
favoured as a fuel for power generation.
When the letter of intent was signed
with HHI in April this year, Hoegh LNG’s
President and CEO Sveinung J. Stohle
expressed confidence in future business
prospects. “Given the very strong LNG
market, with an expected growth of 6%-7%
on an annual basis over the next few years,
and our qualification to bid for all
new FSRU projects, we have with this
agreement with HHI put Hoegh LNG in the
position to compete for such projects based
on our new built FSRUs….”
The sector is currently served by 13
units worldwide, with three under
construction, and around 25 in various
stages of development.
Golar LNG was the first company to
convert a large LNGC into an FSRU. It is
currently involved in five floating solutions,
and earnings from the FSRU segment gave
a boost to the company’s income in 2010.
“Golar is in final discussions regarding firm
commitments for construction of multiple
FSRU carriers,” stated the organisation in
late April.
Meanwhile, Golar is making a huge
investment in the development of its LNG
carrier trading fleet. Little more than a week
after its recent award of four vessels
of 160,000m3 capacity to Samsung Heavy
Industries, the company upped the
programme by signing contracts for another
two ships. Four of the series are due to be
completed in 2013, and two are expected in
2014, and encapsulate a total value of
$1.2bn. In addition, Golar retains options
on a further two LNGCs, which would take
overall expenditure to at least $1.6bn.
Each vessel will employ dual-fuel
diesel-electric technology, favoured on
grounds of comparative fuelling costs over
steam turbine propulsion, the erstwhile
powering mode of choice in the world
LNGC fleet. Technical options built into
the agreement with Samsung afford the
owner the possibility to adopt regasification
equipment, and to incorporate ice
strengthening and winterisation.
The relatively early delivery dates
and nature of the option package make
this an attractive deal for Golar. “The
supply/demand balance for LNG shipping
looks increasingly attractive,” observed
Golar LNG’s Chairman John Fredriksen.
“It is clear from the continued strong global
LNG demand and supply growth that a
significant amount of new infrastructure,
including shipping, will be required over
the coming years,” he added.
Over the past couple of months, other
newbuild orders have been reported by
industry and broking sources to have been
placed with Korean yards, the pre-eminent
global force in LNG carrier construction.
Greek interests are behind a contract for a
vessel of 156,000m3 awarded to Daewoo,
while an undisclosed shipowner is said to
have placed two LNGCs in the 155,000160,000m3 category with Samsung.
China’s shipbuilding industry has
secured a prestigious entry into the export
market for LNG carriers, by way of a major
contracted sealed at the start of 2011,
and involving Japan’s Mitsui OSK
Lines(MOL). Hudong-Zhonghua booked a
series of four vessels, understood to be of
about 170,000 cubic metre capacity, for
delivery in 2015 and 2016. As the ships are
to be used in support of Chinese purchases
TRADE ANALYSIS
of gas, the authorities had stipulated that the
vessels be built in China. HudongZhonghua cut its teeth on LNGC
construction with the 147,700 cu m
Dapeng Sun-class.
The latest contract was steered by
MOL and ExxonMobil, and arises out of
the requirement for transportation capacity
to support shipments from LNG projects in
Papua New Guinea and Western Australia.
The four vessels will be jointly owned by
MOL and China Shipping. China’s overall
demand for LNG is growing as the country
seeks ways of increasing ‘clean’ energy
usage.
Addressing the specific requirements of
regional distribution of LNG, FKAB of
Sweden has designed a 16,500cu m vessel,
embodying three bi-lobe IMO type C
independent tanks with spherical heads and
served by six deepwell cargo pumps. A
dual-fuel main engine of 5,250kW figures
in the basic specification.
In the small-scale LNGC stakes,
Rotterdam-based owner Anthony Veder has
ordered a 15,600cu m vessel from Meyer
Werft. The Dutch gas tanker company’s
contract is the latest in a long line of
bold initiatives which have included
the construction of the 7,500cu m
LNG/LPG/ethylene carrier Coral Methane,
used in regional LNG trade since delivery
in 2006.
Veder’s fleet also features the world’s
first purpose-built carbon dioxide(CO2)
carrier, the diminutive, 1999-built Coral
Carbonic. Deployed in Baltic/northwest
European service, this IA ice class tanker
transports liquefied CO2 in a single cargo
tank of 1,250cu m capacity.
There are currently four coastal CO2
carriers operational in northern Europe,
serving the food and beverage and waste
treatment industries. The ships that would
be required for carbon capture and
storage(CCS) projects will have to be
substantially larger, although vessel design
issues would be similar to those addressed
in LPG carriers.
One of the major consequences of
global investment in LNG liquefaction
trains is the attendant affect on LPG
availability and export volumes, since
significant amounts of LPG are produced in
association with LNG.
Although delays in plant completions
have modified the extent of growth in
the LPG business since 2008, it is
anticipated that LPG volumes will increase
substantially in future years, other positive
factors being robust Asian demand and
the ramping-up of refined oil product
production, in which LPG is a by-product.
The earnings environment for the largest
LPG tankers, or VLGCs (very large gas
carriers), is set for solid improvement over
the next two years, according to analysts. ■
61
A
62
ADHOC
AdHoc
AdHoc
Taking the tension
out of travel
F
or jet setters who relish the
face-to-face
nature
of
shipping, this international
industry can lead to long business
trips and extensive time on the road.
But although the chance to travel the
globe is a privilege, the lack of sleep
and distance from home which
accompany
this
can
prove
challenging for even the toughest
business minds amongst us.
Thankfully, help is at hand as SMI
has uncovered some invaluable hints
and tips which will assist seasoned
travellers in limiting the stress of
globe trotting.
Bjørn Højgaard, Managing
Director at Singapore-based Thome
Ship Management, currently travels
for 150 days a year. As he explained,
efforts to plan your trip prior to
departure can pay dividends in
ensuring a smooth experience: “Up to
a week before I travel, I plan for each
day and pack accordingly. I also
ensure I have enough reading
material for the flight – I never watch
movies but send emails offline on the
plane – I like to be productive. Also,
when travelling, you should try the
local food! It’s about accepting that
it’s not your home turf and getting out
there.”
Depending on the class of travel,
it can be useful to carefully consider
your choice of seat on the plane, as in
economy, an aisle seat can offer a
little more space, while window seats
are purported to offer a more cozy,
sleep-friendly position than other
positions in business class. In
addition, an evening flight allows for
sleep during travel, while simple
requests such as ensuring your hotel
offers an early check-in service will
minimise unwelcome surprises on
arrival.
Using a travel itinerary website
such as TripIt.com can also take the
stress out of flight delays as regular
travel updates can be sent to the user’s
phone, in addition to E-tickets and
information about your destination,
including everything from weather
forecasts to car rental arrangements.
Ron Schroeder, Director for
Travel, Retail and Leisure at
MillerCoors (a supplier of beverages
to the maritime industry) is also
somewhat of an expert at the travel
game, having spent around 200 days
a year away from home during the
past 34 years of his career: “When
you travel frequently, there are things
you can do to maximise your time,
limit excess weight and keep alert.
63
BUSINESS OF SHIPPING ADHOC
Continued from page 63
Watching out
for the hazards
G
When packing, make a choice – light or dark
clothes for that week’s trip. That way, you
pack either black shoes or brown, but not
both. Select a sports coat in a colour such as
navy blue, which can be worn with either tan
or dark colored trousers. The longer the trip
the more important it is to minimise what
clothes you are taking.”
Mr Schroeder also noted the importance
of planning each day prior to travelling: “You
may be participating in a golf outing on the
second day of your trip but have a casual
night out the evening before. You may elect
to wear your golf shirt that evening before
and then for the golf outing the following
morning thus turning this two-shirt situation
into one. If packing for a two-week trip,
remember you’re seeing different people so
you can literally repeat your clothing
selection by sending out your laundry at the
hotel on day six, then you’re ready for the
following week.”
It can also be useful to use hand luggage
alone in order to avoid the 30 minute wait for
luggage collection. This might sound
impracticable for lengthy trips but Mr
Schroeder explained that one of his best trips
included one hand luggage case for a 21-day
trip: “It’s not as hard as you think. One set of
jeans, two pairs of slacks including one pair
you’re wearing. Take shirts that can match
both pairs of slacks and you should carry only
enough underwear and socks that you
actually need. If you’re carrying golf clubs,
it is a great place to put extra jackets, sweaters
or clothes.”
For those who wish to truly maximise
their time when on the road, Mr Schroeder
concluded with this final nugget of multitasking advice: “When you arrive in your
room, normal procedure is to turn on the
computer but it can take a while to warm up
so during this time, place shirts, pants or
jackets that got wrinkled in your case in the
shower area – turn on a hot shower and let
steam do the ironing work for you! By the
time you’ve done this, your computer is
ready to go. Often, I only have around 15 to
20 minutes before heading out again, but this
way I can take care of critical emails before
leaving the room.”
64
uarding against fatal or dangerous
accidents onboard ship should not be
left to chance and according to DVD
and computer-based training specialists
Videotel, it can sometimes take graphic
images and film of potential accidents
onboard ship to ram the safety message
home.
Videotel’s Hazard Series II module makes
extensive use of modern image techniques to
grab the viewer’s attention and shock crew
members into greater awareness of their own
safety and that of their colleagues.
It comprises 10 hard hitting short films
designed to both shock and teach the viewer.
Filmed using real crew doing real work, they
graphically illustrate common errors and then
show how, using correct procedures and
working techniques, incidents can be avoided
before they occur.
“Adequate training, safe working
practices and good safety management
systems all contribute to a safer working
environment on board,” said Nigel Cleave,
Videotel’s Chief Executive Officer.
Wikborg Rein expands
capabilities with Brazil
alliance
L
eading international law firm
Wikborg Rein has concluded an
alliance with one of Brazil’s main
law firms, Vieira, Rezende, Barbosa e
Guerreiro Advogados (VRBG), which will
have significant benefits for the international
clients of both firms.
The best friend alliance agreement
between the two firms will include cooperation on client referrals and joint
assignments, and will also involve the
exchange of lawyers and competence
building.
Wikborg Rein Global Managing Partner,
Susanne Munch Thore, said: “Brazil has
developed into a high-priority market for
many of our clients, and it is important that,
as a leading provider of international legal
services, we have the capacity to support our
clients wherever business takes them.
“This is the first time one of the top
international shipping and offshore oil & gas
firms has made a commitment like this. It
demonstrates our understanding of the
commercial realities of the market, and where
growth will come from for our clients.”
Partner Finn Bjørnstad, who will shortly
be taking up the role of managing partner in
Wikborg Rein's London office, has
considerable experience in supporting clients
in Brazil. He said: “VRBG is internationally
recognised as one of Brazil’s leading law
firms, with an excellent track record in the
offshore oil and gas sector. It is ideally placed
to work with international clients looking to
develop opportunities in a market with such
great potential.”
For a number of years, Wikborg Rein has
supported its clients as they have developed
their Brazilian business interests, specifically
in the offshore oil & gas sector. However,
with an increase in offshore oil & gas
investment in Brazil, it recognised that there
was a need to provide high-quality ‘on the
ground’ legal support.
From June 2011, Wikborg Rein will have
one senior lawyer working out of the VRBG
office in Rio de Janeiro, and VRBG will have
one lawyer working out of the Wikborg Rein
office in Shanghai.
ADHOC
Plant a tree for
the environment
A
sk Bernhard Schulte’s
Cyprus office what it
means to be green and
they will whisk you off to
Parekklisia village on the
island and show you the
400 trees and shrubs its
employees planted as part of its
May tree planting exercise.
The 400 shrubs, given to
the Parekklisia community by
the forest department, were
successfully planted by BSM staff
and families who willingly
volunteered to assist in this event.
Everyone, especially the children,
had a great time as it was also an
opportunity to get together and
have fun outdoors.
As the compnay said, the aim
of this event was to upgrade” the
quality of life of our fellow citizens
and to pass on the message that we
must all contribute towards a safer
and cleaner environment”.
It was arranged in combination
with the BSM (Cyprus) outing so
after the planting the team drove
up to the mountains for a special
lunch.
ISSA is ‘all at sea’
I
t was anchors ‘aweigh’ for nearly
200 ship chandler members of the
International Shipsuppliers &
Services Association as the trade
association
held
its
annual
Convention onboard ship for the first
time.
ISSA delegates boarded the
DFDS cruise ferry Crown of
Scandinavia in Denmark and spent
three days networking, debating and
socialising as the ferry glided between
Oslo and back to Copenhagen. Apart
from a choppy second night’s sailing
from Copenhagen to Oslo, it was plain
sailing for the ISSA delegates as
they listened to presentations ranging
from the workings of the Finnish
customers, to the intricacies of ship
owner negotiations when a vessel gets
hijacked by Somali pirates.
ISSA will be holding its 2012
Convention in the Spanish port city of
Cadiz before retiring to London as the
base for its Convention until at least
2015.
MyView
Nikolay Khovrin, Chairman of the
Switzerland-based International
Law Enforcement Agency (ILEA)
“
The fight against piracy should be
based on three elements. The first element is
a legal element. The archaic principal of the
universal criminal jurisdiction over piracy
should be abandoned while the natural right
of self-defence should be internationally
recognised. It is exactly because of the
UN advocation for the universal criminal
jurisdiction over piracy and against the
natural right of self-defense that the ILEA
agency stands outside the UN structures. We
believe the ILEA would make a difference.
ILEA, via its international net of legal
counsels, is well positioned to defend the
interests of member states.
The second element is exercising an
efficient criminal jurisdiction by the flag
states on their vessels. This is a duty under
UNCLOS. But what is more important is
that this is a natural second step for any state
serious about fighting piracy. The ILEA is
well positioned to offer its member states
well trained operatives or ship marshals to
police their vessels.
The third element is a proper use of
force at sea. ILEA is sponsoring an
International Harmonic Shooting Federation
(IHSF) which would play a key role in
selecting candidates to become ILEA
operatives or ship marshals. So far the
activity of the Navy is questionable. The
Navy is not trained for law enforcement. On
many occasions its actions can be qualified
as a grave war crime of willful killing. That
is because there are no recognised
specialists for precise or sniper shooting
from a moving object onto the moving
object.” ■
65
SHIPMANAGEMENT
SHIPPING ASSOCIATION ROUND TABLE
Round Table
Discussion
If any of our readers have comments to make on the issues under discussion or the panellists’ replies then
please email them to [email protected] and we will include them in future issues.
I
n the latest instalment of its highly popular Round Table
Debates, SMI travelled to New York to exclusively gather
together the heads of the world’s main shipping trade
associations to garner their views on major issues such as the
effects of the Japanese earthquake and tsunami; the dominance of
China; the scourge that is Somali piracy; and the contentious issue
of the exclusivity of the subsidiary industry body that is the Round
Table of Trade Associations. The debate was chaired by SMI
Editorial Director Sean Moloney and he welcomed as panellists
Spyros Polemis, Chairman of the International Chamber of
Shipping and President of the International Shipping Federation;
Capt Graham Westgarth, President of INTERTANKO; Rob
Lomas, Secretary General of Intercargo; Robert Lorenz-Meyer,
President of BIMCO; Alastair Evitt, President of InterManager;
and Noboru Ueda, Chairman of the International Association of
Classification Societies (IACS).
Sean Moloney
How prepared is shipping to come out of what is arguably the worst
recession in its history and to what extent will the ordering sprees of
a few years ago remain the bitter pill that the shipping industry has
to swallow for many years to come. Spyros, what are your views?
Spyros Polemis
First of all I wouldn’t use the word bitter as it doesn’t apply but
shipping is obviously ready to come out of recession. It is just that
66
the oversupply of tonnage is still a problem together with the
contraction in demand because of the financial crisis. Two things
now have to happen: ship owners have to avoid ordering more
ships and the world’s economies need to improve. Because of
globalisation, economies have to improve together rather than
individually. In the past we used to say that the US economy was
the driver. I don’t think this is the case anymore. Because of
globalisation we need to move together in order to generate the
necessary demand.
Rob Lomas
It has certainly not been the best start to 2011 for the dry bulk sector;
we have seen the oversupply of tonnage and a lot of the owners
failing to exercise self restraint in the ordering process. Starting the
year with issues such as floods in Australia and the tsunami in Japan,
it perhaps brings home to us the cyclical nature of shipping. We
haven’t really seen the volatile nature of the shipping industry for
some time and in the dry bulk sector in particular, we have witnessed
steady demand and reasonably steady supply. But now we are back
to the traditional function of the market which is a reaction to
volatility. Although we have some cautious grounds for optimism in
the future – we have China still powering ahead and India not too far
behind in terms of demand for dry bulk shipping – the effects of this
may take a little time to come through. But until it does, we are
seeing operating costs and revenues in disarray and we are just going
to have to ride out that particular storm. It should get better in the
SHIPMANAGEMENT
The oversupply of tonnage is still a problem together
“ with
the contraction in demand because of the
next few months. In terms of the numbers,
we don’t know exactly how many ships will
come out of the yards. We are also seeing an
imbalance through the growth of larger ships.
Examples are the VLOCs ordered by Vale which may
affect the capesize market. But it isn’t all doom and gloom,
we are starting to see some aspects of growth potential even in the
next few months with the smaller types of shipping. World demand
for energy and food isn’t exactly going to decrease over the next
year or two so we have some cautious grounds for optimism.
Robert Lorenz-Meyer
I agree with the case for cautious optimism, definitely. I think
globalisation is here to stay although we are seeing some trends
towards re-regionalisation as well – a lot of this has to do with the
environmental concerns of consumers who are just not prepared to
accept a much larger carbon footprint for products they buy. This
will change the look of shipping as well. There is a lot of product
sourcing which might be re-regionalised later on. With regard to the
order book, we are looking at the youngest fleet we have ever had
and that is also positive but it is not the most modern fleet and that
is something we have to take into consideration as well. A lot of these
ships were built based on construction standards that are 10 to 15
years old, These ships will last another 20 to 25 years and we all
know what kind of regulations are coming into the market; a lot of
these ships that have been ordered are not fit to meet them.
“
financial crisis
technology is the potential game changer. We are seeing more
innovation in the shipping industry than we have seen in the last 30
years and I think we will see ships built to go at slower speeds but
with higher capacity, But we could potentially see different fuel
types being employed and also different hull shapes. If you look at
the basic aframax and suezmax hull, it is the same as it was 30 years
ago. So I think we will see more innovation and the next generation
of ships will be much more energy-efficient. The question is will
that marginalise the older tonnage? Because the shipping industry
is in a way conservative in its approach, not everyone will rush out
and order new tonnage, it will be a gradual thing, but I do think there
is an opportunity for shipping and it will be interesting to see how
things evolve.
Noboru Ueda
Personally, I am very optimistic about the future. As the world
economy continues to grow, the global shipping industry will need
to grow as well. And so I am very confident about the long-term
prospects. In the shorter-term, we are witnessing challenging times
but on the shipbuilding side the boom is finally coming to an end.
But it is important that we do not just focus on the shipping market.
On the technical side there has been a wide shift on a variety of
issues over the past few years, especially in terms of safety and the
environment. It is important to realise that with all the problems with
the market over the last few years, we have taken tremendous steps
in these areas and the shipping industry is safer and greener than it
has ever been.
Sean Moloney
Graham, let me bring you in on this.
Alastair Evitt
Graham Westgarth
In shipowning terms, cautious optimism is positive. I think that the
supply/demand dynamic will resolve itself. Our view is that we will
typically have another two trying years – it may be 2013 before we
see a turnaround but the one thing that hasn’t been mentioned and
which is significant, is the global shipbuilding capacity, and in China
specifically. Because if ship owners stop building ships and China
decides that no matter what, its shipyards should be
building ships then the outcome has nothing to
do with supply/demand dynamics, that is
a political decision. Of course,
China’s real focus is ensuring
it has employment for
its people. I think
Shipmanagement is in a slightly different situation than owners and by
shipmanagement I don’t just mean third party managers but in-house
managers as well. As managers we have been less directly affected by
the market fluctuations and, in some instances, the manager has seen
business come in with the additional tonnage that has led to the market
overcapacity. So we tend to follow a less risky curve. We have seen
vessels come in and out of lay-up and I would like to think we have
seen the solution in increased operational efficiencies – maximising
the usage rather than looking to cost-cutting and I am very pleased to
say that I have not seen that happen through the recession. But the
recession is like a marathon and the winner is not the sprinter but the
last man standing at the end of the race. Managers have a role to play
in that they are the catalyst between investors and owners and charterers
and suppliers and they have a role to play to work with the owners to
get to the end of the marathon.
think technology is the potential game
“ Ichanger.
We are seeing more innovation in the
shipping industry than we have seen in the last
30 years and I think we will see ships built to
go at slower speeds but with higher capacity
“
67
68
Graham Westgarth
There are more and more ships
coming into market and up until
October 2008, there was a real stress in
the industry in terms of the availability of crew
competence. That problem is coming back. But as
we come out of recession and more and more of these ships
come into operation then we will see pressure being placed on
the manning side and in particular, on the supply of manning. Also,
as more ships were ordered and delivered, suppliers were
subcontracting more of their supply needs so the quality of some of
the equipment delivered wasn’t meeting the requirement that it had
in the past.
Rob Lomas
I wanted to endorse what you have just said. We are beginning to
see a few stresses and strains on shore-based staff as well, not just the
seafaring staff. Last year the number of shipping companies set up
in China grew by one third and so we have a third of Chinese
companies that haven’t had more than one year’s experience running
and operating ships. That gives us a little bit of cause for concern
and the challenge for the future is where are we going to get people
experienced enough to run these companies efficiently, safely and
in an environmentally-friendly way.
SHIPMANAGEMENT
are looking at a different type of ship owner in the future as well. Of
course, owners will still try to buy low and sell high but we are
looking more to the future of larger entities, more commercial and
industrialised entities perhaps because regulations are putting a lot
of pressure on ship owners. We were talking about the experience
that ship owners and managers must have, but things are moving so
fast that experience alone is not the key to success. We have to be
ahead of the market and all the changes that are coming. For
example, I am not sure how many ship managers have started to
implement the consequences of the Maritime Labour Convention. I
think a lot of them are still shutting their eyes to it. The same applies
to ballast water treatment. How many ships ordered in China have
any space in the engine rooms for ballast water treatment systems?
So the ship owners who will really benefit are the ones who are
looking at keeping abreast of changes.
Graham Westgarth
Industrialisation is a long-term trend. When I think about legislation,
the challenge I see with the shipping industry is that legislation is
silo driven by conventions such as SOLAS and MARPOL. You have
all of these silos and we keep layering on more and more legislation
but I am not convinced this allows you to look at how you are
managing your overall risk. And I am not sure it is a sustainable
model. If you were to start again today you would adopt a different
approach. You would ask what is the enterprise risk and how do we
construct legislation to enable us to manage it in the right way. If
you created that kind of environment, that would also lead to what
we all want; professional shipping companies operating in a
professional way. Over time it would eliminate the asset players who
are coming in and out of the market.
Alastair Evitt
I absolutely agree with Rob because the numbers and statistics that
have recently been released have looked at the numbers of seafarers
rather than the capability of the seafarers and this is where I feel the
manager, be him in-house or third party, has to play a part and has
to garner the support of the owners and investors because we have
to be able to meet the demand when the good times come.
Spyros Polemis
I agree because before ISM came in, I was saying to people that
quality companies invented ISM. They were not asset players but
quality companies who were operating with this level of quality in
mind. Those fringe companies who do not aspire to the standards
laid down are not going to be able to survive and should not be
allowed to survive in the future.
Spyros Polemis
It isn’t just the supply of good seafarers it is the fact that during the
good years there were a number of companies new to the business.
This meant that it wasn’t just the seafarers who were not up to the
job but the shipping companies themselves who were not following
the right standards and that is something we really have to watch. Of
course there are checks in place and we have all these instruments
available plus port state control but we have to keep an eye on this
development because it is inevitable that when the times are good all
kinds of people jump in because they see you can make good money
– so even though you weren’t a ship owner yesterday you might have
become a ship owner today and you don’t know what you are doing
in terms of managing a quality operation.
Sean Moloney
That is a key factor. You have to manage a quality operation. But do
you believe the industry needs to look towards a paradigm shift
where you don’t have this massive cyclical boom and bust attitude
but you start to run your industry as other industries run theirs?
Robert Lorenz-Meyer
There is a long-term trend that we as a shipping industry have
become more of an industrialised service provider, taking care of the
transportation chain. And we earn our money by providing a service
rather than playing the market and buying low and selling high with
no real substance of value added in-between. Value added is one of
the key elements of the future. We have seen it in LNG terms where
shipping is a huge investment but is part of the logistics chain of a
broader industrial process. Margins are now smaller and maybe we
Rob Lomas
I don’t think we have got anybody who is naturally born to be a ship
owner; we have an evolutionary aspect to shipping that has grown up
over the years. But we also have the recognition now that shipping
is profoundly able to adapt to its circumstances and to maintain an
equilibrium over the amount of regulation that is strictly necessary
to ward off the effects of the substandard operator versus the need for
people to react to the challenges of shipping in a mature way. This
is something shipping hasn’t received the necessary level of credit
for. In terms of regulation, we still need it but it throws up its own
challenges. We need to look at those residual regulatory functions
which the IMO has got, and look at them and say ‘you the IMO have
a lot more power and with IACS as the technical arm of shipping, we
will be looking more towards these regulations and demanding much
more from them while also keeping our own quality ethics right at
the forefront as owners’.
Noboru Ueda
One area I believe where we need better cooperation as an industry
is in developing global regulations. We have already seen this with
regulations on low sulphur and ballast water. If our industry can’t
effectively regulate itself then local governments and interested
groups will be happy to do it for us and the outcome of these
regulations may not have the best interests of the shipping industry
at heart.
Graham Westgarth
Sean, you mentioned about the industry being over-regulated but it
69
SHIPMANAGEMENT
depends how you interpret that. There is too much legislation but
whether it is actually regulated correctly is the point. In the tanker
industry you have so many inspections that are totally uncoordinated
and conducted in a manner which means you are creating more work
for the ship owner. But if you can do it in a more cohesive way so
you get one picture of the ship and one picture of the company then
it would be more effective. There is too much legislation, but in
terms of the enforcement it is just totally fragmented and not
conducive to driving prudence in the industry.
Rob Lomas
In terms of port state control, there isn’t a harmonised view around
the world. Once the standard has been achieved there needs to be a
lot more effort being put in to create a harmonised global system to
take serious steps forward.
Sean Moloney
Can we move on to our second question. China is emerging as the
shipowning and shipbuilding industries’ powerhouse. But what
effect will the Japanese earthquake and the resulting tsunami and the
financial crisis have on that inevitability?
Noboru Ueda
While the damage from the earthquake has been immense the effect
on the Japanese shipping and shipbuilding sectors has thankfully
been limited. A few shipyards in north eastern Japan were damaged
but the majority of building yards were unaffected. Just as with other
industries, there are some concerns about the logistical and supply
issues but these are unlikely to have a lasting effect on the Japanese
maritime industry. More importantly, Japanese shipbuilding
companies are developing some of the most important technologies
in issues such as GHG and improving ship efficiencies. And with
owners increasingly focused on these areas, I think the Japanese
shipbuilding industry has a strong future ahead of it. As for China,
it is one of the world’s largest economies so it is only natural that
China should play a large role in both shipping and shipbuilding.
However, this is not about China versus the world. Shipping and
shipbuilding are global industries and even as China grows in
importance I don’t expect that to change.
Robert Lorenz-Meyer
With China being steered by central government, it has clearly
said it wants to become number one in the shipping industry. That
was made very clear when they opened the Shanghai Maritime
Centre last year. They are number one in shipbuilding; they want
to be number one in shipmanagement; they want to become number
one in ship services; and they want to become number one in
ship finance. When I look at the difficulties well established
ship owners have today in raising finances even for good projects
we all have to look at what China can do. And that of course will
benefit the Chinese shipbuilding industry because Chinese finance
will be available for Chinese yards rather than Japanese and Korean
yards. So there is a power shift in place and China is playing a major
role.
Graham Westgarth
Shipping and shipbuilding as well as securing the supply chain
are probably the largest business objective that China is working on.
It won’t deviate from that path and will continue to build its
competence and capability. How it impacts on Japan and Korea is
more difficult to determine at this time. Shipbuilding, management
and ownership is a competence that takes many years to develop
so I don’t think it will be like switching a light on and off. It will
be a gradual transition but there is no doubt that China will be
a significant player in the shipbuilding and owning world in the
future.
70
Spyros Polemis
First of all regarding Japan, what has happened is tragic and because
of that reason Japan will have to import more oil and coal but this
will not be the case long-term. Longer-term the Japanese shipyards
are developing new technologies and we already know about the
Green ship designs that are coming out of some of the yards. I am a
bit scared about China which is aggressively expanding its
shipbuilding capacity. And when one considers what the Chinese
Prime Minister said in Greece that he was going to give $5 billion
worth of financing in order to continue ordering in China. Well that
was dangerous because he is inducing people. Chinese shipbuilding
is then not being driven by market forces and that is dangerous
because it distorts competition. If because of this policy the Chinese
shipyards are able to outbid the Japanese or the Koreans then there
is a problem there. Also if you make it so cheap where it is difficult
to refuse then you make it difficult for shipowners to say no. If you
can order a ship for $20 million instead of $30m then people will
stop and think despite the oversupply situation. And this is what has
been happening with shipyards lowering their prices to attract
shipowners to order more ships. So overall we have to be careful
how we look at China and the effect their policies can have on every
aspect of shipping. As Graham said, the proliferation of shipyards in
China has been tremendous and their capacity to build ships is
significant. They are creating things without there being a need for
them. There are competency issues but that is where the class
societies come in.
Sean Moloney
Alastair, are ship managers concerned about China?
Alastair Evitt
First of all I would like to reiterate that we were all shocked about
what happened in Japan and we have to support all our friends and
colleagues there. Even before the tragic events there, there were
concerns in Japan about the high labour costs and the strength of the
Yen. We have seen shipbuilding orders go to China but at the end of
the day we will see orders go to that yard that can provide the right
product at the right quality and at the right cost and we will
eventually see pressure coming to China from other countries like
Vietnam and maybe the Philippines where we very recently saw an
order being placed. I think it is an evolution.
Rob Lomas
I would like to echo our condolences to the people of Japan for what
they have had to go through at the moment. Japan for us is the second
largest dry bulk owning country in the world and it is still very strong
in terms of its professionalism and outlook. We must always
remember that China is one of those countries which has come from
very little to a great deal in a short space of time whereas many other
countries have evolved their maritime sectors over many decades.
And China seems to have expressed an intention to reach a particular
position in world shipping in a short space of time. That will throw
up a lot of challenges in its own right. China Shipping recently
announced that its employment costs had risen by 7.5%; these are
stresses and strains on any shipowning operation which will, by
necessity, hamper growth so I think China has shown a potential, in
shipping terms, to deliver much better quality than it was doing
recently but we do need to keep a careful look out on what it is
defining its shipping policy as far as the way it affects the rest of the
world.
Sean Moloney
Robert let me get your views on this and also on the comment by a
ship broker recently that whenever there is a natural disaster shipping
is always a winner, especially when you look at the massive
rebuilding that will have to get underway in Japan?
SHIPMANAGEMENT
Robert Lorenz-Meyer
Spyros Polemis
That is a very difficult question to answer because we are all
commiserating with the Japanese people and I am amazed at the
discipline the Japanese people go about in rebuilding their country
and trying to solve the problems they have. But I agree to a certain
extent that any conflict or natural disaster leads to a rebuilding of
infrastructure and economies and that will probably be positive for
shipping, sad as it may be. We don’t want to have natural disasters
like that to help the shipping industry; that is clear.
I echo Graham’s views because it is a political issue and it starts with
world trade but also with the seafarers that man the ships. So it is by
definition a political issue. Two and a half years ago, officers
onboard warships in the area were saying to us publicly that piracy
was not their problem, ie the navies and the governments. And this
is crazy because it is a political issue and it is the governments who
have to supply the means to fight it. Who would ever have thought
that we should be arming ships, it is crazy. Merchant ships cannot
become warships and crewmembers are not trained to handle guns,
we would never allow that, so governments really have to think
carefully about what they are saying and what they are doing. We
have had a huge problem trying to convince them even to send
warships to the area. Now they believe that the problem is contained,
but the problem is not contained. Recently the pirates have started to
kill people in cold blood and that is unacceptable. There is nothing
shipping can do, but the seafarers are our people who are being
affected because irrespective of their nationalities, they are our
crews, they man our ships and they carry world trade. If you
imagined that these 750 hostages were Americans, or Europeans, the
governments would be there like a shot but because they are
Filipinos and others they do not pay sufficient attention.
Sean Moloney
I want to come onto the issue of piracy as that is dominating our
thoughts at the moment. But why does the shipping industry allow
itself and world trade to be held to ransom by what are, in effect, a
bunch of Somali thugs?
Graham Westgarth
Piracy is not a shipping issue, it is a political issue and shipping is
the victim. We can’t resolve this issue, the governments of the world
have an obligation to resolve it. Often we talk about shipping being
fragmented and talking with different voices but this is one issue
where shipping is united in what it is saying. It is saying that this is
a political issue and there are certain things we need governments to
do, but we can’t do anything about the prosecution of pirates or
disabling the mother ships. The one thing we have to get out is that
this is a political issue and not a shipping industry issue.
Sean Moloney
So what can be done?
Spyros Polemis
As a top priority from a humanitarian and a world trade aspect, they
have to disable the mother ships at sea. That can be done easily. Not
in Somalia because the crew automatically become hostages. Also
you cannot then take the ship away. It will probably still have a cargo
onboard and more importantly people onboard. So the ships have to
be disabled at sea. That way you can bring them back to operational
condition quickly and efficiently. If you were to do this, just imagine,
you will cut by 90% the ability of the pirates to operate at any
distance from Somalia.
Sean Moloney
This whole issue of releasing pirates is the most ridiculous thing in
the world.
Spyros Polemis
Yes, 800 of them last year.
Robert Lorenz-Meyer
Catch and release policies have to stop, it is ridiculous. The risk
reward ration for the pirates is incredible and they make a lot of
money. This cannot go on.
72
Alastair Evitt
I agree that it is a political
solution not a shipping solution but the
shipping industry has to force that political will to
act. The shipping industry has been using the resources it has well
but unfortunately with Libya, Yemen and Bahrain happening at the
moment, the UN Security Council has many issues to deal with now
and shipping remains the invisible industry.
one of the big problems. No one has the political will to go into
Somalia.
Graham Westgarth
Sean Moloney
We are lucky because we have the leaders of the shipping industry
around this table. And you are the ones being bullied by these thugs.
What would you like the political system to do to ensure that
shipping is not affected by piracy?
Graham Westgarth
If you go onto the website www.saveourseafarers.com it is clear
what we want the governments to do; it is to arrest and detain and it
is to disable the mother ships. There are five or six very clear
objectives. There was a recent meeting in London and we are now
talking about phase two. The industry accepts that to get the relevant
amount of public attention this is a campaign we will have to support
and fund for a considerable period of time.
Rob Lomas
I think the downside to the options is that we fall into this frustration
trap that the governments seem to be wanting to perpetuate; we will
start to see a removal of warship support and we will see the
marginalisation of shipping and the thinking that maybe world trade
can cope with a certain degree of piracy. But all of us agree that the
eradication of piracy is the important aspect. Let’s face it, a third of
all bulk carriers were destined for the Middle East and North Africa
when they were pirated and this is something governments should
understand. Because if you start to remove shipping from that area
you will start to see a lot of regional governments coming under a lot
of pressure and this is something we should reinforce.
Graham Westgarth
Suez is not the issue, the northern Indian Ocean is the issue. There
are a number of scenarios that could play out - one being that
seafarers just say we are not going to transit. It is a significant issue
for anyone who has been attacked or had their ships captured to have
their seafarers say they don’t want to transit. If you took that to its
ultimate conclusion, how long would it be before oil stopped coming
out of the Middle East?
Spyros Polemis
The pirates are able to hijack a huge tanker in Oman, that is crazy,
and then use it as a mother ship. We haven’t stopped approaching
all governments at the very top and we will continue to do this. We
are constantly discussing new moves and new approaches to heads
of governments – I am not talking secretaries and politicians.
It is interesting to see that the skiffs being used in Somalia are being
shipped in from Dubai.
Sean Moloney
On to our last question gentlemen; because more and more layers of
the shipping industry are facing shared problems, has the time come
for the Round Table of Trade Associations to open its doors to others
in the industry?
Alastair Evitt
InterManager is obviously a supporter of everything the Round Table
is doing on piracy. But what is the function of the Round Table going
forward? Well certainly not to take issues to the IMO so what can the
biggest industry body be that isn’t governmental? And that is the
Round Table as it stands now. I agree the Round Table will take the
support of any industry body that can give it the resource. As
InterManager we are standing there ready to give our support. The
Round Table is only a title and where that goes in the future I don’t
know.
Spyros Polemis
Alastair is right in terms of support and that is welcome as it is from
IACS but I don’t think we should make too much of a play of the
Round Table because it so happens that the Round Table is made up
of purely shipowning organisations representing ship owners directly
and the reason for that is that the owners and their companies are
the people who are close to the ships and running the ships as distinct
to supporting organisations like InterManager and IACS and others.
It is not just piracy but there are other issues which are owner
specific. We do work with InterManager and IACS almost on a daily
basis.
Graham Westgarth
It is not whether the Round Table has four or 24 members it is a
question of how do we create an environment where on common
issues, we have one position and speak with one voice. I think the
Round Table should play a part in creating that nucleus of opinion
and reaching out to invite people into the debate to create a common
position. So I am not too hung up on organisations per se but we
need the wherewithal to get people into a room at the right time and
on the right subjects and come to the right outcome and be prepared
to go out publicly and voice that. We can do better and should do
better in inviting more participants in debating some of these key
issues.
Robert Lorenz-Meyer
The long-term solution is onshore Somalia and we will never be
successful eradicating piracy at sea. It is just not possible and that is
Sean Moloney
Gentlemen, thank you very much for your time. ■
73
MARKET SECTOR
INSURANCE
Open your eyes
to piracy’s special challenge
By James Brewer
M
74
“
It seems to me that the
insurance world has had its
eyes closed to the potential
involvement of terrorist
groups in the Somali piracy
structure. It would certainly
appear that some areas of
Somalia are very political,
in an extremist way, and
therefore have terrorism
tendencies
Nigel Russell, Marine Director
of RFIB
“
aritime piracy – it is hardly
surprising to hear that this
scourge is cited at the top of the
list of urgent concerns for ship operators and
their insurance providers by Nigel Russell,
Marine Director of RFIB, one of the leading
international brokerages operating in marine
insurance and reinsurance.
While the activity of the brigands of the
high seas remains perhaps the most
damaging threat, there is much else in the
business environment to test the mettle of the
industry, Mr Russell makes clear. To specify
just three barbed hazards in its path:
governments over-reaching their own laws,
prosecutions and penalties against innocent
ships and their officers, and a crushing
burden of new regulation.
Piracy poses a special challenge, but one
that is not always fully appreciated even by
the insurance industry. Mr Russell opines: “It
seems to me that the insurance world has had
its eyes closed to the potential involvement
of terrorist groups in the Somali piracy
structure. It would certainly appear that some
areas of Somalia are very political, in an
extremist way, and therefore have terrorism
tendencies.
“This could lead to a breach of all the
insurance arrangements we make for clients
who have vessels going through the Indian
Ocean and Gulf of Aden. If there were to be
sanctions on payments of ransom to certain
groups, insurance arrangements would not
respond and that would be a major problem.
“If you are of the view that there will be
a ratcheting up of terrorism activity
following the killing of Osama bin Laden,
the terrorists could go out of their way to
prove their involvement in the Somali
situation. If there were no insurance
permitted for kidnap and ransom, that could
make conditions for world shipping pretty
difficult.”
Mr Russell is gratified by the widespread
realisation among mainstream ship owners
of the importance of kidnap and ransom
insurance; and he points out that if that were
not so, the banks that finance ships would
quickly insist that owners contracted
adequate cover to protect their assets. He
adds: “If you do not take out k&r insurance,
you are relying on a named peril, which
might have to be settled by general average,
and negotiating with the war risk
underwriter.”
He adds: “Among our clients, it is
very rare for a vessel to enter the danger
area without k&r insurance in place.”
Negotiations between owners and charterers
are such that it is usually the charterers who
pay for this cover. Importantly, the Court of
Appeal has just reaffirmed that the payment
of ransom to pirates is not against English
public policy; but there has been talk in the
US of making it illegal to pay.
We met the RFIB director at a time when
the attack on bin Laden and his family was
fresh in everyone’s mind, and co-incidentally
the day after another episode in the
increasingly fraught saga of modern piracy,
when a Spanish court had sentenced two
Somalis to terms of 439 years in prison for
the October 2009 hijacking of a fishing vessel
and seizure of the 36 crew. It was a case in
which a $3.3m ransom was said to have been
paid by an official organisation in Spain —
as usual, the authorities denied they had made
such payments.
The fundamental question is how to stem
the piracy outrages. Mr Russell is among
those who favour direct action, by way of the
United Nations changing the rules of
engagement so that merchant ships under
threat from marauders are allowed to fire
first, and so that navies are allowed to attack
pirate mother-ships. “The rules seem to
favour the pirates very much at the moment,”
says Mr Russell. “They imply that firing first
makes the armed guards themselves pirates.”
Ship owners have to defend themselves
against “friendly” governments too. Mr
Russell worries about a “mish-mash” of
liability regimes that has developed in what
is seen as an increasingly confrontational
environment. He says that “there are
governments which are just riding roughshod
over what is sensible, practical and can be
lived with,” making the lives of ship owners
more difficult and more expensive. Too many
governments view the industry as a source
of revenue by charging ridiculously high
penalties for shipping accidents which
happen within their jurisdiction.
The classic case of recent times involves
the very large crude carrier Hebei Spirit. This
resulted in the insurance industry having to
pay more than $300m for an accident “which
was no-one’s fault on the ship nor of anyone
connected to the ship.” While at anchor in
South Korea with a cargo of 260,000 tons of
crude oil, the ship was struck by a Samsung
Heavy Industry crane barge under tow. A spill
of 10,500 tons of crude led to the owner’s
P&I club paying some $150m in claims, with
a further $180m to come from the
International Oil Pollution Compensation
INSURANCE
Fund, and the South Korean government
meeting the balance, estimated at between
$120m and $170m. The tanker master and
chief officer were detained for 18 months,
ahead of being prosecuted for allegedly
failing to do enough to prevent the leak.
“That particular incident may not be
affecting you,” says Mr Russell, addressing
ship owners in general, “but the culture is. At
the end of the day, it is going to cost you more
in P&I premium because the amount of
compensation is going up. Countries are
whacking up limits of liability because they
want more money for themselves.”
He cites a disturbing case in which the
Australian federal and Queensland state
governments sought at least A$7.5m more
than the A$14.5m maximum set by the 1976
Convention on Limitation of Liability for
Maritime Claims. This related to an incident
in March 2009, when the multi-purpose ship
Pacific Adventurer lost 31 containers
overboard and released 270 tonnes of fuel oil
during tropical cyclone Hamish. The premier
of Queensland exerted pressure on Swire,
parent of the ship’s then owner China
Navigation Co, to improve its contribution to
clean-up costs, and threatened action against
the airline Cathay Pacific, another subsidiary
of the Swire group. Canberra went on to
increase by 17% the Protection of Sea Levy,
a tax on shipping which funds its National
Marine Oil Spill Contingency Plan.
Efforts from many quarters to push limits
of liability higher ignore the danger that P&I
clubs would find it difficult to offer adequate
cover, warns Mr Russell. A swing to
unlimited liability in the US, for instance,
could dissuade owners from trading to that
country, despite the freight rewards that
might be on offer.
Mr Russell advises operators to take
particular care over port calls in Venezuela,
where smugglers have attached what are
known locally as “narco-torpedoes” (hidden
cocaine consignments) to the hulls of
unsuspecting ships. Several vessels –
operated by German, Italian, Greek, Turkish
and other companies – have been detained for
long periods in recent years, and many ships
now cover vulnerable areas with protective
grilles.
Venezuela has just increased the
penalties for alleged involvement, including
prison terms of up to 25 years for mariners
even when they are not directly responsible.
What happened to the Ukrainian master and
first officer of the Cayman Islands-flag B
Atlantic still rankles in maritime circles.
The two, who insisted they were innocent,
were sentenced to nine years in a
Venezuelan prison, and only released to
serve their term in Kiev. Mr Russell says
that the Venezuelan authorities are not even
abiding by their own law which obliges a
vessel to be released if the owner is not
charged within 45 days.
In the light of all this, the advice is that
ship owners should review the whole
question of whether to send their ships to the
South American country. Mr Russell
recommends that if they do need to
participate in the trade, owners should buy
loss-of-hire cover against the risk of detention
following the discovery of drugs on or
attached to the ship, but reminds them that
such cover runs out after a stipulated period.
Despite all these uncertainties, it looks as
though ship operators can hope for a
reasonable amount of stability in their
insurance expenses. P&I premiums have
MARKET SECTOR
been less volatile in the last couple of years,
and the hull and machinery market has been
fairly flat for a long time. A central issue is
what will be the impact of a series of
catastrophes that have hit reinsurers hard: the
earthquake in Japan, the two ‘quakes in New
Zealand, floods in Australia, the 2010 ‘quake
in Chile, and the this year’s tornadoes and
floods in the southern US. A surge of red ink
in the recent results of reinsurance groups is
forcing them to take a harder line in seeking
rate increases from direct insurers, who in
turn will be asking their clients, including the
ship owners, for more.
Maitland in ‘rules
of engagement’ call
C
lay Maitland, managing partner
of the International Registries
Inc (IRI), the administrator of the
Marshall Islands flag state, attempted to
put the record strait on the IRI’s antipiracy stance at a recent meeting in
London.
“The Marshall Islands cannot
accept military vessels,” Maitland said
emphatically.
He was replying to media reports
which suggested the flag state would
register vessels providing armed escorts
through the pirate infested water of the
Gulf of Aden and the Indian Ocean.
“Action must be undertaken under the
rule of law, but at present this doesn’t
exist,” he said. He went on to call for
naval vessels to be given ‘rules of
engagement’ when facing alleged pirate
vessels in Somali waters.
He said that the Marshall Islands flag
state was not against the use of armed
guards, but was definitely against the use
of a private navy. “Armed guards are a
better idea than people in 40 ft boats,” he
asserted.
Maitland said that although the naval
coalition forces had met with success in
the Gulf of Aden, this had resulted in
driving the pirates out into the Indian
Ocean, which is almost impossible to
effectively patrol.
“The ‘catch and release’ tactics
imposed by many governments on their
navies have not been helpful in containing
piracy, but where naval forces stop,
search, destroy and occasionally release
suspects, has been more effective in
deterring attacks,” he said.
He attacked so called industry
spokesmen who advocated action without
offering specifics. Maitland expressed
concern that a “mindless escalation of
violence at sea will extract a heavy
price from seafarers, who are likely to
be held hostage and subject to summary
execution, much in the manner practised
by terrorists.”
Maitland also confirmed that the
flag state would welcome proposed
International Convention on the
Suppression of Piracy, currently being
discussed at the IMO.
He went on to outline the things that could
and should be done, such as:
• Persuade governments to enact strong
national laws, promoting the ability to
pursue and capture pirates and destroy
their ‘motherships’ by criminalising
‘conspiracy to carry out piratical acts’
• Implement UNCLOS and SUA 1988,
which provide adequate international
legislation to permit such national laws
to be enacted
• Continue
to require the insurance
industry to demand the adoption and
following of best management
practices (BMP)
• Ensure that navies must become more
flexible and adaptable to the kind of
‘asymmetrical’ patrol and control work.
For which larger grey-hulled vessels
are proving inadequate
Maitland warned that the suppression
of piracy is going to require a much
greater level of specialised training. The
current convoy escort programme may be
more effective than is currently suggested,
perhaps in the hands of the Coast Guard
or naval forces.
75
DISPATCHES
DISPATCHES
Ship owners warned
over ailing coral reefs
S
hip owners are facing mounting
pressure to move their trade routes
away from the coral reefs following a
study just published by more than
20 specialist organisations led by the
authoritative World Resources Institute
(WRI) of Washington, writes Thomas
Orszag-Land. They warn that the reefs,
which provide the livelihood of some 275m
people, are gravely affected by shipgenerated pollution and other destructive
environment management practices.
Their action call issued after three
years of inquiries is in line with another
new report published by an independent
consultant into last year’s grounding of
the Chinese panamax Shen Neng 1 on
Australia’s Great Barrier Reef. It concludes
that a projected increase of shipping in the
area would make similar accidents
unavoidable.
76
The economically productive value of
the world’s coral reefs is put at more than
£60bn a year. The risks posed by shipping to
this global resource include the polluting
discharge of solid wastes, nutrients and toxins
and physical damage caused by anchors and
ship groundings. But ship-generated
pollution is only one of many immediate
threats generated by industrial development
to three-quarters of the coral reefs.
The other threats identified by the report
include destructive fishing techniques, shortsighted coastal development planning and the
relentless assault of chemical and sediment
runoffs from the shorelines. These factors are
compounded by global warming and the
steady acidification of the oceans that have
led to bleaching – the exposure of the white
skeletons of coral reefs. Specialists reckon
that more than 90% of all the reefs will be
under acute stress within three decades.
ISSUE 31 May/June 2011
These are the main recommendations of the
report of greatest interest to ship owners:
●
Designate safe shipping lanes;
●
Expand maritime protected areas to
safeguard reefs and adjacent waters;
●
Reduce the disposal of waste by vessels
at sea;
●
Increase regulation of ballast discharge
from ships; and
●
Improve the management of offshore oil
and gas activities.
The report urges national authorities “to
restrict the areas where ships are permitted to
navigate to deep waters (in order) to protect
reefs from groundings by large vessels”. It
elaborates that “establishing areas where
vessels of all sizes may safely drop anchor
DISPATCHES
owners and other business leaders as
well as policymakers, maritime transport
administrators and scientists everywhere.
Anyone who knows anything about the
oceans must be impressed by the beauty, the
huge variety of life and the enormous
economic benefits bestowed upon humanity
by the coral reefs, comments Al Gore, the
environment campaigner and former US Vice
President. He fears that, “if we fail to address
the multiple threats they face, we will likely
see these precious ecosystems unravel... We
simply cannot afford to let that happen.”
“
Anyone who knows
anything about the oceans
must be impressed by the
beauty, the huge variety of
life and the enormous
economic benefits
bestowed upon humanity
by the coral reefs
Al Gore, the environment
campaigner and former US
Vice President
“
and restricting all vessels from entering
certain critical habitats should protect reefs
from physical damage“.
The document – Reefs at Risk Revisited
(www.wri.org/publication/reefs-at-riskrevisited) – includes case histories of several
current, collaborative coral reef management
and rehabilitation programmes, some in areas
adjacent to major shipping routes and even
harbours, launched in the hope of halting or
reversing the trend.
It is a seminal analysis that looks far
beyond the ground covered by WRI’s 1998
landmark study Reefs at Risk. That earlier
study was the first to expose the global
dimensions of the degradation of coral
reefs. It motivated the shipping industry,
governments and many other authorities
concerned with maritime transport, marine
ecology and coastal development planning to
confront the escalating tragedy.
Maritime shipping is growing rapidly
compared to other forms of transport,
observes the new report, with estimates of the
gross tonnage of international commerce up
by 67% between 1980 and 2003. As shipping
expands, the risk posed by invasive species
also increases since the bio-fouling on ships’
hulls and the threat of the accidental release
of ballast water remain difficult to manage.
Despite the last world recession, cruise
shipping has also continued to expand, with
the number of cruise passengers up by 7.4%
a year since 1980, and 118 new ships
launched since 2000. However, this trend has
been somewhat offset by a significant,
concurrent improvement of the waste
management standards of the cruise industry.
The report notes that some ships have
introduced advanced sewage treatment and
shipboard recycling programmes. They have
also increased the use of biodegradable
alternatives to plastics.
But the report makes gloomy reading. Dr
Jane Lubchenco, an eminent marine ecologist
and Under-Secretary of Commerce for
Oceans and Atmosphere in Washington,
describes it as “a wake-up call” for ship
But Lauretta Burke, a lead author of the
WRI report, emphasises: “There is hope.
Reefs are resilient and we can buy time as we
find global solutions to preserve the reefs for
future generations.”
That is a fearsome challenge, its
magnitude illustrated by the lessons learned
from the Shen Neng 1 grounding on the Great
Barrier Reef in April 2010.
The 70,200-dwt, 1993-built Chinese ship
had sailed from the port of Gladstone in
Queensland fully laden with 72,000 tons of
coal and crashed at full speed into the
Douglas Shoal in a particularly fertile and
vulnerable ecological area. The ship also
carried 1,075 tons of heavy fuel oil, a large
volume for a projected two-week voyage
even for a ship that size, necessitated by
China’s notorious port congestions that might
have imposed on it a long wait before
unloading.
An analysis of the grounding by the
consultant Graham Miller, published by the
Queensland government makes ominous
reading.
It praises the “immediate, extensive and
effective” salvage operation that prevented a
potential environmental catastrophe. But it
also states that the experience “highlights the
vulnerability of Queensland's coastline to
significant oil spills... Increased shipping
movements and the continued likelihood of
severe climactic events suggest that the threat
of marine oil spills will remain and that future
oil spills are inevitable.”
Dr Gully Levelly, the Australian Director
of Conservation at the influential World
Wildlife Fund, has declared: “The current
lack of safeguards over shipping in the Great
Barrier Reef is akin to playing Russian
roulette with one of the world’s most
treasured natural icons.” All this may well
strengthen the call made by the WRI and its
associates for increased regulation to protect
vulnerable areas from shipping.
The WRI report projects a grim outlook
for that massive reef structure, most of which
now comprises the protected Great Barrier
Reef Marine Park. The report says the
greatest threat to its vulnerable ecosystem lies
in the intensifying effects of climate change
that have already led to widespread bleaching
as well as declining coral growth rates.
But it quantifies the threat of marinebased pollution and damage as “moderate”
for Australia’s reefs, driven largely by the
relatively busy shipping lanes that traverse
the area particularly in the north. It describes
the Great Barrier as the largest and one of the
best managed coral reef ecosystems in the
world, supporting more than 50,000 jobs and
yielding an estimated annual revenue of
£3.45bn from fishing, recreational use and
tourism alone.
77
DISPATCHES
The world’s reefs shelter more than
4,000 fish species and some 800 types of
coral. The new WRI report provides the most
detailed and reliable analysis ever assembled
of their fight for survival. Its conclusions are
starker and they are based on far more
scientific data than those contained in the
1998 study.
For example, it includes a new reef map
constructed from data obtained by remote
sensing space satellite technology providing
imagery whose resolution is 64 times greater
than that used for the previous analysis. It
also makes use of the latest studies in
industrial, economic and demographic trends
as well as huge advances in our experience
of shipping technology, oceanography and
climatology achieved during the past 13
years.
The hundreds of scientists contributing
to the WRI report consider that the severity of
the global emergency has increased by nearly
a third during that period. They reckon that
the marine-based sources of pollution and
damage alone, emanating mostly from the
ports and widely distributed along the
shipping lanes, threaten perhaps 10% of the
world’s reefs.
They identify the waters of the Atlantic,
the Middle East and Australia as the regions
most exposed to risks generated by the
shipping industry. The Atlantic is affected
mainly by shipping attracted by rich markets
and served by many freight terminals and
cruise ship ports in the area, the Middle East
by the hydrocarbon traffic and Australia by
the shipping lanes passing inside and across
the Great Barrier Reef.
And they name Comoros, Fiji, Grenada,
Haiti, Indonesia, Kiribati, Philippines,
Tanzania and Vanuatu as the most desperately
vulnerable among the 27 countries most
exposed to the social and economic effects of
coral reef degradation.
The WRI is an action-oriented
environmental think tank that collaborates
with industry, governments and civil society
in search of solutions to global challenges.
Its principal partners in the current
project included specialist units of the United
Nations Environment Programme as well as
the International Coral Reef Action Network
grouping many marine science organizations,
the Global Coral Reef Monitoring Network
active in more than 80 countries and the
Nature Conservancy uniting more than 100
marine protection programmes.
“Reefs offer multiple benefits to people
and the economy,” observes Dr Mark
Spalding, Senior Marine Scientist at the
Nature Conservancy and another lead author
of the report. “They provide food, sustain
livelihoods, support tourism, protect
coastlines and even help to prevent disease.
Well managed marine protected areas are
among the best tools to safeguard them.”
That is why, he explains, the advice
contained in the report for the protection of
the reefs is focused on “people as well as
nature: ensuring stable food supplies,
promoting recovery from coral bleaching and
acting as a magnet for tourist dollars.“
He goes on: “We need to apply the
knowledge we have to shore up existing
protected areas, and to designate new sites
where threats are the highest.”
The report recommends a long list of
remedies including environmental control
measures at the local level, which its authors
believe are “essential for mitigating marinebased pollution and damage to reefs... Such
measures include developing infrastructure at
the ports to accept and properly dispose of
ship-generated waste, improving further the
wastewater treatment systems on cruise and
cargo ships, routing shipping traffic away
from reefs and developing effective oil spill
contingency plans.
“Regulations that require the disposal or
exchange of ballast water far offshore in deep
waters before ships approach the ports are
important for reducing the risk of invasive
species entering coastal waters. Expanding
the availability of fixed moorings for
recreational craft can reduce anchor damage
and the likelihood of groundings. Educating
78
shipowners can also help with compliance.
Monitoring should include assessments of
shipping practices and holding facilities
along the supply chain.”
More than a quarter of the world’s coral
reefs are under some form of protection in
various marine reserves, the report shows, but
it asserts that only 6% of that area is properly
administered. The report offers many
suggestions based on analyses of
management experience and scientific
observation to improve effectiveness. ■
Examples:
●
Egypt – A coral reef in the Red Sea
near the Suez Canal is exposed to
pollution from a constant super-tanker
traffic, an adjacent major shipping port
and a busy coastal highway nearby. The
corals suffered a substantial oil
pollution and subsequent bleaching
incident in 2005, but they have
spontaneously recovered to thrive
unexpectedly under extremely harsh
environmental conditions. Marine
biologist Zaki Moustafa of Duke
University comments that the ability of
some corals to survive against such
odds “may hold the key to the
preservation of reefs elsewhere.”
●
Florida – The major American ports
of Miami, Everglades and Palm Beach
have attracted thousands of big freight
and cruise ships a year to the large and
vulnerable South-east Florida Coral
Reef Ecosystem. Many ships have been
involved in grounding and anchor
dragging incidents during recent years,
causing substantial ecological damage.
Acting in conjunction with the shipping
industry and various federal, state
and civil organizations, the port of
Everglades moved its anchorage away
from the reefs in March 2008, ending
all such major incidents in the vicinity.
NEWBUILDING
NEWBUILDCONTRACTS
COMPETITIVE PRICES,
BOLD STRATEGIES
FUEL CONTINUING
ORDER FLOW
By David Tinsley
F
ollowing the year-long hiatus in
ordering after the global market
slump of 2008, Greek principals reemerged as prime movers in newbuild
contracting during 2010. Notwithstanding
still large order backlogs in the main vessel
sectors, with newbuild delivery levels
weighing down on recovering trade
volumes, Greek owners have continued to
enter into fresh commitments during 2011.
This unerring activity may be attributed
to a range of factors including lower
shipbuilding prices, the cash-rich situation of
many companies and concerns over
alternative investment avenues, selective
financing availability, new charter
opportunities and moves into different areas
of the market.
Signalling such a strategy, in entering a
new field, European Navigation recently
placed an $186m order with STX Offshore
& Shipbuilding of South Korea for two
suezmax-size shuttle tankers, due to be
delivered by April 2013. It is understood that
the vessels will be engaged on a long-term
project with Brazilian energy group
Petrobras.
Towards the end of last year, Tsakos
Energy Navigation (TEN) entered into a
similar employment agreement covering a
pair of 157,000dwt shuttle tankers contracted
from Sungdong Shipbuilding. The DP2-class
vessels are expected to be handed over by the
Korean yard in December 2012 and January
2013, and represent a combined purchase
cost of $184m.
Hyundai
Heavy
Industries(HHI)
announced in April that it had clinched an
order to build four 5,000 teu boxships to the
account of Container Carrier Corp of Greece.
The contract includes options on four further
vessels, and underscores the Greek
community’s increasing involvement in the
container liner segment as well as the general
upswing in fresh business for cellular
tonnage.
In the meantime, Greek owners have
continued to take measures which play to
their longstanding strengths in the most
populous tonnage categories. Almi Tankers
recently booked two 320,000dwt VLCCs in
Korea, keeping faith with Daewoo
Shipbuilding & Marine Engineering in a deal
worth around $210m, and following previous
contracts valued at about $650m all-told. The
crude carriers are due in the second half of
2013.
South Korea’s vigorous shipbuilding
industry was also the beneficiary in March of
a major new stage of fleet investment
initiated by one of Europe’s leading lights in
the north/south liner trades and refrigerated
container transportation. Hamburg-Sud
placed six 9,600 teu box ships with HHI, for
delivery between May 2013 and January
2014, and took out options on four further
vessels.
The design accommodates high-cube
boxes and up to 1,700 reefer containers, and
is destined to bring increased sailing capacity
and scale economies to the Hamburg-based
company’s east coast South American trades
with either Europe or Asia.
At the time of writing, A.P.MollerMaersk looked set to take up its first option
on 10 vessels of the 18,000 teu Triple-E class,
following the opening 10-ship deal with
Daewoo Shipbuilding & Marine Engineering
in February. The Maersk programme, and
reports of competitor groups aiming to raise
the capacity of existing newbuilds in the
’ultra-large’ category to around 16,000 teu,
underscored the industry’s bold drive for new
unitary scale in liner shipping.
While bespoke new construction, at a
cost of $190m per ship, shapes the group’s
latest, seminal stage of containership fleet
development, Maersk has taken a different
tack in the crude carrier domain. Expressing
the view that secondhand and resale deals in
the crude carrier category can presently offer
superior value over newbuilding, Maersk
Tankers purchased three VLCCs in hand at
HHI’s Ulsan yard from original contractual
owner Great Eastern Shipping of India. The
first of the tankers is due for completion in
January 2012.
National Shipping Company of Saudi
Arabia (NSCSA), one of the prime exponents
of deepsea ro-ro cargo transportation, has
chosen Hyundai Mipo Dockyard to build a
new generation of 26,000dwt vessels to serve
the operator’s liner trade between the US East
Coast, Red Sea, Arabian Gulf and Indian
subcontinent.
The contract encompasses four firmlyordered ships, due between the end of 2012
and end-2013, plus fifth and sixth sisters on
option. The series will supersede NSCSA’s
larger class of four delivered by Kockums in
1983. Designed by Knud E.Hansen of
Copenhagen, the newbuilds have a stronger
accent on ro-ro and project cargo, and far less
provision for containers than the company’s
existing con-ro class.
The development of a new solution to
tap the ocean floor’s mineral wealth, and the
formation of a strategic partnership between
a Canadian offshore mining group and a
German shipping and ship management
company, opens the way to an unusual
shipbuilding project.
Under the pact, a joint venture is to be
formed by Nautilus Minerals and Harren &
Partner to own and operate a production
support vessel to serve as the operational base
for the production of high-grade copper and
gold ore in the Bismarck Sea, off Papua New
Guinea. Harren will also provide the crewing,
logistics and shipmanagement services to the
joint venture.
Harren has completed the preliminary
design for the 18,800dwt vessel, of
multipurpose dry cargo ship type, which will
house some 30MW of generator power,
seafloor production tools and associated
pumping machinery. Construction is to be
placed with a German shipyard, and delivery
is sought during the first half of 2013. ■
79
DISPATCHES
Iran struggles to hang on to the
shipping lanes
A
greement by the big reinsurance
companies to refrain from
providing cover for ships doing
business with Iran has unleashed a seachange in the effectiveness of the United
Nations sanctions mounted against the
Islamic Republic.
Less than a year ago, Iran’s maritime
transport strategists seemed able to sail
effortlessly through the Western-led
sanctions regime. But as previously reported
in SMI, the international shipping and
industrial classification giant Det Norske
Veritas is already refraining to bid for up to
five potentially winnable contracts a month
because of the sanctions (SMI, Jan/Feb
2011) and the trend may well intensify.
The effect of the change is being
felt throughout the shipping business and
in investment flows, trade, insurance,
banking, energy, construction and many
other related industries both in Iran and its
traditional trading partners.
Western ship owners are losing business
to
their
competitors
in
China
and other countries eager to seize the
consequent profit opportunities. Ships
smuggling
proscribed
nuclear
technology to Iran and
illegal weapon
80
consignments from Iran to Islamist terrorists
elsewhere are being arrested in Asia and
Africa. Ayatollah Ali Khamenei, the
supreme leader of the Iranian theocracy, has
just celebrated the Persian New Year by
calling for an “economic Jihad (struggle)”
to break the sanctions.
For the immediate future, Iran’s ability
to resist the will of the West as expressed
through intense commercial pressures may
well be decided by its battle to retain a
presence in the maritime trade routes. The
outcome will depend on Iran’s ability to
keep afloat its sanction-restricted commerce
onboard ships – its own as well as those on
charter – mostly sailing under foreign flags.
This involves a great deal of deception.
Iran has been subject to increasingly
tough sanctions authorized by the UN
Security Council in order to dissuade it from
attaining a nuclear war-fighting capability.
The Tehran government insists that its
feverishly accelerating nuclear power
development programme is
entirely peaceful.
But it has failed to give credible
assurances of that to the UN’s Vienna-based
International Atomic Energy Agency,
guardian of the crucial 1968 Nuclear NonProliferation Treaty. The Western allies are
determined to defend the treaty, if possible
by peaceful means. The sanctions are in
place to avert war.
They date back to the Reagan
presidency, applied originally to punish Iran
for sponsoring international terrorism.Iran’s
secret nuclear development programme
began at about the same time, but it came
to light only in 2003. Today, Iran is within
three years of assembling a workable
nuclear bomb, according to weapons
scientists.
But its rapidly developing nuclearcapable missiles can already hit any target
within the Middle East as well as
Southern Europe including
Russia. This
DISPATCHES
has unleashed a nuclear arms race in the Middle East,
with regional rivals putting their faith in the theory of
Mutually Assured Destruction (appropriately named
MAD) – a concept discarded by the super-powers 20
years ago at the end of the Cold War.
The last substantial tightening of the UN
sanctions screw was imposed in July 2010 banning
Iran’s trade in arms and nuclear technology and
hitting investment in the shipping, insurance and
other key industries. Further provisions have been
enacted separately by the US, the European Union,
Canada, Australia, Japan and many other countries.
This has led to the designation of many
enterprises connected with the troubled IRISL
worldwide – including the Maltese concerns Marble
Shipping, Bushehr Shipping and ISI Maritime,
several in Malaysia and Singapore and no fewer than
102 others in South Korea alone – on charges of
assisting proscribed nuclear activities in Iran.
Sean McGovern, General Counsel of Lloyd’s of
London, the biggest insurance market in the world,
immediately announced its compliance with the
sanction provisions. By August, the London marine
insurance market passed a clause to protect
underwriters from breaching the rules.
Neil Roberts, a Senior Technical Executive at
Lloyd’s
Market
Association,
explained:
“
Citing the sanctions provisions,
Russia has suspended a contract
for the delivery of an advanced
$800m, S-300 air defence system
ordered to protect Iran’s secret
uranium enrichment facilities from
an eventual Western attack
“
“Underwriters have taken steps to ensure they
do not contravene the sanctions. One of the
ways of doing that is to write carefully the
allowed business using an appropriate
exclusion or limitation clause.”
Similar action was taken by such other major
European financial concerns as Munich Re, Swiss
Re, Allianz, Pricewaterhouse Coopers, Ernst &
Young and KPMG. The field is now open to a few
fledgling Chinese and Russian reinsurers. But they
lack adequate financial capacity to meet the demand.
And even in cases where insurance cover is still
available for the Iran trade, albeit at exorbitant rates,
remittance of claims to clients would be difficult
because the big international banks are also obliged
to refuse handling such funds.
Several Western banks have agreed to pay
substantial penalties to clear charges of violating the
sanctions regime by transmitting funds secretly to
listed Iranian enterprises. The biggest banks that
have declared their intention to refrain from trade
in Iran or to restrict severely their operations
there include Barclays PLC, Credit Suisse AG,
Deutsche Bank, Lloyds TSB, Dresdner Bank and
Commerzbank.
One
significant
exception
to
the
banking rule has been Europaisch-Iranische
81
DISPATCHES
82
come to share the concern of the West over
Iran‘s true nuclear ambitions.
Citing the sanctions provisions, Russia
has suspended a contract for the delivery of
an advanced $800m, S-300 air defence
system ordered to protect Iran’s secret
uranium enrichment facilities from an
eventual Western attack.
It has also rejected a proposal by Khazar
Sea Shipping Lines of Iran for the outright
purchase of Alpha Port at Astrakhan on the
River Volga. The port can handle big ships
and has access to the Russian Railways. The
offer was declined, explains a spokesman
for the Russian committee on foreign
investment, because the Iranian shipping
enterprise had failed to disclose the identity
of its true owners and it was suspected of
being engaged in sanction breaking.
“
The Kremlin has
traditionally protected Iran
from the brunt of the UN
sanctions and enjoyed a
lucrative arms export trade
with its client. But it has
come to share the concern
of the West over Iran‘s true
nuclear ambitions
“
Handelsbank of Hamburg that has been
instrumental to the transmission of billions
of dollars from India to Iran for hydrocarbon
purchases.
The authoritative newsmagazine Der
Spiegel understands that the transactions
were tolerated by the Berlin government –
until a recent personal intervention by
Chancellor Angela Merkel, a passionate
critic of the Ayatollahs’ nuclear power policy
and human rights record – in order to
facilitate the release of two German
journalists imprisoned in Iran for
interviewing the son a woman condemned
there to die by stoning. The journalists have
now been freed. India has just been
persuaded to refrain from making further
money transactions to Iran through Germany.
Other major enterprises ending their
operations in Iran or declining to launch new
ones there include the following: the
Japanese shipping company NYK Line;
Infineum, a British joint venture with
ExxonMobil; Royal Dutch Shell; the French
oil company Total; the biggest Spanish oil
company Repsol; LUKoil of Russia; Statoil
of Norway; the Turkish oil refiner Tupras; the
Independent Petroleum Group of Kuwait;
Petronas of Malaysia; Reliance of India,
formerly one of Iran’s main gasoline
suppliers; the Italian transport, energy and
defence conglomerate Finmeccanica; the
Swiss-based commodities trader Glencore;
and the German chemical trader Helm, steel
maker ThyssenKrupp, gas and engineering
concern Linde, luxury carmaker Daimler and
engineering conglomerate Siemens. The list
is very long.
But Iran has just reached a trade accord
with the administration of President Robert
Mugabe of Zimbabwe in landlocked Central
Africa, another international pariah with a
dismal human rights record, for the export of
oil in exchange for large quantities of
uranium. Iran’s other strategic trade partners
include North Korea and China.
A veto-wielding permanent member of
the UN Security Council, China does not
approve of the sanctions regime. But it is
profiting by the effects of the sanctions that
have resulted in Iran’s growing dependence
on the hungry Chinese energy markets.
During the first two months of 2011, China
increased its oil imports from Iran by 62%
compared to the same period a year earlier,
according to Xinhua news agency. And
China's Sinohydro Corpn. has also just
signed a $2bn contract to build a
hydroelectric dam in Western Iran.
Russia, which has built the recently
completed $1bn Bushehr atomic reactor
at the heart of the Iran nuclear power
controversy, is another permanent UN
Security Council member. The Kremlin has
traditionally protected Iran from the brunt of
the UN sanctions and enjoyed a lucrative
arms export trade with its client. But it has
Iran has responded by announcing plans
to build rail and road links to the overland
freight transport infrastructures of its
allies Syria and Lebanon accessing their
Mediterranean ports. Another current
proposal is the erection of an international
transport hub and industrial centre linking
Iran and neighbouring Iraq. One way or
another, the ayatollah’s projected “economic
Jihad” is intended to counter’s Iran’s
progressive retreat from the maritime trade
routes.
Iran’s own 165-vessel fleet is probably
the biggest in the Middle East and the most
modern in the world. Its trade is mostly
concentrated on China and elsewhere in Asia
as well as Africa and South America. Many
IRISL ships are registered in Hong Kong,
Malta and Germany. These vessels carry a
high financial risk.
In the absence of reputable cover, their
insurance is provided by the virtually
unknown Iranian enterprise Moallem whose
own reinsurance supposedly guaranteed by
the Iranian state is in serious doubt. And in
the current climate of fear generated by
threats of nuclear terrorism, the ports are
inclined to search for dubious cargoes and
the banks to foreclose mortgages held by
unwelcome customers.
Five IRISL ships impounded during
recent weeks have been rescued from
bargain-hunters through a default payment
in excess of $200m to the French banks
Credit Agricole Corporate and Societe
Generale as well as the Export Import Bank
of Korea. Three of the ships had been held
in Singapore, one in Hong Kong and one in
Malta.
Mohammad Dajmar, Chairman of the
Iranian shipping line, has vowed that no
other IRISL vessels would be seized ever
again for financial reasons. He could be
sure of that only if the company had
managed to settle its commitments early.
But it is burdened with heavy financial
exposure. Market watchers say 80 of the
new IRISL ships carry substantial
outstanding loans and many of its older
vessels were recently remortgaged.
Adam Szubin, chief of the American
Treasury’s office in charge of the sanctions,
reckons that the shipping line’s “successive
loan defaults and its threadbare insurance
coverage have left it with massive debts...
And in the meantime, IRISL cannot sail
into a foreign port without fear that its
vessel will be searched for contraband
under UN resolutions, or seized outright.”
Another US Treasury official adds that
the evasive tactics employed by Iran to beat
the sanctions include repainting or
renaming ships, falsifying shipping
documents and assigning vessel ownership
to front companies abroad.
Datuk Seri Hishammuddin Hussein,
the Malaysian home minister, believes his
country has emerged as a midshipment
transit point in the proscribed trade of
weapons of mass destruction. He made his
statement after the arrest in March of a
consignment of nuclear technology on
board a ship bound for Iran from China.
Secret diplomatic cables disclosed by
WikiLeaks have just named two more
Malaysian enterprises accused of acting as
Iran’s front companies.
Israel also arrested a vessel in the high
seas during March carrying a cargo of
sophisticated armaments including naval C704 missiles designed in China and
manufactured in Iran. The weapons were
bound for the Islamist organization Hamas,
a client of Iran, in the Gaza Strip.
Adm. Eliezer Marom, the Israeli Navy
commander, said the missiles would have
been effective against commercial shipping
and gas barges along the coastline as well
as warships.
Senegal and Gambia have severed
diplomatic relations with Iran following
the arrest in the port of Lagos late last
year of consignments of arms from that
country, intended for terrorist organisations
operating in their territories. Illegal Iranian
arms shipments disguised as civilian
cargoes have also been intercepted recently
in Italy, Turkey, Egypt, Sudan and
elsewhere. ■
OBJECTS OF DESIRE
LIVE
Objects of desire
Mini microscope
You can transform your iPhone 4 into a pocket-size laboratory with
this Mini Microscope made especially for the handset.
Armed with a 60x zoom, the microscope comes complete with three
LEDs to illuminate your close ups and, incredibly, one of them will even
verify watermarks, so it is great for checking larger currency notes.
Of course, what you choose to zoom into it is entirely up to you, but
you could make use of it when bug-catching with children, taking upclose pictures, model-making or even inspecting parts of a ship.
iPhone Mini Microscope
£29.99
www.firebox.com
Build your own ship
A piece of maritime history could be yours for the making with this
HMS Victory model kit.
The HMS Victory is the only surviving warship to show the
skills of 18th century shipbuilders and you can capture the
charm and craftsmanship involved with your very own shipbuilding.
The magnificent double-planked, laser-cut 1:75 scale
replica measures just under 53ins in length when
assembled. It is constructed from wood and brass and
comes with plans and step-by-step instructions to guide you
through the building process.
HMS Victory Kit
£299.99
www.presentsformen.co.uk
Tap to the Tip
This funky little radio is great for when you are at home or on the move –
all you have to do is tip it on its side to change radio stations.
Because it is an internet radio, the number of stations you can listen
to is huge – over 10,000. All you need to do is connect it to your computer,
assign each side of the cube a radio station and get tipping!
The Tip & Tilt radio works via wireless broadband. There are no buttons to
fiddle with and if you want to mute it, all you need to do is tip it onto its front
speaker. Volume is controlled by simply tilting the radio backwards or forwards.
The radio is available in four different colours and has a rechargeable battery,
mains adapter and headphone/line-out socket.
Tip & Tilt Wireless Internet Radio
£89.99
www.iwantoneofthose.com
85
OBJECTS OF DESIRE
LIVE
Carry cash in style
You can be confident in keeping your money secure with this new arrival to the Louis
Vuitton men’s range.
The Zippy Vertical wallet is the height of elegance in durable Damier Graphite
canvas with grained calf leather lining.
It offers a refined way of carrying cash, cards and coins with eight credit card
slots, a large compartment for notes, zipped coin compartment and two additional
compartments for receipts and papers.
Louis Vuitton Zippy Wallet
£420
www.louisvuitton.com
Boating bling
Jewellery designer to the stars Theo Fennell, known as ‘The King of Bling’, counts
his team of craftsmen as among the most the talented in the world and this
stunning solid silver model sailing boat is just one of the pieces offered by the
London-based company.
The collection comprises exceptional and one-off pieces, from his signature
skull design jewellery to barware and curios.
The solid silver J-Class Yacht shown here measures 24 inches in height,
but you could also commission a copy of your own favourite vessel to a scale
of 1:24, or as required.
Solid silver model boat
from £10,000
www.theofennell.com
Photos in an instant
Do you have lots of photos trapped inside your mobile phone or digital
camera? Even better, would you like to be able to print them off quickly
while you are on the move?
This ultra-sleek inkless PoGo Instant Photo Printer, from Polaroid,
would come in very useful for business trips and holidays.
All you do is send your pictures to the PoGo wirelessly via
Bluetooth or with a USB lead and watch the gadget deliver
images on a 2ins x 3ins side of sticky-back photo paper in under
60 seconds. The photos can then be stuck anywhere you like.
Prints are smudge-proof, water resistant, fade resistant and
tear-proof.
The PoGo Instant Photo Printer is powered by a
rechargeable battery or directly via mains and holds 10
sheets of paper at a time.
PoGo Instant Photo Printer
£39.99
www.amazon.co.uk
86
Books
The Fifth Witness
By Michael Connelly
Orion £18.99
M
ichael Connelly’s straighttalking attorney, Mickey Haller,
puts in his fourth appearance in
clever thriller The Fifth Witness.
This time round, the criminal defence
lawyer’s practice is being hit by the
recession and subsequently not getting too
many cases – even people needing legal
representation to keep them out of jail are
having to make cut backs.
So, the firm starts to handle civil
cases, trying to protect clients whose banks
are imposing foreclosures on their homes
because they cannot afford to keep up with
the mortgage repayments.
One of Mickey’s clients is Lisa
Trammel but, as the stresses and strains of
possibly losing her house start to take their
toll, the bank she owes money to takes out
a restraining order to prevent her
protesting against their fraudulent
practices.
Unfortunately for Lisa, the bank’s
CEO is found murdered in the company
car park and she is arrested for the offence.
For Mickey, the case suddenly turns
back to what he knows best – criminal
defence – and by the time the verdict is in,
his whole world has been turned upside
down.
The Fifth Witness is, again, an
enthralling, intense courtroom drama from
Michael Connelly.
The author’s experience as a former
police reporter for the Los Angeles Times
gives him a great ability to know the ins
and outs of the legal system and work
them into what is a compelling novel.
Haynes RMS Titanic
1909-12 (Olympic class)
By David F. Hutchings &
Richard de Kerbrech
Haynes Publishing £19.99
W
hen RMS Titanic sailed away
on her maiden voyage on April
10th 1912 she was hailed as
‘the new wonder of the world’. A
remarkable feat of engineering, the ship
was the most luxurious ever seen. Five
days later she was lying at the bottom of
the Atlantic Ocean, having struck a huge
iceberg off the coast of Newfoundland.
One of the most famous, maritime
disasters in history left 1,523 people dead
88
and this manual, from Haynes, gives an
insight into the design, construction and
operation of the Titanic, showing just why
it was not ‘practically unsinkable’, as first
thought.
With next year marking the centenary
of the sinking of the Titanic, the book will
create a wave of interest among those who
like to soak up every snippet of trivia
associated with the White Star liner.
It is crammed full of fascinating facts
and figures, set out in various chapters
including The Titanic Story, Anatomy of
the Titanic and Engineer’s View. In classic
Haynes style there are also cutaways and
technical illustrations showing the ship’s
measurements – 882ft 9in in length from
stem to stern.
The reader is taken from the history of
the White Star Line and the ship’s building
at Harland & Wolff’s Belfast shipyard
through to the discovery of the wreck 73
years later. Photographs show the ship in
detail, along with just some of the luxurious
rooms the first class passengers could enjoy
on their way to New York, as well as the
cramped third class sleeping quarters.
There is also a poignant image, said to
be the last picture ever taken of the Titanic
as she leaves Queenstown, Ireland. The
photographer, Father Francis Browne, had
an invitation to stay on the liner but his
superior telegraphed ‘Get off that ship!’
Author David F. Hutchings served his
shipwright apprenticeship at the Royal
Dockyard, Portsmouth and followed a
career as a draughtsman, weights engineer
and technical librarian, while Richard P. de
Kerbrech served a marine engineering
apprenticeship with Shaw, Savill and
Albion Shipping Company and was
an inspector at the Admiralty Marine
Engineering
Establishment
before
becoming a lecturer.
Books
Starman:
The Truth Behind the Legend of Yuri Gagarin
By Jamie Doran & Piers Bizony
Bloomsbury £8.99
T
his year marks 50 years since
intrepid adventurer Yuri Gagarin
became the first human to leave the
Earth’s atmosphere and travel into space.
Gagarin’s journey saw him become an
icon of the 20th century but this read gives
a fascinating insight into the pressures that
came with the fame. He died, aged just 34,
when he was killed in a plane crash.
Based on KGB files, restricted
documents from Russian space authorities
and interviews with his friends and
colleagues, this biography reveals a man in
turmoil, torn apart by political pressures.
It talks about his rivalry with Gherman
Titov, with whom he vied to be the first
man in space and gives a fascinating insight
into the workings of the early Soviet Space
Programme and the 1960s space race.
Following his trip into space he was touted
as a celebrity and forced to endure a
gruelling schedule of diplomatic
engagements which drove him to drink and
depression.
The book more or less stamps out the
conspiracy theory that says Gargarin was
murdered by the Brezhnev regime, saying
his death was nothing more than a tragic
accident. Contributors include Alexei
Leonov, who was close to Gagarin for
many years.
This new edition of Starman: The
Truth Behind the Legend of Yuri Gagarin
also includes a new afterword that
celebrates the importance of that
momentous expedition and reflects on the
cosmonaut’s legacy.
Spanish Gold:
Captain Woodes Rogers and the
Pirates of the Caribbean
By David Cordingly
Bloomsbury £20
T
oday the word ‘piracy’ evokes
images of terrorists laying siege
off the coast of Somalia, but as
seen with Johnny Depp and the Pirates of
the Caribbean, it used to have a
whimsical and, dare we say, romantic
connotation.
This fabulous book from maritime
historian and writer David Cordingly
studies famous pirates such as Blackbeard
and Calico Jack to give us the bold and
ruthless truth.
When the Treaty of Utrecht ended the
War of the Spanish Succession in 1713
there was an explosion of piracy across
the Caribbean and along the eastern
seaboard of North America. Hundreds of
unemployed sailors roamed the ports and
many were tempted into piracy. The
narrative focuses on Captain Woodes
Rogers, a former privateer and his battle
against pirates.
Nowhere was the problem greater
than The Bahamas, so the British
Government was forced to act and
Captain Woodes Rogers was installed as
Governor of The Bahamas ‘to drive the
pirates from their lodgement’ with the aid
of three warships. His actions as Governor
restored order to the colony, inspiring the
fight against men like Blackbeard.
This swashbuckling true story of the
rise and fall of the Caribbean is engrossing
and full of trivia such as tales of Calico
Jack’s (Captain John Rackham) two
female crew – Anne Bonney, his lover,
and Mary Read who was taken on
disguised as a man.
It is a fantastic for anyone interested
in history and will no doubt appeal to
many with actor Depp reprising his role as
Captain Jack Sparrow in Pirates of the
Caribbean: On Stranger Tides, is now
showing at cinemas.
89
review
Music
Songs For Japan
Paul Simon
Various Artists
Sony/EMI/Universal/Warner
So Beautiful Or So What
Hear Music/Concord Music Group
T
This
10-track
album, the first in
five years, from
Paul Simon is
vintage Simon,
going back to
crafted
songs
around harmony
and song structure instead of the beat-driven
form of writing which has inspired him since
the mid-1980s.
Taking over a year to perfect, it has
much more in common with his acclaimed
first solo release, Paul Simon, back in 1972.
The songs blend R & B, gospel and
he world’s four biggest record
labels collaborated on this charity
album to raise money for the
Japanese Red Cross Society following
the earthquake and tsunami which
devastated parts of Japan in March.
The various artists who supplied the
38 tracks, along with the music labels and
publishers are all waiving their royalties
and proceeds and to date millions of
dollars have already been raised from
sales on iTunes. Now the album is
available in CD format.
Tracks cover many genres in the
world of music and include the remastered classic Imagine, by John
Lennon, Elton John’s Don’t Let The Sun
Go Down On Me and teen favourite Justin
Bieber with Pray.
There are also songs from the likes of
Bob Dylan, Madonna, Eminem, Lady
Gaga, Shakira and U2 – a real melting pot
of musical talent.
Vancouver International Jazz Festival
The great and the good of the jazz world will
be descending on Vancouver later this month
for its annual International Jazz Festival.
The Canadian city’s signature festival
animates the city for 10 days and offers a rich
tapestry of jazz, blues, funk, Latin, fusion,
electronica and world music at venues big
and small, outdoor and indoor.
The festival, now in its 25th year, grew
out of a local jazz scene that centred around
Vancouver Co-op Radio, a community radio
station, in the early 1980s. The inaugral event
saw the likes of Miles Davis and Bobby
McFerrin take to the stage.
Films
Edinburgh International Film Festival
F
ilm-lovers will be flocking to the
Scottish capital later this month for
the Edinburgh International Film
Festival.
The event, now in its 65th year, has long
been seen as a platform for showcasing the
best in British movie talent and over the
years has also seen the launch of such
worldwide blockbusters as Dr Zhivago,
Blade Runner, Pulp Fiction, and most
recently The Hurt Locker.
This year’s line-up is no exception with
highlights including David Hare’s political
90
world music with great melodies and, in
some cases, a funky beat – most notably in
the African-inspired The Afterlife which
brings a feeling of warmth and sunshine.
Opening song Getting Ready for
Christmas Day starts the album with the dry
wit which continues through the rest of the
album, based on Simon’s musings on life,
love and God.
Best known for his success as part of the
duo Simon and Garfunkel, responsible for
such classics as Mrs Robinson and Bridge
Over Troubled Waters, the singer-songwriter
is sure to please many of his followers with
this offering.
thriller, Page Eight, starring Rachel Weisz,
Michael Gambon, Ralph Fiennes and Bill
Nighy. Native Scot Ewan Mcgregor will also
be cropping up in sci-fi film Perfect Sense.
The festival takes place at venues across
the historic city and for those times in
between showings, there are numerous other
sights to soak up including the famous
Edinburgh Castle and the port of Leith, now
home to the Royal Yacht Britannia.
www.edfilmfest.org.uk
From 15th June – 26th June 2011
During this year’s festival there will be
over 400 concerts featuring over 1,800
musicians from Canada and around the
world.
Some of the big names include
Grammy award-winning trumpeter Wynton
Marsalis, playing with Jazz at Lincoln
Center Orchestra, guitarist Paco De Lucia
and his band, and French-American
singer/songwriter and guitarist Madeleine
Peyroux.
www.coastaljazz.ca
From 24th June – 3rd July 2011
Theatre
Frantzén/
Lindeberg
Zarkana
P
remiering at New York’s Radio
City Music Hall this month is
Cirque du Soleil’s breath-taking
new production, Zarkana.
The story is set within the walls of an
abandoned theatre, locked in time for 80
years, and follows magician Zark’s quest
to find his lost love and redeem his lost
powers. A dormant world awakens and he
finds himself plunged into a world
inhabited by surreal and mesmerising
creatures.
Described as beautifully odd and
delightfully twisted, Zarkana transports the
audience into a world of fantasy and
suspense where highly-acrobatic feats are
heightened by interactive multimedia
elements and live music, which has been
composed by Nick Littlemore, a protégé of
Sir Elton John.
Seventy one international artists come
together under the direction of the
internationally acclaimed Francois Girard,
who has directed films including Silk and
The Red Violin. He was also responsible
for directing Cirque du Soleil’s show ZED,
which continues to play at the Cirque du
Soleil Theatre in Tokyo.
Following its run at Radio City Music
Hall, the show will head to the Grand
Kremlin Palace in Moscow in February,
2012.
www.radiocity.com
Showing 9th June - 4th Spetember 2011
1842, one of the pieces on display, is
regarded by many among the finest
achievements not only of Turner but also
of the watercolour medium. In it he depicts
the Rigi, a Swiss mountain peak, rising
above Lake Lucerne at sunrise.
Watercolour is the most accessible of
all paint media and is used by professionals
and amateurs alike. This exhibition shows
the wide range of contexts in which it was
used including documentation of exotic
flora and fauna on Captain Cook’s voyages
to spontaneous on-the-spot recordings of
life on the battlefield by war artists such as
William Simpson and Paul Nash.
The great variety of techniques used
are also on display, ranging from loose,
vibrant washes of colour to precise
draughtsmanship, wet sponging and
scratching out. There really is something to
please everyone.
www.tate.org.uk/britain
Showing until 21st August 2011
www.frantzen-lindeberg.com
Open Tuesday - Saturday
Watercolour
A
R
ecently picking up the award for
‘The One to Watch’ in the S.
Pellegrino World’s 50 Best
Restaurants 2011, this small, intimate
restaurant in Stockholm delivers a feast
of surprises to its diners.
It does not have a menu, preferring to
offer daily dishes prepared according to
the seasons and formed around the latest
produce and fruit and vegetables picked
fresh from the restaurant’s two gardens
that morning.
The restaurant was opened just three
years ago by chefs Bjorn Frantzén and
Daniel Lindeberg who previously worked
together at the famous Edsbacka krog in
Sweden, and achieved two Michelin star
status in its first two years.
There are just six tables in the
restaurant and the chefs can be seen at
work in the open kitchen.
Diners can enjoy signature dishes
such as French toast ‘a la maison’ with
truffle thé, silver onions, parmesan and
100-year-old vinegar, and the ‘Tour de
France’ cheese platter with a map of
France on it, which comes complete with
an iPad placed in front of you informing
you of the cheese you are eating! For
dessert, you might be treated to the
delicious sounding oven-baked blueberry
ice cream with honey cress.
Art
history of watercolour painting in
Britain from the Middle Ages
through to the present day is
delighting visitors to the Tate Britain in
London.
The Watercolour exhibition shows
over 200 works including pieces by
historic artists such as William Blake,
Thomas Girtin and JMW Turner through to
modern day artists including Patrick Heron
and Tracey Emin.
Turner’s The Blue Rigi, Sunrise from
Dining
91
Enjoy the lifestyle with
LIFESTYLE
An appreciation for the style and
vehicles of times past is stirring up
an inspiring new fashion scene and
some truly original days out,
writes Helen Jauregui
A
young family are sat picnicking on a
freshly mown bank, in the fine yet
unpredictable heat of an English
summer. The gentleman, dressed in an
impeccably smart Royal Air Force uniform
of rich blue, hugs his wife, who gazes at him
behind her cherry red cat’s eye sunglasses
and polka dot headscarf. They sip tea from
floral china cups as their infant son, dressed
in a flat cap and tweed three piece suit plays
on a tartan rug. The hum of a speeding Aston
Martin DB3 passes in the distance.
Observing this pair of well-turned out
baby boomers, it may seem that you’ve
stumbled onto the location of a high budget
film evoking 1950s suburbia but in fact, their
well-planned outfits indicate a particularly
modern trend – that of vintage living.
Whether your inspiration stems from the cool
dressing of Cary Grant, the hippie-flair of
John Lennon circa Sgt. Pepper's or the
rebellious leather-clad wardrobe of James
Dean, those with an appreciation for styles of
the past are living the look, at themed events
designed to quench their appetite for
nostalgia.
Of all occasions which champion retro
style, the most popular feature a dual
celebration of period clothing and vehicles,
where ladies and gents can dress to impress
and explore their motoring heritage
simultaneously. A leading light in this field is
the Goodwood Revival, a historic motorsport
and aviation event based at Goodwood
Estate, West Sussex, which encourages
punters to adopt the fashions of the 1940s,
1950s and 1960s. Between 1948 and 1966,
the Goodwood race track ranked alongside
Silverstone as one of Britain’s most important
homes for motorsport, where punters could
92
LIFESTYLE
enjoy the celebrated Goodwood Nine Hours
race, Tourist Trophy sports car race and even
Formula One, while savouring spectacular
views from the track’s surrounding green
bank.
Honouring the fashion, music and
vehicles from this ‘golden era’ of racing, the
Goodwood remit is broad, with attendees
celebrating everything from the big band
‘swing’ era of Frank Sinatra et al, to the
rockabilly scene first popularised by artists
such as Buddy Holly and Roy Orbison or the
hippie lifestyle of the psychedelic sixties.
Those attending the Revival, which takes
place from 16th-18th September, can expect
to see an impressive range of vehicles
competing on the authentic 2.4 mile track of
the Goodwood Estate. This includes a tribute
to the E-type Jaguar; a much-loved vehicle
amongst vintage enthusiasts which will
celebrate its 50th anniversary at Goodwood
with a 45 minute, two driver race between
different kinds of Jaguar which originally
competed up until 1966, including a mixture
of lightweight roadsters and coupes.
With around 85%-95% of ticket holders
taking the plunge and dressing in period
clothing, the Revival offers an immersive
experience, where all staff and racing
competitors must dress accordingly to
take part. As Janet Bradley, Motorsport
Representative for the Revival explained,
since it was established in 1998, this annual
event still draws mass appeal: “It’s a more
glamorous era. These days, everyone dresses
down a lot when they go to events but this is
how they used to dress, when racing
originally started here at Goodwood and this
is how we would like it to continue – it sets a
standard. One or two people have referred to
it as fancy dress but it’s not – it’s a standard of
period clothing and it’s not the fancy dress
aspect of it that appeals. People love to come
here because they’re stepping back into a time
which was much more leisurely and it also
has more of a social appeal.”
For Lord March, current owner of the
estate, the 2011 celebrations are especially
significant as the Revival will include a
celebration of the 80th anniversary of his
grandfather Freddie March, the Ninth Duke
of Richmond, winning an important race at
the track, with a re-enactment of the MG
team’s Brooklands paddock, to include a
selection of supercharged racing MGs from
the early 1930s. Other planned events include
a circuit parade tribute to Argentinean driver
Juan Fangio, on the centenary of his birth and
the 60th anniversary of his winning the first of
his five world championships. The Revival
will also mark 100 years of Ford in Great
Britain with a selection of different saloons,
sports cars and military vehicles, in addition
to a celebration of motorcross champions.
The aerodrome at Goodwood, which was
a satellite to RAF Tangmere during World
War II (from which RAF fighter ace Douglas
93
LIFESTYLE
Bader flew his last sortie), is also key to the
Goodwood estate and in celebration of 75
years of the spitfire, a spectacular mass
scramble will take place during the Revival.
There will also be a static display of pre-1966
aircraft, which can be viewed at the Freddie
March Spirit of Aviation Pavilion.
It’s no surprise the Revival has grown in
prominence, as Television and film are
inspiring individuals and society at large to
partake in the vintage fashion revolution.
Set in a 1960s Manhattan advertising
firm, the popular US drama series Mad Men
is lighting the path to vintage style, largely
owing to charismatic protagonist Don
Draper, whose vehicles (including a Buick
Electra 225 convertible and a 1959
Oldsmobile) are as classy as his finely
pressed suits. Cashing in on their experience
of providing outfits for the show, designers at
Brooks Brothers (the US’s oldest menswear
chain) created the ‘Mad Men Edition Suit’
which sold out early on, despite the $1,000
price tag.
With Grace Kelly-inspired frocks
cluttering up the catwalks and GQ magazine
offering advice on how to obtain Don
Draper’s ‘unfathomably impeccable hair’
there’s no doubt the Mad Men look is
injecting a dose of sixties-infused flair into
fashion but whatever their era of choice, how
does a 21st century gentleman perfect the
vintage look? According to Mad Men
costume designer Janie Bryant, “the same
rules apply when buying vintage as for offthe-rack – it's all about fit”. Sharing her
fashion kudos in a ‘How to Dress’ guide
for influential men’s glossy Esquire, she
explained: “Normally, guys buy suits too big,
so when you're trying on vintage sizes, keep
going smaller until it's too small. Then buy
one size bigger.”
Other key pieces of advice from Ms
Bryant include sourcing one off pieces and
accessories from flea markets and getting
shirts specially made which emulate the
94
patterns and styling of your chosen era.
There’s no doubt that as the high street
continues to follow the vintage look, a quality
tailor will be part and parcel of the wardrobe
budget for those aiming to perfect their
Attendees celebrate
everything from the big band
‘swing’ era of Frank Sinatra to
the rockabilly scene first
popularised by artists such as
Buddy Holly and Roy Orbison
or the hippie lifestyle of the
psychedelic sixties
vintage style into something truly original.
When attending events such as the
Goodwood Revival, this is especially key due
to the quality and authenticity of the outfits
worn by those you’ll be socialising with –
where no expense is spared in aiming to give
punters the impression they have stepped into
a fashion time warp.
Indeed, those who take immersion in a
previous era as a full time occupation may
find it a pricey route to stylish dressing.
Raven haired American model, actress
and burlesque artist Dita Von Teese has
popularised the ‘pin up look’ favoured by
1940s and 1950s icons such as Bettie Page
and Betty Grable, but as she explained to
online style guide The Frisky, her wardrobe
can put a strain on her Christian Dior purse
strings: “It’s really expensive, tailoring is
expensive; the constant moth control is
expensive. I have an assistant that takes care
of all of my clothes. When you wear vintage,
you have to fix everything. It’s like old cars:
you have to keep ‘em up.”
Indeed, it takes dedication to ensure full
submersion in the golden era at the
Goodwood Revival, where the vintage
atmosphere is enhanced with help from the
Goodwood Actors Guild, a troupe dedicated
to making the experience as authentic as
possible. With thespians dressed as mods and
rockers (with leather and vespas in tow),
pearly kings and queens, or even the
particularly British institution that is the
‘spiv’ – with a horde of jewellery, watches,
nylons and other goods of dubious quality
hidden beneath his coat, ready to sell to naive
punters. Other characters include a 1950sstyle airline pilot accompanied by his team of
besotted female flight attendants and a rag
and bone man – another loveable rouge
known for collecting and trading unwanted
junk.
“We have talented people acting out
scenarios,” Ms Bradley explained. “We’ve
had painters with their easels conducting an
art class; a family on a picnic with their little
tent and pram; a female trio who sing 1940s
songs and a band teaching people to jive.
Lord March is keen that things must be
perfect – he’s very hands on and we must
ensure all aspects are true to how it was. This
is where the period clothing came in as he is
keen for it to be like it was when it was a
social event back in the 1940s and 1950s
LIFESTYLE
when people would go dressed in their
Sunday best to a race meeting and that’s what
he wanted to recreate with the revival. I think
we’re pretty much on our way to doing that.”
The fashion-forward pay
thousands of pounds for
an original Biba outfit – your
mother’s Woodstock
wardrobe could earn you
a small fortune on Ebay
One vintage expert who understands the
need for authenticity is Ollie Vee (AKA
Billie) – a familiar face on the vintage scene
and owner of Ollie Vee’s vintage clothes
boutique in Leighton Buzzard, Bedfordshire.
Dressing appropriately, usually in 1950s
clothing each day, Ms Vee is a true
ambassador for the feel good aspects of
vintage living, and has a scarlet lipstick smile
to match the shine of her shop’s light up juke
box. Deriving her moniker from ‘Rock
Around with Ollie Vee’, a song made famous
by pioneering rock icon Buddy Holly on his
1958 album That’ll Be The Day, Ms Vee
explained how the lyrics tell the story of a
fun-loving girl from Memphis, who Buddy
takes out to “rock to the rhythm and blues”
while, (taking fashion tips from Elvis),
wearing the “blue suede shoes” so obligatory
with his look.
With this anthem for the vintage era as
her mantra, it’s to be expected that Ms Vee is
open in lamenting the number of men seen in
tracksuit bottoms nowadays. However, she
explained how the look of characters from
popular culture such as Charlie Harper
(Charlie Sheen’s character in TV comedy
Two and a Half Men, known for his penchant
for 1950s bowling shirts) are encouraging
men to look beyond the high street for their
style and added that vintage garments such as
pegged-trousers are an especially popular
wardrobe staple for the stylish gentleman.
Having attended the Goodwood Revival
as a re-enactor herself (along with her 12 year
old son, 1950s tank top and shorts in tow) and
helped to style a number of customers
heading for vintage events, Ms Vee noted that
the vintage scene has great appeal,
particularly owing to a lack of ageism and
sexism: “There are people who get into
vintage later in life, perhaps in their 40s but
there’s no discrimination – you get
youngsters and older people joining in
together. It doesn’t matter what your
background is or how much money you have
either as you can pick up vintage clothes on
a budget. It’s not like years ago when you
used to be able to go to charity shops and pick
up vintage items but you can find the
occasional thing. Now, even charity shops are
wise to the trends and have their own
websites where they sell vintage items.”
Different routes to a vintage look for the
well-heeled and the hard-up are exemplified
95
LIFESTYLE
through fashion label Biba, which gained
popularity during the swinging sixties.
Nowadays, the fashion-forward pay
thousands of pounds for an original Biba
outfit but while your mother’s Woodstock
wardrobe could earn you a small fortune on
Ebay, Barbara Hulanicki, who founded the
label, is currently creating a sixties-inspired
collection for George – the budget clothing
range of British Supermarket giant Asda. In
The Sunday Telegraph, Ms Hulanicki was
recently quoted as saying: “Why should
fashion be only for the elite? It’s wonderful in
fashion shows...but it’s an art form there and
it’s very confusing for people, I think, to see
that and then realise that what is in the shops
is different.”
But whether you seek a look based on
expensive and authentic or cheap and chic,
what first sparks an interest in vintage for
fans of styles past? Ms Vee explained that for
her, a childhood love of Elvis films and
dressing up in her mother’s original 1950s
outfits led to her getting into the rockabilly
scene during the 1980s. “When I was 16, I
went out with a guy who had a really nice car
– a Vauxhall Cresta PB and we used to go
driving with rock and roll blaring out of the
radio,” she added.
When asked about her male clientele and
what draws men to vintage fashion, she
explained that it’s a popular look for men
who are into sharp dressing: “I think men
aspire to look like somebody – people who
are into rockabilly and rock and roll may be
inspired by Elvis, Eddie Cochran, Gene
Vincent – and men look great in this style of
96
clothes. For example, we get mods in the
shop looking for 1960s suits; men who are
into their fashion. I think people want to be
individual and within vintage, clothes are
often one-offs. It’s about expressing
individuality. Perhaps it’s also partly about
remembering what your parents were into –
there’s a connection there, but as for the
1940s and 1950s, I just think the music
was great, as were the films – though
romanticised!”
“There are many people getting into
vintage and more magazines are coming out
which celebrate this. With the burlesque
scene, it’s all crossed over as well. You’ll see
rockabilly, ska and northern soul evenings
combined at the same club night. Whereas
years ago this wouldn’t have happened, now
we’re all mixing together and the younger
ones who are coming into it are seeing this
blending of scenes and combining them all in
their own outfits,” Ms Vee concluded.
For some, the act of wearing vintage has
also become rather competitive, as men and
women strive to be the best dressed. This
friendly rivalry has been formalised through
contests such as on Ladies’ Day at
Goodwood, when a coveted award for the
most authentically dressed female leads to an
array of expensive attire and outlandish hats.
The vintage appeal has also attracted a
number of celebrities, including racing
legends such as Sir Stirling Moss, Sir Jackie
Stewart and Formula One drivers but as Ms
Bradley explained, those currently competing
in motorsport can only take part in tributes or
‘parade races’ at Goodwood and are not
allowed to race competitively on the estate,
particularly following the case of Polish
Renault F1 driver Robert Kubica, who in
February, suffered life-threatening injuries
after crashing during the Ronde di Andora
rally – an event he took part in during his
spare time but which has prevented him from
returning to F1 this year.
For those who enjoy authentic
motorsport but are unsure about the ‘dressing
up’ aspect of the event, Ms Bradley said an
aversion to retro dressing and appreciation
for period vehicles can be reconciled, but
as she concluded – if you turn up in jeans and
a t-shirt, you will miss out on much of the
fun: “For some people, perhaps it’s out of
their comfort zone. I know when I leave the
house in the morning wearing my Goodwood
Revival gear, I do feel rather conspicuous
but once you’re at the event, as soon as
you walk through the gate, you’re part of it
and I think that’s the joy people feel – they’re
not just there to be a spectator but they’re
taking part in the event and making it the
Goodwood Revival, which appeals to a lot of
people.” ■

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