asia-pacific shipping 2011/12

China Special

8 Environment

8 Fighting piracy

8 Markets

8 Classification

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2 The Official Magazine Of The BalTic exchange: SPecial SUPPleMenT 2011/12

AsiA

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Read more about us, our career opportunities and education programmes at www.maerskbroker.com

‘As a young sale & purchase broker, you experience business deals of a size which are amazing; they give you the appetite to develop even larger transactions again and again. At the same time, being part of a truly global broker team assisting and working for each other adds to the excitement, and gradually develops an unbelievably strong platform for business development.”

Kasper Holm-Hemmingsen is a Shipbroker active within sale and purchase of container vessels at Maersk Broker in Copenhagen.

Kasper Holm-Hemmingsen

“In Maersk Broker we work indepen-dently, but our global network helps us develop our international shipping business efficiently with customers. We work closely to achieve each and every goal - turning conflicts into compromise and competition into cooperation, bitter or sweet, as the times goes by, we learn and grow together with an international team of colleagues within the big Maersk Broker family.”

Jocelyn Chen is a Senior Manager in Maersk Broker’s office in Taiwan.

Jocelyn Chen

“We differentiate ourselves from our competition through a seamless synergy of talented individuals at a global scale, and through local presence which enables us to stay as close with clients as possible. This serves a single purpose, to provide our clients true partnership. It is no surprise that Maersk Broker is recognized in China as one of the most successful broker firms.”

Gordon Guo is the General Manager of Newbuildings in the Maersk Broker office in Beijing.

Gordon Guo

“Maersk Broker is a company with professional and competitive employees. We work together as a team towards a mutual goal. The best thing about my job is my extensive, global network, through which I have customers, colleagues and friends over the world.”

Nicole Wang is a graduate from the Shipbroker Trainee Programme, and is currently Personal Assistant to Maersk Broker’s CEO & Manag-ing Director.

Nicole Wang

“We grow the Maersk Broker business in a wide spanning international setting. This provides us, as brokers, with a strong and well defined framework for efficient business development in close cooperation with an international team of colleagues, and a joint focus towards customers all around the world. It is demanding and requires personal adaptability and continuous learning.”

Kasper Stærk Olesen is General Manager of the Maersk Broker Korea office in Seoul, and a member of Maersk Broker’s Global Management Team.

Kasper Stærk Olesen

It’s all about trust

International Focus – Continuous GrowthMaersk Broker is one of the leading international shipbroking companies – we are also a company profiled by continuous business growth achieved via a widespread international network and a global organisation, currently comprising 17 Maersk Broker offices employing about 350 shipbrokers and other staff.

Through our offices, Maersk Broker are doing business in the world’s largest shipping centres - Scandinavia/Europe, Africa, the Middle East, India, Asia, the U.S.A. and, as from mid 2011, South America.

• We are active in all shipping markets within chartering, contracting of newbuildings and sale & purchase of second-hand ships; furthermore, rather broadly based activities are being developed in relation to specialised tonnage, among others for the offshore industry

• We recognise the necessity of constant and pro-active development of our global organisation in order for us, as shipbrokers, to remain at the forefront of a global shipping market characterised by almost continuous change

• We differentiate ourselves by proactively offering our customers innovative business opportunities, while simultaneously carefully indentifying and considering all potential commercial risks of our customers

• We engage with all customers under the headline of “It’s all about trust”, and we continuously grow our business scope in order to offer our individual customers – be it ship owners, operators, cargo owners, shipyards, banks, ship financing companies or others – as comprehensive and well covering services as possible

• We continuously expand and optimise our services based on the expertise, competences and know-how of our shipbrokers with the aim to offer ‘intelligent shipbroking’

• We focus on strong and longstanding relationships with customers, as well as our employees, based on mutual trust and respect

• The Asian shipping markets are of paramount importance to the global Maersk Broker activities. Through 9 offices employing almost 150 brokers and staff, Maersk Broker Asia is today the largest consolidated shipbroking operation in the region. All major segments of the market are covered in respect of chartering, contracting of newbuildings and sale & purchase based on a dedicated service focused on local presence with a truly global perspective.

Asia-Pacific shipping 2011/12 www.thebaltic.com 1

Asia-Pacific Shipping is an official magazine

of the Baltic Exchange

Tel: +44 (0) 20 7623 5501

E-mail: [email protected]

Website: www.balticexchange.com

Asia-Pacific Shipping is published for the Baltic

Exchange by Maritime Media

The Diary House, Rickett Street, London SW6 1RU

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ThE BAlTic AnnuAl suBscriPTion rATEs

Worldwide £110

isBn 1-900521-04-0

PUbLiSHER

W h robinson

EDiToR

David hughes E-mail: [email protected]

SALES mAnAgER

David scott

DESignER

Justin ives

Asia-Pacific Shipping is published on behalf of the baltic

Exchange and is supplied to members as part of their

annual membership package. However, the views

expressed in Asia-Pacific Shipping are not those of the

baltic Exchange, its directors, its officers or the publishers

unless expressly stated to be such. The baltic Exchange

is the world’s premier and oldest international shipping

market. most of the world’s open market bulk cargo

chartering is negotiated at some stage by baltic members

who represent leading international companies. other

activities include the world’s most important market for

buying and selling ships, specialist freight by air and

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2010.8.27


Contents5 The Baltic Exchange in Asia

6 overview

7 Asian voice

10 Piracy – Asian shipowners urge un action

11 Piracy – india takes firm action

13 Dry market

14 Tanker market

15 Broker’s view

17 freight derivatives

20 supply & demand

21 Environment – green thinking

22 Environment – seeking solutions

23 Environment – strait talking

24 human element – Working in singapore

25 human element – Massive task

26 human element – Preparing for Mlc

28 human element – Waking up to Mlc

29 insurance – overview

30 insurance – charter

31 russian – overview

33 china special report – government’s link with the market

35 china special report – Traps for the unwary

36 china special report – class opportunities

37 china special report – chinese growth creates opportunities

39 china special report – gateway to china

41 china special report– Difficult year ahead

48 Events

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Marinetec2011_A4.ai 1 12/09/2011 11:17 AM


foreword The baltic Exchange in Asia

Opened in 2006, the baltic Exchange’s Singapore office has

given the baltic a foothold in the region and enabled it to

publish Asian dry and tanker market information before the

European markets open.

“We’ve increased the number of assessments we offer,” explains the

baltic’s Singapore based general manager Philip Williams. “in the past 12

months we’ve introduced three new india supramax routes as well as a

new naphtha trading route to Japan.”

All the new routes have an india focus covering east coast india coal

imports from indonesia and Australia; iron ore exports to China and

naphtha exports from the west coast of india to Japan.

Since the opening of india’s immense iron ore reserves to private

exploitation in 1999, india has quickly risen to become the world’s third

largest exporter of iron ore, behind Australia and brazil supplying a steel-

hungry China.

The TC12 naphtha route is key for traders who use the run as a

benchmark for their trades.

Reflecting the rise in the Asian market’s influence on the bulk freight

markets, not only in terms of volumes, but also where the chartering

decisions are made, has been the driving force behind the baltic

Exchange’s decision to focus its attention more closely on the region in

recent years.

From its Clarke Quay base in the heart of Singapore, the baltic

Exchange is able to ensure that its products and services meet the needs

of the Asian trading and shipping communities.

According to mr Williams, Singapore in particular has grown

exponentially as a shipping hub in the five years that he has been based

here since moving from Perth. “it has reached critical mass here,” he says.

“if you want to be involved in bulk shipping, this is the place to be.”

However, Singapore is not the baltic Exchange’s only focus and its

development strategy involves not only market reporting from the region,

but greater engagement with both companies and governments across

the region. The baltic employs a China specialist whose role involves

liaising the Chinese authorities. Recent achievements have included the

incorporation of baltic Exchange standards of shipbroking practice into an

official scheme for accrediting shipbrokers – a profession which up until

last year had not officially been recognised by the Chinese government.

The baltic Exchange runs a range of events in the Asia Pacific region,

focusing particularly on freight derivatives. The Asia Freight Derivatives

Forum took place in late november in Shanghai, bringing together

FFA traders from across the region as well as showcasing how freight

derivatives can form part of a shipowner’s or charterer’s freight risk

management strategy the baltic also runs a series of popular in depth

training courses in Singapore which cover every aspect of derivatives

trading in shipping. The next courses take place 16-19 January, with full

details available at www.balticexchange.com/training.

The number of Asia based companies joining the baltic Exchange

continues to grow as companies benefit from their association with the

baltic and its emphasis on standards as encapsulated in its motto “our

word our bond” as well as access to its wide range of information.

During tough times, it is important that the baltic Exchange exerts its

influence to ensure that contracts are honoured and the spirit of the Baltic

Code is adhered to. its stance on this has never wavered for without trust

and proper conduct the shipping industry could not function. The baltic

Exchange has the power to censure, suspend or expel a member if, in

its opinion, the principles set out in the Baltic Code are not met. in these

rare circumstances the damage done to a company’s reputation in the

commercial market is huge and can potentially have a real impact on its

ability to do business with shipowners and charterers.

For further details on the range of services offered by the Baltic Exchange

contact Mr Williams.

Email: [email protected]

Tel: +65 6377 0654

The Baltic Exchange in AsiaPhilip Williams explains how the Baltic has met the challenges of

Asia’s rapid economic growth over the past five years.

Philip Williams

Asia-Pacific shipping 2011/12 www.thebaltic.com6

overview Letter from the Editor

Testing timesshipping is, once again, going through difficult times and this special

supplement on the Asia Pacific partly reflects that. Throughout the pages of this

issue there are references to the problems the industry is facing.

By David hughes

On the other hand it is soon apparent from reading the com-

ments of the many people who have contributed their views

that not only is ours an extraordinarily resilient industry but

also that long-term prospects continue to be bright, especially

in Asia.

it is true, as accountancy firm moore Stephens’ Richard greiner

says, that: “We are starting to see now what many had predicted

would happen much earlier. banks are calling in their loans, shipping

companies are filing for bankruptcy protection, ships are being arrested

and auctioned around the world, and the courts and arbitration tribunals

are starting to see an increase in their workloads.”

none of this comes as a novelty to anybody who has been in this

cyclical industry for any length of time. As mr greiner also says: “There

could be some nasty surprises, and some tough decisions, in the

months ahead for operators and investors alike. but those who are in

shipping for the long term will ride it out, and many will have had previous

experience of doing just that.”

When it comes to be being in the business for the long term that is

certainly true of the big Japanese shipping companies. So it is interesting

to see two senior “K” Line executives, Atsuo Asano and Tomoyuki

okawa, give what can be described as cautiously optimistic appraisals

of, respectively, the dry and wet markets.

nevertheless elsewhere we note that well

known shipping economist, and managing

director of Clarkson Research Services, martin

Stopford has warned that companies will have

to focus on controlling costs. Vessel oversupply

and, consequently, low freight rates look set to

be with us for the foreseeable future.

While the prospects for rates may not

look especially rosy, the basic fact remains

that goods and commodities will need to be

transported by sea to serve a world population

that passed the 7bn people mark in october.

increasingly that cargo is bound to or from

Asia and, to a large extent, trade growth

is being driven by China’s still fast growing

economy. So a considerable portion of this

supplement is devoted to China; highlighting its

growing influence in all sectors of shipping. This

is typified by the Shanghai Shipping Exchange

which has clearly found its role as a link between

industry and government and an authoritative

source of statistical data on the container

shipping industry.

our China feature also highlights the opportunities afforded by the

country’s emergence as a leading maritime nation.

it is not only China, of course, that is growing in importance. The

balance of maritime activity is shifting towards Asia as a whole. in an

interview oh Kong-gyun, chairman and CEo of the Korean Register (KR),

makes the case for the Asian shipping community taking a higher profile

on the world stage.

The baltic Exchange itself is closely involved in Asia, with a regional

base in Singapore and growing Asian membership. As the baltic’s

Singapore based-general manager Philip Williams explains, the baltic’s

presence in Singapore enables it to publish Asian dry and tanker market

information before the European markets open, and the number of

assessments offered has increased.

meanwhile the baltic Exchange’s electronic marketplace for dry

freight derivatives, baltex, is gaining ground. Already it is available to

participants in Singapore, and Hong Kong is expected to follow shortly.

This issue comes out in time for marintec China 2011, itself an

indication of the tremendous growth in the country’s maritime sector.

This major shipping event in Shanghai will be followed in march 2012 by

the similarly impressive Asia Pacific maritime show in Singapore. by then,

perhaps, it may be clearer just how difficult the shipping markets will

turn out to be. Let us hope the more optimistic forecasts prove correct.

The Baltic Exchange makes good use of its regional base in Singapore


Asian voice

Mr Oh: Asian shipowners now control nearly half of the world’s

commercial fleet and the world’s top shipyards in the region are building

close to 90% of new vessels. This has led to a greater focus on Asia

taking its place on the world’s shipping stage.

by saying that we need to raise an “Asian Voice”, i am not suggesting

that Asian countries should always speak with a unified voice or promote

policy objectives that set the region apart from the rest of the world.

What i’d like to see is Asian countries taking a more active role in the

policy and regulatory decision-making process through the imo in the

same way as Western countries do.

The inhibitor seems to be that Asia has not really had a mechanism

by which to consolidate the different views in the region and to project

those views globally.

With the emergence of new organisations within the region, i believe

that the Asian industry will achieve a greater influence in the global rule-

making process. i am referring to the Asian Shipowners’ Forum (ASF),

which represents the interests of shipowners in the region, the Asian

Shipbuilders’ Experts Forum (ASEF), representing the shipbuilders’

interest, and, more recently, the Association of Asian Classification

Societies (ACS) which aims to raise the level of technical contribution

that Asian class societies make to the international maritime community.

The tripartite meeting between shipbuilders, owners and classification

societies, which is held in the Far East on an annual basis has also been

a highly successful forum for these important sectors, including those

in the Asian region, to voice opinions on the initiatives that affect global

shipping and which are crucial to the production of robust and quality

ships.

i believe that the Asian industry – organisations as well as individuals

– should proactively work together to ensure that the size and scope of

our marine sector is matched by its influence in international maritime

affairs.

The Baltic: More generally, has Asian shipping lost out in recent

years because it has not made its voice heard, especially at IMO?

Mr Oh: Although not a class issue per se, there have been cases where

a lack of voice and active participation at the beginning of a rule-making

process has led to a hard fought battle at the end of such a process.

An example might be Performance Standards for Protective Coatings

(PSPC) and Permanent means of Access (PmA), which are deemed by

many in the Asian region as being drafted in accordance with European

related standards and interests. i’d like to see the Asian region being

more pro-active in setting the regulatory and policy-making agenda and

involving itself – to the same degree as other regions – in policy creation.

The Baltic: On its website and in presentations the Korean

Register (KR) stresses the need to go green, but has the

environmental agenda been driven by the EU and US? What should

the priorities be now? Regarding the greenhouse gas debate, will

the imposition of market based measures (MBM) be acceptable to

the majority of Asian countries?

Mr Oh: To be frank, it is of little relevance where the green agenda drivers

are coming from as long as regulation and legislation is applied evenly

in all jurisdictions. i am a firm believer in furthering the environmental

agenda, and developing greener ships is a central challenge and one in

which KR is actively engaged. The society is heavily involved in green

research and development activities and is working alongside the Korean

government on a number of these issues. KR is also involved in wind

turbine and ocean energy technology and had published guidelines and

undertaken certification activities in both these sectors. in addition, the

society is an active contributor on this issue to imo and the Korean

ministry of Knowledge Economy and the ministry of Land, Transport and

maritime Affairs.

KR is currently working on designs and guidelines for cleaner ships

that involve alternative fuels and power supplies as well as hull designs

and various heat and vapour recovery systems.

Taking a more active roleThe Baltic asked oh Kong-gyun, chairman of the Korean register and the

Association of Asian classification societies for his views on the need for an

Asian voice in shipping

Oh Kong-gyun is the current chairman of the ACS


Asian voice

one of the central issues under discussion now is the debate on

carbon tax versus carbon emissions trading. Among the three building

blocks in the imo’s greenhouse gases (gHg) work, the technical and

operational measures, namely the Energy Efficiency Design index

(EEDi) and the Ship Energy Efficiency management Plan (SEEmP) were

adopted by the vote of Parties to mARPoL Annex Vi in the 62nd marine

Environment Protection Committee. Thus, from now on, the negotiation

of the last building block, market based measures (mbm), will be

accelerated.

The global gHg reduction target to limit the increase in global

average temperature below 2°C above pre-industrial levels were agreed

at the 16th Conference of the Parties (CoP) of the United nations

Framework Convention on Climate Change (UnFCCC).

According to the second imo gHg Study, the gHg emissions

from international shipping were calculated to be 2.7% of the global

total. With business as usual (bAU), the forecast growth in world trade

suggests this share might grow to 12-18% of global emissions by 2050.

Technical and operational measures alone would not be sufficient

to reduce shipping’s emissions to contribute to achieving a global

stabilisation of the climate to less than 2°C warming.

in addition, mbm would provide an incentive for the efforts of the

maritime industry to improve energy efficiency and provide additional

and cost-effective options to achieve emissions reduction by purchasing

Un-approved emissions reduction credits such as Clean Development

mechanism (CDm) credits.

meanwhile, there might be a more serious conflict between developed

and developing countries relating to the fundamental principles, ie

“common but differentiated responsibilities (CbDR)” of the Kyoto

Protocol and “no more favourable treatment (nmFT)” of imo.

This kind of conflict might be resolved by providing financial support

to the developing countries using the part of revenues generated by

mbm.

However, the level of revenues generated by mbm is decided by the

level of auctioning rate to allocate emissions allowances in the Emissions

Trading System (ETS) or by the level of tax on bunker fuel in Carbon Tax

(so called gHg Fund). This means that if the auctioning rate or tax rate is

set at a high level, the level of financial burden that shipping companies

have to bear becomes high also. Therefore, an assessment of revenues

generated and the burden on shipping companies need to be made.

At imo, an ETS for ships is proposed as an “open system” to land-

based industries. KR believes that the competitiveness of the shipping

industry is lower than land-based industries because the shipping

industry lacks experience and knowledge of the system. There are

no CDm projects, which generate emissions reduction in addition to

emissions allowances allocated, applicable to the shipping industry.

Also the reduction potential of the shipping sector, which is the most

energy-efficient transport mode, is less than the land-based sector.

Consequently, the shipping industry would be likely to be a buyer in

the system resulting in a potential outflow of capital from the shipping

sector. in addition, the ETS is an unfavourable scheme for small shipping

companies in terms of administrative and technical burden.

Like many shipping companies and organisations, KR is of the

view that Carbon Tax ensures a level playing field and prevents market

distortion. it is also very simple and transparent system to implement.

The Baltic: What is your view on the EU’s insistence of mutual

recognition of class approval. Is this an issue for KR, or for the

Asian class societies more generally?

Mr oh: mutual recognition is not just an issue for KR or for the Asian

class societies for that matter. This issue is a EU-Ro related issue and

affects the majority of iACS member societies.

Regardless of some concerns that stakeholders have, safety and

sovereignty, for example, the legal basis for mutual recognition of class

certificates is in place with the publication of Regulation EC 391/2009.

All class societies which are Ros of the EU are now discussing and

sharing views on the steps to be adopted with a view to meeting the

requirements of Regulation EC 391/2009.

The Baltic: Several class societies, mainly in Europe are openly

advocating the adoption of LNG as the marine fuel of the future.

Does KR share this view?

Mr Oh: With the steep rise in oil prices recently, the shipping sector is

increasingly looking for alternative fuel sources to operate its ships. Lng

happens to be the most practical fuel in that sense. Considering that

bunkers comprise around 65% of total ship operating costs, the shipping

industry has no choice but to consider alternative fuel sources.

other alternative fuel types being considered nowadays are bio-fuel,

new and renewal energy, hydrogen fuel and nuclear power. However,

they are considered to be somewhat impractical owing to their cost,

applicability and safety. For these reasons, Lng is considered to be most

practical alternative fuel for shipping industry.

other factors driving up Lng demand in shipping are its eco-friendly

properties. With stricter nox and Sox (nitrogeon and sulphur oxides

respectively) emission controls for ships under the mARPoL Convention,

combined with regionally enforced Emission Control Areas (ECAs) and

gHg emission reduction initiatives at imo, many consider Lng-fuelled

ships to be the best option both from an environmental and an economic

point of view. in fact, it is estimated that an Lng fuelled ship reduces

emissions of nox by 85-90%, and Sox and particles by close to 100%

compared to today’s conventional fuel. in addition, Lng fuelled ships

emit 15-20% less gHg.

of course there are challenges such as the lack of Lng-bunkering

terminals, the need for extra space on board ships to store Lng, etc.

but increased demand always brings about market adjustments and

technical ingenuity, so KR believes that these problems will be readily

resolved in the future.

KR has a rich experience in the design, construction and survey of

Lng carriers with a classed fleet of 14 LngCs in total. in addition, KR

has been working with the industry and academia on various research

projects encompassing all aspects of Lng transport, such as engineering

and risk studies on the structure and process reliability, containment and

related systems, and marine operation and cargo handling.

KR has also teamed up with major shipyards in Korea such as

Daewoo and Hyundai to develop optimum design for Lng-fuelled ships,

which would leave a reduced environmental footprint.

The Baltic: What are the main concerns Asian classification

societies should be raising on the international stage, at IACS and

IMO?

Mr Oh: i am not really in a position to comment on the views of the Asian

classification societies as a group. Although i am the current chairman

of ACS, the organisation is still very much in its foundation stages and is

not yet ready to promote a common viewpoint.


Piracy

Anger and frustration at the ever-increasing threat of piracy and

ship hijacks, particularly in the Somali basin, Arabian Sea and

in the West indian ocean, is now evident at every shipping

industry meeting. This anger certainly surfaced at the 21st

interim meeting of the Asian Shipowners’ Forum (ASF) Safe navigation

and Environment Committee (SnEC) held in Singapore in September.

The meeting criticised the United nations (Un) and governments for

the lack of urgency and political will to suppress this growing problem.

The Committee expressed concern that, despite the presence of

military and naval forces, Somali pirates attacked 163 ships, hijacked

21 of them and took 361 seafarers hostage so far in 2011. based on

UKmTo’s report as at 9 September 2011, 11 merchant vessels with

271 seafarers remained captive under deplorable conditions in Somalia.

“not only are these dangerous Somali pirates free to roam the indian

ocean at will attacking and hijacking ships, they have not spared ships

anchored in sovereign waters. Also, Somali pirates may serve as a strong

inspiration for criminals in other states,” said SnEC chairman Patrick

Phoon.

“The safety and welfare of our seafarers and their families must

remain of utmost importance. Discounting the economic cost of

anywhere between US$3.5bn and US$8bn a year, we cannot ignore the

lasting physical and psychological trauma suffered by our seafarers at

the hands of these merciless outlaws.

The SnEC agreed that the time had come to implement bold

measures. in the absence of concrete policy to address the root problem

of Somali piracy, the Committee strongly supported the Round Table of

international Shipowners Associations’ call urging the Un to establish

an Anti-Piracy military Task Force consisting of Armed military guards

that can be deployed in small detachments onboard merchant ships

to protect them during their transits through those treacherous waters.

it urged the Un and all governments to adopt a strong political will

and take decisive actions to resolve this problem expeditiously.

The Committee reiterated that, as a bare minimum, ship owners

and managers must comply with best management practices but the

Committee also recognised that bmP 4 alone will not guarantee that a

vessel is safe from being pirated.

Whilst ship owners and managers are doing their utmost to protect

their seafarers and ships, the Committee stressed that the ultimate

responsibility for ensuring safety of navigation on the high seas should

rest with Flag States and all governments.

The Committee further urged individual Flag States to offer clear and

concise guidelines on the use of privately contracted armed security

providers which have been duly vetted and accredited by the flag State

in question. “We emphasise that governments must have the political

will to firmly address this pressing problem”, said mr Phoon. “The

situation as it stands is unsustainable, and places a very serious financial

burden on the shipping industry. if the situation fails to improve, soaring

transportation costs will have a detrimental effect on already fragile

regional and global economies.

Kl centre reports somali gangs are having fewer successesPiracy on the world’s seas has risen to record levels, with Somali pirates

behind 56% of the 352 attacks reported this year, the international

Chamber of Commerce (iCC) international maritime bureau (imb) says

in its latest global piracy report. However, more Somali hijack attempts

are being thwarted by strengthened anti-piracy measures.

“Figures for piracy and armed robbery at sea in the past nine

months are higher than we’ve ever recorded in the same period of any

past year,” said Pottengal mukundan, director of imb, whose Kuala

Lumpur-based Piracy Reporting Centre (PRC) has monitored piracy

worldwide since 1991.

Somali pirates are initiating more attacks – 199 this year, up from

126 for the first nine months of 2010 – but they are managing to hijack

fewer vessels. only 24 vessels were hijacked this year compared with

35 for the same period in 2010. Hijackings were successful in just 12%

of all attempts this year, down from 28% in 2011.

imb credits this reduction in hijackings to policing and interventions

by international naval forces, correct application of the industry’s latest

best management Practice – including the careful consideration of the

crews’ retreat to a ‘citadel’ – and other onboard security measures.

Asian shipowners urge UN action

Asian shipowners’ forum calls for “new and bold anti-piracy measures”


Piracy india

When the international Chamber of Shipping (iCS) Chairman

addressed the india Shipping Summit (iSS) held in

mumbai on 10-12 october piracy was uppermost in eve-

rybody’s minds.

mr Polemis, who had just been awarded international maritime

Leader of the Year Award, forcefully articulated the position of the

international shipping industry on the issue of piracy, saying they had

“reached the end of their tether” over a situation where “the international

community has ceded control of the indian ocean to pirates”.

Focusing on one of the hottest current issues, piracy, mr Polemis said

“india and its seafarers have truly been in the firing line”. He went on to

state that this is because india is a major maritime labour supply country

and indian seafarers are widely dispersed amongst the international fleet,

as well as serving on board indian flag tonnage. Sadly this means that

indian nationals have been especially exposed to the risk of attack and

capture for ransom by violent Somali pirates.

on the face of it, the response from the international community,

thanks to the Shipping Associations and imo, has been impressive.

However, the fundamental problem is the relatively small number of navy

ships that are committed to protecting shipping – mr Polemis likened this

to “a band aid on a gaping wound”.

He summarised by saying: “The shipping industry and the world

community are very concerned about the lack of decisive action by

governments. i believe the time for talking has passed, we need action

not words. in calling for the decisive and rapid eradication of piracy i

am doing no more than supporting what is already contained in the Un

Convention of the Law of the Sea. We need:

• navies to act robustly against the pirates.

• All motherships, big and small, to be immobilised.

• All suspected pirates to be delivered to a court of law and if found

guilty to be subject to the full weight of the law.

• Pirate bases ashore to be targeted for action.

India takes firm actionThe indian navy’s determined stance appears to have reimposed an Eastern

limit on the range of somali pirates.

Shipowners want firm action against pirate motherships

© All rights reserved by imo.un


Piracy india

• All hostages and their ships currently in Somalia to be freed.

• United nations to arrange to provide armed military guards, either as

part of a blue beret force or as VPDs (Vessel Protection Detachment

Units), that many independent nations can volunteer to provide.

• All vulnerable merchant ships transiting the AWRP (Additional War

Risk Premium) area, to receive armed military guards.

• All nations in the region to agree and to assist in the embarkation and

disembarkation of the Amgs (Armed military guards).

The world community cannot tolerate the abuse and the killing of

seafarers of any nationality. This has to stop now. The pirates must get

the message that we have reached the end of our tether, and that any

act of piracy will be severely dealt with.”

in many ways, however, mr Polemis was preaching to the converted.

india is one of a handful of states, notably the US, Russia, malaysia and

South Korea, whose navies have taken robust action against pirates.

mr Polemis acknowledged: “We have been particularly impressed by

the seriousness that the indian government has afforded this problem

and the willingness of the indian navy to act robustly against the pirates.”

Urging the indian navy to continue its efforts, he called on it to focus

on inhibiting the activities of motherships, adding: “in particular, it will be

most helpful if the indian navy can continue to ensure that within some

300 nautical miles of the indian coast they continue to prevent the pirates

from operating, since this provides a relatively safe route for ships to and

from the gulf of Aden to the Arabian Sea and beyond.”

The indian navy has conducted numerous operation against pirates

but an action taken in march sent a particularly clear signal to the pirate

gangs. An indian warship captured Vega-5 some 600 nautical miles off

mumbai. The vessel itself had been hijacked by Somali pirates on 28

December 2010, and her position and the number of pirates found on

board suggest that the vessel had been used to stage multiple attacks

on shipping in the indian ocean. The captured pirates were taken to

mumbai to face trial. A few weeks earlier the indian navy had sunk two

pirate motherships as part of its ongoing ‘operation island Watch’.

The action drew praise from the iCC international maritime bureau

(imb) whose director, Pottengal mukundan, commented: “imb

congratulates the indian navy on the firm stance taken by them against

the pirates and particularly the capture of a large number of pirates. This

instance shows that the pirates were planning attacks against ships on

an industrial scale. This action has prevented many potential attacks

against merchant vessels. Similar actions against known pirate action

groups is vital in an area which is simply too vast for close monitoring by

naval assets. For too long pirate gangs have been operating with relative

impunity.” Along with the recaptured vessel, 13 hostages were released

as part of the operation. in January 2011, the indian navy sank two pirate

motherships as part of the ongoing ‘operation island Watch’.

mr mukundan continued: “We urge other states to commit additional

resources to help fight this problem and to give naval commanders the

rules of engagement which will provide an effective deterrent against

the pirates.”


Dry market

Despite the world economy moving into a difficult period, the

capesize market has shown a somewhat stronger tone in the

last few weeks, with several new front haul orders and a lack of

the right tonnage in both the Atlantic and Pacific basins.

Fundamentally, the demand and supply balance for capesize bulkers

is still in an over-supply situation. However, this recent improvement in the

market is evidence that cargo trade volume is increasing and demand for

capesize ships is also growing.

From the beginning of this year, Chinese crude oil output has stayed

at a high level, close to 60 million tonnes per month. This year’s output

is estimated to reach 700 million tonnes, which is a 12% increase year

on year.

At the same time, the volume of iron ore imports in the first half of this

year has increased by 8% from the same period last year. This indicates

that the proportion of domestic iron ore usage has expanded. in fact,

output of domestic iron ore production from January to June this year

increased by 18% compared to the same period last year.

So, the demand side is growing steadily in China and should be seen in

the same light as a Chinese government announcement that the country’s

expected annual gDP growth for the next five years is 7%.

Similarly the demand for seaborne transportation from india is also

growing, especially from the infrastructure sector, including the steel

industries and power generation.

However, looking at recent capesize fleet growth, it is expected that the

pressure from the supply side will still be strong and continue to outstrip

demand growth, even though the number of ships going for demolition are

increasing at historically high rate.

it is reported by sources that 147 new vessels, all of which are at least

100,000 dwt, totalling 26 million tonnes deadweight, have been delivered

from January to July this year, while 52 vessels have been demolished

in same period. Actually, the deletion of old vessels is closing the gap

between demand and supply now, but it seems that the current demolition

rate is higher than normal and further downward pressure will be placed

on the capesize market, unless the current high demolition rate can be

kept up.

The question is when will the capesize market pick up? As demand is

there and growing, occasional improvements in the market could be seen

at any time. However, full-scale of recovery of the market can be expected

from the second half of 2012 onwards.

We may say that the capesize market is still very fragile, despite the

growth in demand, in view of the uncertain world economic situation.

While we do not doubt that the stronger capesize market will be back

after the gap between demand and supply has been closed by economic

growth in developing countries, we feel that we must be prepared for a

potentially difficult six months.

Chinese demand set to drive recovery next yearAtsuo Asano, general manager of “K” line’s coal & iron ore carrier group looks

at the prospects for the capesize market

Atsuo Asano, general manager “K” Line’s Coal & Iron Ore Carrier Group

“K” lines’ 2009-built Tohoku Maru


Tanker market

The tanker market, currently depressed due to fleet over supply,

will recover from the end of year 2011. There are several reasons

to support this view. one is that VLCC newbuilding supply will

be actually only about 70% of expected output from the yards.

That is to say there will be about 60 newbuilds in 2011, as was the case

last year. This is due to a weak tanker market as well as difficulties some

owners have experienced in funding newbuildings. Also, the phasing out

of single-hull VLCCs should remove about 30 such vessels this year.

on the demand side the iEA oil demand forecast shows oil increasing

this year by1.4 million bbls/day, of which 70% add to seaborne trade.

overall, there is likely to be an increase in demand equivalent to about

30 VLCCs and increase in demand is set to continue at least until 2015.

The number of spot VLCC fixtures in the first half of this year increased

by about 10% over last year, supporting expectations of demand increase.

Currently VLCC’s demand/supply balance is almost the same as last

year, but tonne-mile increases are to be expected due to more crude

being transported from the Atlantic basin to Asian countries.

Clean petroleum product (CPP) trading will also increase with more

long haul activity than in the first half of this year due to CPP production

increases in Asian nations, while CPP production in the Atlantic basin is

likely to remain unchanged or maintain a current slight downward trend

due to commercial considerations at the refineries.

The number of newbuildings joining the CPP fleet is fixed until 2013

and is much smaller than in the past few years.

However, the above perspective will be threatened if there is a world

economic recession due to financial difficulties, especially in US and

European nations.

mr okawa’s analysis is broadly supported by an assessment by

braemar Shipping Services. it said that, despite record crude oil liftings

from the middle East and anticipated demand growth of around 2% for

2011, there remains a persistent oversupply of VLCC tonnage, according

to analysis by braemar Shipping Services.

However, owners may be relieved to know that the 47 VLCC deliveries

scheduled for the first half of 2011 did not all enter the market on time.

in both Q1 and Q2 this year, over 20 VLCC deliveries were inked in

at the rate of more than one every week. in the event, braemar recorded

fewer than 20 VLCC deliveries in both quarters of 2011 to date: 19 in Q1

and 15 in Q2.

on 1 July, the VLCC fleet was 559 ships including 22 non-double hull

units, with 150 ships in the orderbook.

in deadweight capacity, the VLCC fleet grew by 5.6% this year, from

160.9 million dwt on 1 January 2011, to 169.9 million dwt on 1 July.

According to braemar, it seems likely that further slippage from delivery

schedules will happen in the coming quarters.

Single hull exit set to cut oversupply

Tomoyuki okawa, general manager of “K” line’s Tanker group explains

why he sees a revival in rates coming soon

Tomoyuki Okawa, general manager “K” Line’s Tanker Group

A market recovery could be on the way for

Tankers like “K” lines’ Rainbow River


Broker’s view

Denis Petropoulos is an executive director of London-based

braemar Shipping Services but moved out to Singapore

nearly a year ago to head up the group’s expanded Asian

headquarters, which now employs more than 120 staff at its

Pickering Street offices.

He says that Singapore is strengthening its position as a technical

and commercial maritime super hub, but corporate success cannot

be taken for granted and is as dependent on strong and effective

relationship-building.

“one of the issues participants coming to Singapore expect is that

the region is going to come to them. but to succeed in Singapore, you

have to be prepared to go out and meet the region. South East Asia is

a highly competitive region so drawing on the good relationships made

is crucial to maximising opportunities that may exist. People also have

the wrong impression that you have to undercut your prices in order to

compete. i believe that, while the service you provide has to come up to

scratch, it is the companies and the individuals who can build on new

and historical relationships who will prosper,” he said.

The group’s five Singapore businesses have been brought under

one roof – shipbroking, including offshore, port agency as well as

braemar’s technical services of maritime and offshore surveying, marine

warranty and hull and machinery surveying, and loss adjusting. These

are all represented through its braemar Seascope, Cory brothers and

braemar Falconer and braemar Steege subsidiaries. The Salvage

Association has also been introduced through a recent acquisition.

braemar has expanded its penetration of the global marine and offshore

services sectors by bringing together its technical business units under

the umbrella control of the braemar Technical Services (bTS) division.

The establishment of bTS will, it believes, benefit both customers

and shareholders by providing a pool of wider industry expertise;

encouraging synergy between the business units and forming a wider

global network of offices.

braemar has also expanded its chartering activities in Singapore by

moving into the deep-sea crude and products tanker trades as well as

sale and purchase, adding to its already established dry cargo, container

and offshore broking.

“Shipping isn’t necessarily moving east but it is the growth in

shipping that is moving east, Denis Petropoulos said. “The geography

of Singapore makes it an ideal location for a maritime cluster as it forms

the perfect crossroads from east to west – from Australasia, india and

Japan, Korea and China to Europe and beyond. Regional demand

in Vietnam, malaysia and Thailand as well as indonesia and Australia

means that geographically, Singapore is very well placed to benefit.

but you don’t come to Singapore just to do business with Singapore;

you base yourself in the area because you want to do business in the

whole region, which inevitably includes China and india. That means

networking, visiting clients and clients visiting you. Singapore is a hub of

cultures as well as of shipping expertise, and the cultures differ in Asia as

much as they differ in Europe or the Americas,” he added.

braemar also has shipbroking offices in Delhi, mumbai, Perth,

melbourne, Shanghai and beijing. “The region generates good business

for our indian office in particular, with imports of coal from various

Long-term optimismin charge of Braemar shipping services recently expanded Asian headquarters

in singapore, Denis Petropoulos explains how he sees the opportunities and

challenges of providing shipping services in the region.

Denis Petropoulos is an executive director Braemar Shipping Services


Broker’s view

sources, notably indonesia. With exports of iron ore from Australia and

China’s insatiable demand, our offices in Australia and China are in

continuous dialogue dealing with Singapore,” says mr Petropoulos.

Singapore is growing as a regional hub and as an island it is probably

becoming close to capacity, but it has held onto its position as the

regional capital of commerce and, according to mr Petropoulos, is going

to remain that way. “it has managed its finances well in the past three

years and as a result has come out stronger,” he said.

but while Singapore may have witnessed double-digit gDP growth

over recent years, the shipping industry on the island and elsewhere, is

struggling to come to terms with the ravages of the global recession.

Shipowners are finding problems offsetting rising vessel operating

costs against dwindling freight rate revenues. While the environment in

Singapore and the rest of South East Asia is vibrant and shows every

sign of remaining so, the question on the lips of experts like Denis

Petropoulos is to what extent is the depleted freight market sustainable

for business?

Looking at the prospects for shipowners, mr Petropoulos added:

“more owners might start locating in Singapore in search of a growing

client base and because they want to grow their relationships across

the board. Today, it is survival of the fittest. Those shipowners who have

made provisions for poorer markets and who have been conservative

in their investments and modest in ordering ships will survive. They will

have to spend money earned but they will survive.”

“Some owners who have been somewhat eager in ordering, because

they were pushed by available money and started to order without giving

real consideration to what actual demand will be over the next two

years, will suffer and, if they have ordered tonnage at prices that can’t

be sustained over the next two years, then i will say there will be quite a

lot of tonnage changing hands.

“The ships won’t go away and one factor that can’t be discounted

if the market carries on as it has done, is lay-up. Lay-up has been

present in every market segment since the late 1970s when there was

massive over-ordering following a strong market. The over-ordering

state continued until the mid-1990s when there was light at the end of

the tunnel. i can’t say we have an identical situation to then, but over-

ordering is here and one of the solutions to ships running below oPEX

is lay-up across sectors.”

This time though, mr Petropoulos observes, there is a rather different

factor at work. The Chinese shipyards are going to continue in business

and will need to maintain a throughput, although not necessarily run to

full capacity. That, he says, is a given.

The Chinese yards’ first preference is to secure orders from foreign

owners, but where that is not possible Chinese owners step forward.

This has the potential effect of keeping prices down in the international

newbuildings market and also increasing the Chinese-owned fleet. As a

result oversupply, with the obvious implications for freight rates, looks set

to continue for the near-term future.

nevertheless, mr Petropoulos points out, there are still massive

volumes to be transported, particularly in the Asia Pacific region, and

shipping and ship broking will carry on. He notes wryly that during the

30 or so years he has been in the business, rates and markets have

been considered low for about 70% of the time. “i’m still here,” he says,

“and so is shipping. The owners who survive know how to handle the

lean times.”

but what about scrapping levels; are they at the levels they need to

be at? “Scrap yards do not have the ability to scrap tonnage fast enough

to meet the new supply coming on-stream so lay-up is an agenda item

that will be talked about more and more over the next few months. Some

harsh decisions will be taken. it is not necessarily the owner who will take

the decision but the operating company with the debt,” he said.

Shipping does have its cycles, and unpredictable events can change

freight market directions, but the fundamental demand for raw materials

and energy services is constantly growing in Asia. As mr Petropoulos

stressed, he remains upbeat about the medium to long-term future in

these regions.

Handling the lean times


risk management Freight derivatives

The baltic Exchange runs a series of shipping courses and work-

shops on risk management and derivatives on the theme Dealing

with Unpredictable Change.

Two courses, Freight Derivatives & Shipping Risk management

and Advanced Freight modelling & Trading, are delivered around the world

by Professor nikos nomikos and Dr Amir Alizadeh of the Centre for

Shipping, Trade & Finance at Cass business School. Singapore is the

regular Asian venue for the courses.

Dr Alizadeh told The Baltic: “We have been running courses in Asia

since 2005, generally in Singapore. initially we ran them once a year in

Singapore but this has increased to two a year. We have between 15

and 25 participants in each course, many of them coming from outside

Singapore.”

“Feedback has been good and interest in both courses remains high.

There was understandably a falling off of number during the Credit Crunch

but interest soon returned to previous levels.” The downturn was not

surprising given very difficult market conditions of 2008 and 2009.

A mixture of lectures and workshops is aimed at achieving a high level

of practical knowledge within a short period of time.

Dr Alizedeh said that although a significant number of participants take

both courses, and they are run back to back, the objective and targeted

attendees are rather different. He explained that Freight Derivatives &

Shipping Risk management is a basic course intended to raise market

awareness of risks involved in shipping businesses and how various

physical and derivatives instruments can be used to control such risks

efficiently and effectively.

The course is based on the premise that shipping markets are

becoming increasingly risky. This calls for prudent control of freight rates,

ship values, bunker price, credit, foreign exchange and interest rate risks,

which are all part of the shipping investment and day-to-day operating

activities.

The module is delivered over two days by experts in the areas of

shipping and commodity risk management and uses a variety of real life

examples. it demonstrates how risk can affect cash flows from operating

activities along with an in-depth analysis of theoretical and practical

aspects of risk management instruments in shipping.

“This course is primarily aimed at those in shipping companies

and elsewhere who need to understand the use of derivatives for risk

management,” said Dr Alizedeh.

The Advanced Freight modelling & Trading course, on the other hand is

aimed much more at those actively trading freight derivatives.

initially more participants signed up to the Risk management course

but now an equal number attend the advanced course which focuses on

modelling freight rate dynamics and pricing options on freight. it includes

constructing forward curves on freight, modelling freight rate volatility as

well as hedging and trading strategies using freight options.

So how aware of risk management and derivatives trading are Asian

based companies? Dr Alizedeh said that in the early days it was mainly

traders in Europe who were aware of and used derivatives but that was no

longer the case. now Asian-based shipping companies and traders are as

likely as the European counterparts to make use of derivatives.

He did say that one thing holding back the the development of physical

trading and futures in Asia was the time zone issue. many companies in

Asia waited until Europe had started business before trading. The advent

of the baltex screen would, he thought, go some way towards rectifying

this situation.

Looking ahead Dr Alizedeh saw increased used of shipping derivatives

in Asia, simply because it now accounted for about 50% of world trade

and because trade in raw materials was growing strongly. However current

market conditions could dampen interest in futures, if freight rates and

volatility remained low.

A senior executive in a shipping bank who had been on the courses

told the baltic that the course was useful, especially for people working

for shipping companies. He added: “i have not really seen a shift towards

higher usage of risk management tools by customers.”

The banker pointed out that, for some risk management tools,

customers need banking lines noting: “it is questionable whether banks

will provide these nowadays. Each bank will have a look at customers

individually to see whether the tools are beneficial for the clients.”

on the other hand a risk management executive in a major dry bulk

operation in Asia had no doubts both that the course was useful and

that risk management should play a key role in shipping companies. The

company concerned runs a large and sophisticated risk management

department.

on the courses, and particularly the Advanced, the executive thought

that it certainly included enough mathematics to carry out effective

modelling. “but the important thing with teaching risk management,” he

said, “ is to make it simple. These courses did that. They also made it clear

that risk management is much more than just modelling and derivatives. it

is about a company’s culture.”

While this person was was clear on the advantages of using risk

management tools many Asian-based companies were “cash sensitive”.

Using derivatives meant real cash exposure and many companies were

not prepared to allocate cash for hedging.

Some of these companies had used the over the counter (oTC)

shipping derivatives market, which meant exposure to credit risk. but over

the past two to three years trading had been almost entirely in cleared

futures where there was cashflow risk.

This experienced risk management professional cautioned that while

hedging with FFAs was a very good tool it as also important to be aware of

the pitfalls and drawbacks. it is possible to lose significant amounts of real

money on futures, as was demonstrated in 2008 and 2009.

Spreading the wordDavid hughes reports on a Baltic Exchange course on

shipping derivatives that is now in its sixth year.



Following its successful launch

in June, the baltic Exchange’s

electronic marketplace for dry

freight derivatives, baltex, has

launched incentive schemes aimed at

increasing the already substantial inter-

est being shown in the system.

The new initiator Scheme for

Principals (iSP) will run for an initial term

of six months from 1 october and offers

principals the opportunity to receive a

100% rebate of the baltex Transaction

Fee subject to certain terms.

The iSP has been approved by the

UK’s Financial Services Authority (FSA)

and by baltic Exchange Derivatives

Trading Ltd (bEDT), which runs baltex.

The second initiative is the broker

Execution Scheme (bES) which will pay

brokers up to US$6 per lot traded.

baltex chief operating officer Paul

Stuart-Smith the strategy of using

“market-maker” schemes to boost

volumes saying: “With a critical mass

of companies signed up and at least

a further 30 in the pipeline, we have

now entered the second phase of the

development of this market which is

to build up liquidity.” He added that

another facet of this strategy was to

the increase the number of jurisdictions

in which baltex can be used while

continuing to market the system in key

trading centres.”

The number of principal and broker

members of baltex is increasing steadily.

The initial 15 principals included Asia’s

largest diversified commodities trading

company noble group and major

Hong Kong-based modern handysize

and handymax dry bulker owner and

operator Pacific basin Shipping.

As expected, initial trading volumes

were light, but baltex members have

Baltex makes good start

The dry freight electronic marketplace is being well received,

as David hughes reports.


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been putting competitive prices on the screen and trades are clearing

within 20 minutes and often much more quickly.

Regulated by the UK’s Financial Services Authority (FSA) as a

multilateral Trading Facility, baltex provides live FFA prices and on-line

execution and supports straight-through processing to the international

clearing houses LCH and noS, with SgX and CmE expected to be added

shortly. The transaction’s clearing status is displayed in real time.

The system is available for trading from 0730 to 1800 UK time and

can be made available initially to participants throughout the European

Economic Area, Switzerland, Singapore and monaco. other jurisdictions

are expected to follow shortly.

Used by both brokers and principals, baltex has been developed in

close collaboration with the market. it was designed with the backing

of major principals in the FFA market who were looking for a regulated,

central screen which would enable them to trade dry freight derivatives in

an anonymous, simple way which would also meet the tougher regulatory

requirements being imposed by the European and US financial authorities

on derivatives trading. Principals told the baltic Exchange that they wanted

to see more transparency in this market and greater liquidity

All live prices can be seen by baltex screen members, but the trader’s

identity is kept anonymous to all except the nominated broker. As well as

a live trading screen, a view only option is available to those who simply

want to see the depth of the market. This view only mode is also be made

available through quote vendors.

baltex is designed to be an easy to use tool for freight derivatives

traders. it incorporates a fully bespoke screen layout, built-in warnings

and functionality which can be tailored to traders’ needs as well as an

Application Programming interface (APi) which can be used to interface

into in-house systems.

baltex’s chief operating officer Paul Stuart-Smith says that so far

the system has been operating well, observing: “All the members seem

happy with the way in which it is operating and we’ve received lots

of compliments about how easy it is to use and its straight forward

functionality,” he says.

Stuart-Smith admits that it has been a long road to get here and that

meeting the requirements of both the regulators and baltic members was

at times a difficult balancing act. “i first got involved with the project in

november 2010 and developing a business model which would appeal

to all was a challenge. However, we are now up and running, have a

sustained commitment to baltex from a range of major FFA traders and

although we’re not there yet, we’re growing to plan.”

So far most of the trading activity on baltex has been on shorter

dated contracts covering capesize, panamax and supramax time-charter

averages. Against a backdrop of a market trading around 20,000 lots

per week and a low freight rate environment, mr Stuart-Smith believes

that baltex offers the FFA market a chance to develop from a niche to a

mainstream commodity market.


supply & demand

In a recent presentation, martin Stopford, managing director of

Clarkson Research Services and well known shipping economist,

painted a gloomy picture of the market in the coming decade.

Dr Stopford outlined three themes for the 2010s: shipyard

overcapacity; energy costs; and the environment. All were correlated, he

said, and would lead to a renewed focus on costs.

He said that shipbuilding overcapacity will mean cheaper ships and

greater willingness to do innovative work while lower ship earnings will

push the strategic focus towards cost control.

High energy costs will push up the bunker prices. but he cautioned

that society has only accepted this at a macro level while micro-decision-

making is only partially committed. He likened the situation to that of

the 1980s.

Environmental pressure will increase because shipping is seen to

have an oversized carbon footprint. Heavy fuel oil is seen as ‘super dirty’

and shipping is a growth industry so its emissions are increasing. but,

again, commitment at a macro level is not reflected in micro-decision-

making.

Shipbuilding technology is very mature and so has no magic solutions.

Cutting energy costs and carbon footprint will involve compromise and

difficult choices. The options will include lower speed, modified designs

and multiple fuel systems (eg oil or Lng).

These factors, Dr Stopford argued, mean that cost management will

have a much greater urgency than in the past decade.

The realisation that over capacity is set to be a semi-permanent

feature of the shipping markets was a major factor causing overall

confidence levels in the shipping industry to fall to their lowest

level for three-and-a-half years in the three months ended August

2011, according to the latest shipping confidence survey by shipping

accountant and adviser, moore Stephens.

Fears about overtonnaging, and continuing uncertainty about the

global economy, were the main reasons for the decline in confidence.

The rising cost of bunkers was also a cause for concern.

in August 2011, the average confidence level expressed by

respondents in the markets in which they operate was 5.3 on a scale of

1 (low) to 10 (high), compared to 5.6 in the previous survey in may 2011.

This is the lowest figure recorded since the survey was launched in may

2008 with a confidence rating of 6.8, which remains the highest rating

achieved thus far.

Perhaps significantly confidence held steady in Asia, at 5.7. on the

other hand it remained lowest in Europe, falling from 5.5 to 5.0, its lowest

level since the survey was launched.

moore Stephens says that overtonnaging was a recurrent theme

throughout the comments. “markets are at rock-bottom,” said one

respondent, “and will stay there for some time because of the large

number of new vessels due to come into service. older vessels and

speculative investors, as well as low-grade operators, will have to

disappear before the situation can start to improve.” Another respondent

noted: “The situation looks pretty grim, given the massive amount of

over-ordering.”

geographically, demand trends emerged as the most significant

factor for operators in Asia, Europe and north America (19%, 23% and

30%, respectively), with competition and finance costs making up the

remainder of the top three.

There was a big fall in the numbers of respondents expecting rates

in the tanker sector to increase over the next 12 months - down overall

from 44% last time to the lowest level since February 2009, at 34%.

in the dry bulk sector, the number of respondents expecting rate

increases over the next 12 months was down from 37% to 27%, an all-

time low in the life of the survey. The number of owners who shared this

opinion also hit an all-time low, while the 8% of charterers of like mind

was easily the lowest in three-and-a-half years.

moore Stephens shipping partner, Richard greiner, says: “The drop

in shipping confidence to a record low is a disappointment. but it has

been coming. given what has been happening in the world, and in

the industry, confidence remained surprisingly high last year, but it has

started to slip in 2011. indeed, in many ways, it is back to the levels of

two years ago.”

He continues: “We are starting to see now what many had predicted

would happen much earlier. banks are calling in their loans, shipping

companies are filing for bankruptcy protection, ships are being arrested

and auctioned around the world, and the courts and arbitration tribunals

are starting to see an increase in their workloads. Financiers wants their

money, and are ready to take what they can get now rather than wait

in the hope that the markets will recover and enable them to achieve a

return on their investment. This results in a situation in which everybody

loses something. Financiers need to continue to work together with

shipping companies and external financial advisers to find a way forward

for viable long-term businesses, perhaps exploring the opportunities

offered by independent business reviews.”

Summing up mr greiner says: “There could be some nasty surprises,

and some tough decisions, in the months ahead for operators and

investors alike. but those who are in shipping for the long term will ride

it out, and many will have had previous experience of doing just that.”

Cheap ships, low ratesovercapacity looks set to be the dominant feature of the

shipping markets for years to come.


Environment overview

There are no Emission Control Areas (ECAs) in Asia and much of

the impetus for increased environmental regulation has come

from the US and Europe. nevertheless, Asian shipping is now

very closely engaged in the environmental debate at all levels.

At September’s 21st interim meeting of the Asian Shipowners’ Forum

(ASF) Safe navigation & Environment Committee (SnEC) in Singapore,

the shipowners’ welcomed the international maritime organization’s (imo)

adoption of mandatory measures to reduce emissions of greenhouse

gases (gHgs) from international shipping.

in a statement ASF said: “The amendments to mARPoL Annex Vi

Regulations, which make mandatory the Energy Efficiency Design index

(EEDi) for new ships, and the Ship Energy Efficiency management Plan

(SEEmP) for all ships are pragmatic and goal-based, which adhere to

the imo’s principles of no more favourable treatment. The Committee

hopes that the implementation of these imo energy efficiency design

standards will discourage any individual or regional group of countries from

introducing unilateral measures to curb gHg emission from international

shipping.”

Like the rest of the industry, Asian owners are waiting to see what, if

anything, comes out of Un Convention on Climate Change (UnFCCC) at

the end of the year. in particular, interest focuses on whether, and how,

shipping will be expected to fund action to combat global warming and

curb gHg emissions. Through membership of the international Chamber

of Shipping, the region’s owners have stated a preference for a bunker levy

scheme rather than emissions trading.

While shipping still has to find out what will be expected regarding

gHgs it is all too aware of the need to reduce

emissions of sulphur dioxide (SoX) and nitrous oxides

(noX).

Hong Kong has already initiated a voluntary

initiative, the Fair Winds Charter, to reduce pollutants

in its waters and in the Pearl River Delta. A number of

major shipping lines have undertaken to use marine

gas oil with a sulphur content of 0.5% at berth in

Hong Kong from 1 January 2011 to 31 December

2012. members of the initiative say they hope that the

voluntary agreement will encourage authorities in Hong

Kong and guangdong province to collaborate in efforts

to establish limits on ship emissions in the region in line

with international standards.

meanwhile, the Singapore government has said

it is “very encouraged by the good response and

participation from the industry we have received so

far” to its maritime Singapore green initiative that was

launched in July.

maritime and Port Authority of Singapore’s chief

executive Lam Yi Young told delegates at the green

Ship Technology Asia Conference this week: “These are

voluntary programmes designed to recognise and provide incentives to

companies that adopt clean and green shipping practices over and above

the minimum required by imo Conventions.

The Singapore green initiative comprises three programmes: green

Ship, green Port and green Technology.

The green Ship Programme is targeted at Singapore-flagged ships

that exceed the imo’s recently EEDi requirements. Qualifying ships are

eligible for a 50% reduction in initial Registration Fees payable and a 20%

rebate on their Annual Tonnage Tax.

Under the green Port Programme ships using type-approved

abatement technology (‘scrubbers’) or that burn clean fuels with sulphur

content lower than mARPoL requirements within Singapore port limits,

receive a 15% reduction in port dues.

The green Technology Programme encourages local maritime

companies to develop and adopt green technologies by providing

co-funding for up to half of the qualifying costs. mPA has set aside S$25

million (US$19 million) from the maritime innovation and Technology Fund

for this programme. if response is good, mr Lam said, mPA will set aside

another S$25 million.

mr Lam added that commitment and support from the industry

towards clean and green shipping was also evident from the maritime

Singapore green Pledge signing ceremony held in conjunction with the

announcement of the maritime Singapore green initiative in April. During

the ceremony, 12 organisations from a diverse spectrum of the maritime

industry, including shipping lines, port operators, shipyards and oil majors,

signed a pledge to support clean and green shipping.

Green thinkingAs David hughes reports, shipowners and maritime authorities in Asia are under

much the same environmental pressures as their counterparts elsewhere.

“Green” ships pay discounted port fees when using Singapore’s busy anchorages


Environment Lloyd’s Register Asia

Lloyd’s Register is an organisation that exists to deliver public

benefit. our mission is to uphold safety of life, property and

the environment and in today’s world an important part of this

has to be helping all of society to work to combat the effects of

climate change. With shipping, this means vessels that have better, more

environmentally-friendly designs and, of course, more advanced means

of propulsion.

Last year, Lloyd’s Register celebrated its 250th anniversary. it’s

something we are very proud of. We started life in a Central London coffee

shop, serving the city’s thriving shipping industry. The world, of course,

has changed a lot since the middle of the 18th century and so has Lloyd’s

Register. Then, our ship surveyors, drawn from the ranks of shipwrights

and master mariners, set the first standards of seaworthiness for ships.

Today our scope is far wider but our essential mix, of practical experience

and technical expertise, remains the same.

Today we have almost 8,000 employees in 247 locations across

the globe. our people provide independent assurance to companies

operating capital intensive assets, to help improve the safety, quality and

performance of their businesses.

We work with clients who range from small local businesses to

multinational companies managing large-scale, high-value assets, where

the costs of mistakes can be very high, both financially and in terms of

their impact on communities and the environment. And, while we work

across multiple industrial sectors, we have not forgotten our roots.

We are still a leading global provider of marine classification services,

helping to ensure that international recognised standards are maintained

throughout the life of a vessel – from design through to decommissioning.

Today we also provide sophisticated risk management and support to ship

owners and shop managers. We provide management systems, training,

human factor support, environmental services and fuel oil quality testing.

We are also carrying out essential research work in the area of the

use of future fuels for the marine industry – including liquefied natural

gas (Lng), nuclear, bio-fuels, fuel cells and wind assisted propulsion. The

shipping industry is approaching a watershed as it looks at how to adopt

new technologies in response to environmental issues. Lloyd’s Register,

with its knowledge, expertise and unique global reach has a leading role

to play in this process.

global shipping has expanded dramatically in recent decades and

ships now move more than 85% of the world’s trade. That accounts for

almost 3% of global carbon emissions – the equivalent of a major national

economy. This cannot be ignored and shipping, like the rest of the world,

has to act responsibility. Today, Asia is the home of ship building so the

solutions have to be implemented in the Asia-Pacific region effectively.

but what are the solutions? The shipping industry has been using heavy

fuel oil (HFo) to power its engines for almost a hundred years. before that

it used coal and, before that, wind. Today there are many competing

approaches and agendas as the world attempts to plan successfully

for the future, by charting a course between an increased demand for

energy and the need to reduce its

environmental impact.

Shipping still sits behind the

car and aerospace industries,

who both have spent decades

optimizing their technology and,

while tighter regulations have

helped propel the maritime

industry into action, the main

driver has still probably been cost.

The industry has for a long

time relied on low-grade bunker

fuel that contains sulphur oxide

(Sox), nitrogen oxide (nox) and

other pollutants.

The price of bunker fuel has

tripled in the past three years and for large vessels, fuel can still make

up more than 50% of the operating costs, therefore efficiency is

paramount to profitability, which in turn is paramount to long-term supply

chain sustainability.

but this is not the long term answer. The real challenge here is far

trickier. The actual question is to what extent shipping can make real

efficiency improvements that allow it to move toward genuinely clean fuel

sources that will tangibly reduce its greenhouse gas (gHg) emissions?

Lng is one of the much talked about options. However, while Lng will

help reduce Sox, nox and particulate emissions, there is still no hard and

fast evidence that proves it will help reduce gHg emissions.

Putting the practical difficulties momentarily to one side – especially

that of developing a global Lng bunker network with all the corresponding

logistical, commercial and safety issues addressed – for now, at least,

Lng can be seen as only part of the solution. There is no solid proof

currently that Lng lowers gHg emissions (Lng is, after all, another fossil

fuel) and, also, a plentiful supply of cheap gas is far from guaranteed.

Yet our society is dependent on efficient low-cost shipping and this

dependency is only set to increase. World population growth will continue

to rise and, while the current focus is on renewable technologies and

nuclear power, fossil fuels are expected to continue to dominate primary

energy demand until the middle of this century.

When Lloyd’s Register celebrates its 300th anniversary, coal and oil

will still be important, but then so will nuclear and renewable sources.

The important factors in the coming 50 years will be the three-way

equation between fuel availability, technology efficiency and environmental

sustainability. The main factors will be how power is made – or converted

from raw fuel to usable energy – and how it is used.

A change in cultural habits will reduce actual energy demands and this

will be as true for shipping as it is for the rest of our world. What we do

know however, is that whatever the outcomes here, Lloyd’s Register will

be an important part of the solution.

Seeking solutionsJohn rowley, regional director of lloyd’s register Asia, looks at the alternatives

to heavy fuel oil as environmental pressures on shipping continue to grow

John Rowley


Environment Straits of malacca

The 4th Co-operation Forum on Safety of navigation and

Environmental Protection in the Straits of malacca and Singapore

took place in malacca, malaysia, in early october.

The chief executive of the maritime and Port Authority of

Singapore, Lam Yi Young said that the meeting of the Co-operation

Forum, under the chairmanship of malaysia, was a milestone for the

Co-operative mechanism, kicking off the second cycle of chairmanship

since the Co-operative mechanism was launched at an imo-Singapore

meeting in September 2007. He said: “That the Co-operative mechanism

has come this far suggests that it remains relevant and important for

enhancing safety of navigation and environmental protection in the Straits

of malacca and Singapore.”

mr Lam noted that the littoral states have taken significant technological

and regulatory measures to enhance navigational safety and environmental

protection in the Straits. He said: “For example, we tested the usefulness

of installing AiS-b transponders on vessels under 300 gt and are in the

process of setting up a wind, tide and current measurement system in the

Straits. We are also considering the feasibility of establishing emergency

towage response capabilities along the Straits, and continue to maintain

the all-important aids to navigation.”

This “good work” had been possible, he noted, only with the support

of the contributors to the Co-operative mechanism. Key contributors

included China, European Union, germany, greece, india, Japan, Republic

of Korea, norway, Saudi Arabia, United Arab Emirates and the US. mr Lam

also mentioned the nippon Foundation, the malacca Strait Council, middle

East navigation Aids Service, “and last but definitely not least, the imo”.

The Round Table of international shipping associations has also been

involved in the Forum’s work on navigational safety and environmental

protection in the Straits. At the Forum meeting the international Chamber

of Shipping (iCS) presented the results of a survey of incident reports that

are intended to result in agreed proposals to enhance the management

of traffic in the Straits.

The iCS report praises the skill and professionalism of those managing,

operating and navigating ships in the malacca and Singapore Straits.

However, iCS suggests that improvements could be made to the location

of pilot boarding areas and the timing of pilot departures. There is also

concern about the understanding and use of navigation systems, such as

ECDiS, AiS and radar, both at sea and ashore.

of the incidents examined, 68% resulted in collisions and all could have

potentially caused harm or pollution incidents. The incidents involved a

range of vessels from tugs to tankers.

The report recommends the littoral states consider how to address:

• Speed management in the Singapore Straits

• Heavy traffic around pilot boarding areas

• optimum pilot departure times

• improved VTS/VTiS interaction with shipping

• Situational awareness

• Pilot, tug, berth availability integration.

iCS director marine, John murray commented: “The littoral states

welcomed the report and we were pleased to hear that measures are

already being taken to further improve navigational services in the Straits.

malaysia and indonesia have agreed to forward additional accident reports

to further enhance the iCS study’s findings, particularly in relation to the

malacca Straits. Singapore will be sending information on measures it has

already taken to improve navigational services in relation to the Singapore

Straits, which iCS will review by conducting a gap analysis in order to

identify remaining safety proposals.”

in conjunction with iCS, it is expected that the littoral States will make

a joint submission to imo’s navigation Sub Committee in July next year,

advising of the accident survey and its current status.

Strait talkingThe coastal states bordering the straits of Malacca and singapore and the

international shipping industry organisations are working to improve navigational

safety in these busy and important waterways

Speed management needs to be addresssed in the Singapore Strait seen here through

the haze caused by rainforest fires, which frequently reduces visability


human Element Staffing

Singapore’s rapid development as Asia’s leading chartering

centre for both the wet and dry markets has seen global ship-

ping recruitment specialist Faststream’s Singapore office grow

equally rapidly to meet this demand. The office reports that

despite the doom and gloom in the freight markets, companies are con-

tinuing to open new desks, hire shipbrokers and chartering managers in

all areas of the commercial shipping markets.

“our Singapore office, which opened in 2008 is now 23 strong and

our services are really in demand,” says Faststream Asia’s managing

director and baltic Exchange member mark Robertshaw. “As we’re

getting bigger, we’re getting more specialised. The specialists within our

commercial team are focused particularly on tanker, dry, offshore and

legal roles.”

Singapore’s maritime and Port Authority estimates that the Singapore

maritime cluster comprises over 5,000 companies, provides employment

for just under 100,000 and contributes around 7% of Singapore’s gDP.

Whilst much of this activity is of course directly related to the port, the

government’s wooing of shipping, mining and other trading companies

over the past few years with attractive tax breaks and relocation

assistance has paid dividends.

in their wake have come the professional service providers –

from lawyers to shipbrokers, seeking to be part of the continuing

success story that is Singapore. most of the medium and large baltic

Exchange shipbrokers now have offices here. What were initially smaller

representative offices have now developed into significant revenue

generators. mark Robertshaw reports that Faststream is working with

many of these companies as they seek to strengthen their teams.

“in Singapore, a shipbroker aged between 35 and 45 is very well

sought after. They’ve got the experience of different markets and can

bring in business. Without wishing to talk up the market, companies are

paying very good salaries for the right people.”

it is the “growing diversity of the talent pool” which mark Robertshaw

believes is making Singapore particularly attractive to shipping service

providers. Companies are able to set up strategic commercial desks

here, not just because it puts them in close proximity to their clients and

markets, they are also able to find the necessary professional staff quickly

and easily. Ex-pat packages covering employees’ accommodation,

airfares and boarding schools are not necessary these days, most staff

are employed on a local basis. Whilst many companies will provide initial

support to staff brought in from overseas, Singapore is not a hardship

posting for which companies need to pay more to encourage staff

to relocate. People from around the world are putting roots down in

Singapore, buying property and sending their children to local schools.

“Singapore is a place that many shipping professionals see as a good

environment in which to further their career,” notes the Faststream Asia

managing director. “i’m seeing more graduates with shipping related

degrees from European universities coming here to start their careers too.”

indeed Singapore came out on top and ahead of London as the

location in which most candidates would like to work in a Faststream

survey of shipping professionals from around the world conducted at

the end of last year.

Singapore is not, however, the low cost centre it once was. The

strong Singapore dollar, rising office rents and living costs mean that

many ship management operations are finding cheaper alternatives in

places such as indonesia, the Philippines and Vietnam. However, from

a commercial shipping point of view, Singapore remains the location of

choice in Asia.

The influx of western maritime companies into Singapore has had

a knock-on effect on their Asian counterparts. Local Singaporean

companies that were traditionally Asia-focused are now adopting more

international standards when it comes to the terms and conditions they

offer their employees.

mark Robertshaw says that he has seen the amount of holidays

offered increase from 14 to 21 days. Private medical insurance is

typically offered on top of the Central Provident Fund Contributions.

once a common feature of the Singaporean working week, Saturdays

are now spent shopping and relaxing with friends and family rather than

working. Working alternate Saturdays even five years ago was seen as

the norm in shipping circles, but today, as in other international shipping

centres, most activity takes place between monday and Friday. of

course, technical people are usually on call 24/7, but flexi-time working

practices have been introduced in many companies as employers

recognise the importance of establishing a good work-life balance for

their employees.

Companies have become more focused on making the working

environment more pleasant and ensuring that the office is located

near public transport. They understand that shipping and offshore

professionals have many choices when it comes to employment and

that it makes good economic sense to ensure that they are kept happy.

The Singaporean government is well aware too that it is competing for

global talent and that child care and maternity leave are important issues

for young families. it has accordingly raised child care and maternity

allowances to better match those offered in Europe and the USA.

As mark Robertshaw says: “Singapore will go from strength to

strength as a maritime centre, as long as employment terms match

international standards and it is seen as good place to work and play.”

Working in Singapore The Baltic speaks to recruitment specialist Mark robertshaw of faststream Asia

about the demand for shipbrokers in the lion republic


human Element mLC

It has been estimated that there are roughly 20,000 shipping compa-

nies in the Asia-Pacific region, operating something like 29,000 ships

which will require certification in connection with the maritime Labour

Convention 2006 (mLC). in addition, there are thousands of man-

ning agencies in the region which may require certification – 850 in the

Philippines alone, according to some estimates.

That represents a lot of certification, but international classification

society bureau Veritas (bV) has already completed a considerable amount

of work in this and is well advanced in its planning for the task yet to come.

Claude maillot, bV’s ships in service director, says, “our internal

procedural system, together with inspection checklists and reporting

systems, is ready for the start of the certification process for large

numbers of ships. in the Asia-Pacific region, bV has 90 mLC inspectors

and trainers, which represents 32% of its total number of trained mLC

personnel that provide worldwide coverage of those ships which will have

to be mLC-inspected.”

maillot emphasises, “Shipowners need to start work now on mLC-

related issues in order to avoid the final rush when the convention enters

into force. This is particularly important for those companies with ships

where the mLC-ratifying country – for example, the marshall islands,

bahamas, Antigua and barbuda, Panama and Liberia - have adopted the

concept of pre-convention certification of ships.

“As a Recognized organisation for the marshall islands, the bahamas

and Panama (with Antigua and barbuda and Liberia soon to be signed,

also), bV is authorised to perform reviews of DmLC Part ii and the pre-

convention certification of ships. it is also helping owners in connection

with gAP analyses, regardless of flag.”

bV has certified 19 ships under the voluntary certification scheme

with the marshall islands and bahamas flags. The same number of gAP

analyses has also been carried out. nine seafarers’ manning offices have

been certified in greece, the Philippines and the UK.

maillot explains, “With the recent increased demand for gAP analyses

and voluntary certification by shipowners and seafarers’ manning offices,

we are involved in various projects worldwide. This number is likely

to increase in the following period as the convention ratification date

draws nearer.

“The certification of manning agencies, of course, will depend also on

the national legislation that governs implementation of mLC in different

countries. Some countries may adopt their own standards and control

systems necessary for certification and for the control of manning

agencies in their own territory.

“Certification of manning agencies is performed in accordance with

bV’s Rule note Standard for Quality management System of Seafarer

manning offices. The process requires a documentary review and an initial

audit to be performed for certification purposes.”

The duration time for the whole mLC certification process is difficult to

estimate. maillot explains, “it mostly depends on the time required for the

company to prepare documentation in line with the flag state requirements

defined in the Declaration of maritime Labour Compliance (DmLC) Part

i and the results of gAP analyses. The process also involves shipboard

inspection and reporting. Companies should start planning as soon as

possible in order to be able to complete the whole certification process in

the required time.”

bV holds regular training courses for companies in relation to mLC

compliance. These courses are based on the training material for bV’s

own mLC inspectors. Since 2009, bV has performed 43 external training

sessions related to mLC 2006 worldwide, attended by a total of 522

participants. in the Asia-Pacific region alone, there have been 15 training

sessions, attracting 156 participants.

bV is also currently developing a web-based training program for the

education of personnel involved in mLC compliance. This interactive multi-

media e-learning course will be available on bV’s business School web

page. in addition, a series of web-based seminars (or webinars) on mLC

compliance have been prepared and will be delivered by bV tutors on the

web. This service is open to anybody interested in the subject.

Massive taskclaude Maillot of Bureau Veritas says it is well advanced in Mlc certification

compliance but warns that shipowners and manning agents need to get ready now

Claude Maillot


human Element Class nK

In recent years the classification societies have increasingly been asked

to certify areas away from their traditional focus on ship’s structure. The

imminent implementation of the maritime Labour Convention 2006 will

see the classification societies acting on flag states’ behalf to provide

what will soon be crucial certification for the operation of a vessel in inter-

national trade.

in an interview with The Baltic mr Kakubari explained how ClassnK has

geared up to meet the demands of mLC 2006.

The Baltic: Could you outline the extent of ClassNK’s involvement in

MLC certification?

Mr Kakubari: As a classification society, our main role with regards to

mLC certification is to carry out the onboard surveys and issue certificates

on behalf of the flag administration. We currently have authorisations from

12 of the world’s top flag states to carry out such surveys as an Ro, and

we hope to receive such authorisation from all major flag states prior to the

implementation of the convention.

in addition to the surveys and certifications themselves, we also offer a

consulting service to help shipowners prepare for the certification process,

including conducting gap analyses to identify discrepancies between

convention requirements and the owners, labour management system, as

well as advise owners on what procedures they will need to implement in

order to address the convention requirements.

The Baltic: Are you having to devote additional resources to this,

train/recruit more staff?

Mr Kakubari: While we do expect that there will great demand for mLC

certification in the coming years, we don’t anticipate the need to greatly

increase our staff from external sources. instead we’ve established an

internal training system for our surveyors who are already certified to

carry out iSm and iSPS surveys, and we expect to be able to meet

demand for surveys entirely with our own expert staff. At present, more

than 260 of our surveyors have completed mLC training, but our goal is

to have more than 300 surveyors around the world, or roughly one-third

of our total surveyors) capable of carrying out mLC certification by the

time the convention is implemented.

Preparing for MLCclassnK’s Executive Vice President, shosuke Kakubari, explains how the Japanese

classification society is getting ready for the Maritime labour convention.

ClassNK Executive Vice President Shosuke Kakubari (back row third from left) with other members of the

classification society’s board including Chairman and President Noboru Ueda (front row, centre).


human Element Class nK

The Baltic: How aware do you think shipowners and manning

agents, especially in Asia, are of the need to comply with the MLC

and its certification procedures?

Mr Kakubari: We’ve been discussing the mLC with shipowners

throughout Asia at technical seminars, meetings of our technical

committees, and at one-on-one meetings with shipping companies for

some time now, and while some shipowners are more prepared than

others, the procedures and requirements for mLC compliance are well

understood throughout Asia, and a majority of companies are taking the

necessary steps to ensure compliance.

The Baltic: It is still not clear exactly when the MLC will come into

force but, if it is in late 2012 or early 2013, will there be enough time

to get all shipping companies certificated?

Mr Kakubari: if the convention is adopted in late 2012 or early 2013,

then we still have a year and a half of preparation time. However,

the countries which have already ratified the mLC will need to create

procedures for shipowners to ensure compliance with the convention, as

well as incorporate the convention requirements into their own domestic

regulations before the convention is officially adopted. This is likely to

be the most time-consuming part of the entire process. if flag states

complete this process quickly, then shipowners will have that much more

time available. on the flipside, every extra day that the flag states take

to incorporate the requirements is one day less available for shipowners.

nevertheless, once the mLC enters effect, we expect there to be

peak demand for certification, and we’re taking steps to make sure we

have the resources on hand to meet that demand.

The Baltic: Are you already issuing pre-Convention certification?

Mr Kakubari: Currently the marshall islands is the only flag state to

have completely incorporated the requirements of the mLC into its

own domestic regulations, and we have already issued statements of

compliance to four vessels in line with the marshall islands’ instructions.

As these statements of compliance can be easily converted into maritime

Labour Certificates once the convention is enacted, we expect there to

be a strong demand for this service in the months ahead.

The Baltic: Can you give an estimate of how much additional

cost per vessel complying with the MLC could mean for a typical

owner?

Mr Kakubari: As the convention itself has yet to be adopted, and as

every shipowner’s labour management system differs, it is hard to say

exactly how much compliance with the convention will ultimately cost.

However, based on our experience with pre-convention certification,

excluding travel costs, we expect the certification process itself to cost

roughly US$3,000 per vessel.

The Baltic: Turning to issues of fleet growth, and demand and

supply, are you expecting the current glut of newbuildings to be

followed by a prolonged downturn in ordering?

Mr Kakubari: While the market remains difficult for bulkers, tankers and

container carriers, the main cause of the current down market is the

large number of orders placed during the boom before the economic

crisis. However, ordering has been significantly reduced over the past

few years, and there are only a small number of newbuildings slated for

completion after 2013.

With the rush of newbuilding orders for container carriers in the first half

of this year, i think we are already starting to see signs of recovery. With

prices for newbuildings still low, i think we will slowly see the market for

tankers and bulk carries return as well, but this may take some time yet.

The Baltic: More generally, how do you see prospects for the

classification sector over the next two or three years?

Mr Kakubari: While we don’t expect the core of our classification

activities to change, with the constant pace of new regulation, the

number and variety of surveys we carry out is steadily increasing, and

we expect this trend to continue.

However, we have always believed that classification’s ultimate

role is to serve the greater maritime industry, and what downturns like

this one show is that there is much more that we can do to support

the continued growth and development of the industry as a whole. At

ClassnK, we’re completely dedicated to this task and are working with

partner companies from both inside and outside the maritime industry to

develop new software systems and iT tools to help reduce the burden

of convention compliance on shipyards and owners, and hopefully

contribute to the resurgence of the maritime industry.

ClassNK says the number and variety of

surveys it carries out is increasing


human Element Supply and demand

The maritime Labour Convention (mLC), adopted by the

international Labour organisation (iLo) in 2006, is often seen as

simply a bringing together of existing iLo conventions. And that

is quite true. However it does much more than bring together

regulations that, in many cases, have been in existence for many years.

Previously, adoption of iLo conventions and their was very patchy.

The mLC is likely to come into force in late 2012. When it does all of

the iLo regulations protecting the welfare of seafarers will apply to all

vessels and will be backed up by a system of flag state certification and

enforcement. Perhaps more importantly, inspecting for mLC compliance

will become a key part of port state control inspections.

in other words iLo regulations will change from being not much more

than guidelines for the top end of the industry, and seen as irrelevant to

the bottom, to being a regulatory fact of life for all in the industry.

most major open ship registers and the big classification societies

have long recognised the importance of the mLC and are well prepared.

Whether the same can be said for some other flag sates and for many

owners and crewing agents is another matter.

Earlier this year the Liberian Registry carried out the first ship

inspection for compliance with the iLo maritime Labour Convention

2006 (mLC), ahead of its entry into force. The inspection was performed

on board the 7,000 TEU containership UASC Yanbu, owned by D

oltmann Reederei of bremen, germany, and managed by Hong Kong-

based Anglo Eastern Ship management.

Liberia was the first state to ratify the mLC; its shipping administration

has trained nearly 100 of its auditors to carry out mLC inspections and

verification of Liberian-flag ships.

meanwhile, French classification society bureau Veritas has certified

Philippines-based manning agency maryville manila inc for compliance

to the maritime Labour Convention 2006 on a voluntary basis. This

was the first manning agency to be certified by bureau Veritas in the

Philippines.

Claude maillot, VP Ships in Service management, bureau Veritas,

says: “The readiness of maryville manila inc. to move towards voluntary

compliance and certification under mLC 2006 in advance of the

convention coming into force demonstrates both the quality of the

organisation and the forward thinking of its management. We have so

far certified one seafarer manning office in the UK and its branch office

in india, two in greece and we have published a guidance note (ni 563)

to facilitate the certification process. We expect other manning offices

will be looking for certification before the convention enters into force,

probably next year.”

unexpected challengesSome of the implications of enforcing the mLC are only just becoming

apparent. The mLC requires owners to “ensure that seafarers engaged

as ships’ cooks are trained, qualified and found competent”. The

Convention’s guidelines state: “Seafarers should only be qualified as

ships’ cooks if they have passed an examination prescribed by the

competent authority or passed an equivalent examination at an approved

training course for cooks.”

A new study has, however, highlighted that there is no common

standard for the training and certification of ships’ cooks, something that

will be required by the impending international Labour organisation’s mLC

2006, or Seafarer’s bill or Rights. The European Union-funded Seachefs

project warns that the situation is made worse by the diminishing number

of qualified cooks on the maritime employment market at a time when the

fleet is continuing to grow.

At the recent international Chamber of Shipping/international Shipping

Federation conference Professor Ralph becker-Heins from bremen

Shipping University said that nearly all flag states have ignored the

existing legal basis regarding standards for cooks aboard ships. now

with the ratification of the mLC likely this year all flag states will have to

take action.

Professor becker-Heins warned that it was totally unclear what

certificates were needed. He said: “Flag states urgently need to define

regulations for ships’ cooks and put them in force to meet the demands

of mLC 2006. The current reality is that owners and managers have little

evidence that the cooks they employ really do have cooking and hygiene

skills and are not going to poison the crew.”

Professor becker-Heins says the best way to achieve a common

standard in time to comply with mLC 2006 is to make use of the existing,

non-marine, international Cooking Certificate (iCC) which, he says, is

setting new industry-derived standards for cooking worldwide.

The proposal is for shipping to enrich the iCC syllabus with a maritime

module. According to the Seachefs project the iCC already largely

covers the core curriculum now used at maritime cooking centres. The

key subjects to be added are provisioning, menu planning, hygiene and

ship safety.

Waking up to MLCnow is high time for owners and crewing agencies to pay attention to the

Maritime labour convention, as David hughes reports.

One expected affect of the MLC will be a

renewed focus on cook certificates


insurance overview

Most economists agree that Asia will be the primary engine

of global growth in the current decade, with the Asian

consumer market in particular driving it. This trend has a

direct impact on infrastructure needs, energy requirements,

demand for raw materials, tourism and of course, consumer goods.

increased shipping activity in support of these developments is a direct

result. As well as benefiting international trade from Europe, north America

and other regions, supported by large vessels, there is significant develop-

ment in the smaller vessel sector within Asia itself.

owners operating coastal vessels and those employed in regional

trades have not experienced the same recession-driven difficulties as

some owners elsewhere in the world. offshore craft supporting the oil

and gas sector and the energy industry in general, have seen an increase

in employment and will continue to be in demand as energy needs in

the region grow further. Tug and barge operations are primarily used to

transport coal throughout Asia and a similar outlook applies to this sector.

interestingly also, as consumer wealth increases and disposable

income is expended on leisure pursuits, then the tourism industry is

beginning to take off, particularly in parts of Asia previously considered

off-limits. This in turn has led to a noticeable increase in sightseeing and

passenger craft. in the future, growth will be both organic in nature as

trade continues to rise in volume and via the development of new markets;

indonesia, malaysia and Vietnam in particular.

The growth in Asian infrastructure, energy demands, consumer

spending and tourism all have a direct relevance to the various vessel

operating niches of the Shipowners’ Club due to our unique focus on

smaller vessel activity, and regional trading. These vessel types include:

coastal tankers, including LPg and chemical, as well as bunkering vessels;

offshore support craft such as AHTS, PSV, crew boats and seismic survey

vessels; fishing boats ranging from inshore craft, to purse seiners and

large factory vessels; harbour craft and dredgers; coastal cargo ships

and container feeder vessels; ferries, comprising conventional, high speed

and day trip excursion boats; tugs and barges and even super yachts,

increasingly appearing as the accessories of the Asian super-rich.

As business grows in the region however, a critical challenge for

us is to ensure the maintenance of high levels of service. There is little

purpose in expanding business and venturing into new markets unless

the service offered to existing and new members continues to match their

expectations in accordance with our reputation. Equally, and of particular

importance to our strategy, is the continuing quality of business based on

sound and prudent underwriting practices, as this ensures the ongoing

underwriting strength of the Club.

A major challenge faced by all owners continues to be the shortage

of good-quality crew. For example, in the offshore industry vessels are

getting bigger and more sophisticated, yet there remains a lack of good

crew to be trained in the safe and efficient operation of these new vessels.

in an attempt to assist vessel owners and operators in addressing this

sort of challenge, to maintain professional levels of training, safety and

security, the Loss Prevention team at the Singapore branch of Shipowners

invests a lot of time and effort in risk management advice and loss

prevention guidance. operational best practice and awareness of safety

regulations are paramount within the Club’s communication programmes

aimed at members and the brokers who represent them.

So, quality of service in terms of underwriting and the provision of

relevant insurance cover, rapid and efficient response to claims and the

judicious provision of loss prevention advice are the three key components

of our offering to our members.

At Shipowners, we see the chief challenge in the near future is to

maintain this quality of service within an expanding market place. not only

that, but as competition in all forms increases, so a closer relationship

between the Club, broker and member is required.

The geographical proximity of Shipowners’ Singapore branch is a

great help in nurturing these relationships. in this way we can gain a better

understanding of the regional needs of our members and can better

explain the value of a comprehensive P&i cover provided by a mutual club,

as opposed to the alternative provided by commercial insurers.

Within this expansionary economic environment, with its variety of

specialised tonnage and with the determination to maintain a top-quality

service in a competitive market, we have decided to increase our staff

at the Singapore branch which services the Asia-Pacific region. by the

end of 2011 there will be in excess of 20 staff in total in our this office,

our expansion having added more underwriters, claims handlers, and an

additional loss prevention executive to the complement.

We are determined to staff the branch with the relevant skillset to

improve our service to our members and their brokers in the Asia-Pacific

region. The region and its growing trade are producing challenges which

we want to ensure that we can meet. The traditional values of a mutual

P&i club will be maintained, but we must adapt to the demands peculiar

to the region and appropriate to a fast-changing economic environment.

Region fuels P&I growthThe Asia-Pacific region economy is providing business expansion potential that

is lacking elsewhere in the world. Yet the economic environment is creating

challenges as well as opportunities, says steven randall, general manager of

The shipowners’ club singapore branch

There has been a big increase in passenger craft as tourism grows


insurance Charterers liability

Recent growth in the take-up of insurance coverage specifically

designed to respond to issues involving charterer’s liability has

continued in the Far East over the last twelve months, according

to Simon King, an underwriter with the London P&i Club.

“one of the reasons for this,” says King, “is the flexibility of the

insurance, which can be tailored to suit individual requirements. Charterers

can select the risks they want to insure against from a range of covers.

These include P&i, war risks, liability to hull, liability as a cargo owner and

a separate bunkers cover. Furthermore, there is flexibility to select the level

of the combined single limit of the cover – in the case of the London Club,

up to a maximum of $500 million or €500 million per event. Assistance

with additional cover for other risks can also be provided, such as

insurance in respect of liabilities as a bailee or for cargo placed in storage.”

Charterer’s risks are a relatively recent addition to the London Club’s

coverage, but the business has shown strong growth – of more than 30%

in the last year. King adds, “Seventy per cent of our charterers portfolio

currently comes from the Far East, which is one of the areas in which the

club’s shipowning membership is particularly strong. Some of this growth

is through entries from new members of the club, but part of it is also

coming from existing members, a number of whom also have owned ships

entered with us.

“The progress which the business has made reflects increasing market

awareness, particularly in Asia, that we are offering such an additional

service set alongside the long-established owners’ P&i and FD&D covers.

Further, in a number of cases, we find that the ability to offer charterers

cover can complement owners’ P&i arrangements. For example, we

recently had a general Average situation where a ship operated by one of

our Far East-based owners was unable to carry the cargo to destination

– and a vessel was therefore chartered in for transhipment purposes.

The club was able to provide the owner with cover for the risks it had

assumed as charterer, so ensuring that its overall P&i cover for the voyage

was seamless.”

King says the club, which has a dedicated office in Hong Kong, is

well-placed to engage with members about their needs in respect of

cover for chartered tonnage. “one of the day-to-day challenges,” he

says, “is to keep up with the frequency with which some of the chartered

entries come on and off risk. but there is no doubt that this type of cover

is becoming ever more important in an environment where charterers

face increasing exposure to ever-evolving liabilities, driven by legal and

regulatory developments, claims inflation and landmark court judgments.”

Charterers take liability cover

london P&i club underwriter simon King explains why charterer’s

liability cover has become a growth area in Asia

Simon King


russian far East

The global downturn hit the shipping related industries of the

Russian Far East (RFE) from early 2009 and it has taken some

time to recover. The RFE is very dependent on the export of raw

materials and a drop in global demand hit the region badly.

one indicator of just how severe the recession was can be seen from

the experience of the local bunker industry. Vitaliy Us of Tsetan Co. Ltd,

says that volumes plummeted by two thirds as trade dwindled.

According to mr Us, the local situation was made far worse by the

introduction of prohibitive duties on export timber and imports of cars.

The move wiped out what had been the staple trade for smaller RFE

shipping companies, taking timber to Japan and coming back with cars.

Companies folded and ships were scrapped.

This year has however seen quite a recovery. in the first half of 2010

major RFE-based shipping and transport company FESCo made a net

loss of US$28 million. This year the company has reported a first-half

profit of $45 million.

FESCo chief financial officer Yury gilts attributed the improvement

to increased volumes and prices . He was quoted as saying that there

had been a “substantial increase of domestic demand for industrial and

consumer goods in 1H 2011 in combination with FESCo’s successful

development of high value added integrated logistics

services enabled us to show good operational and

financial performance. We grew not only in terms of

volumes, but also, in pricing.”

He added: “given the traditional seasonality of

our business we expect even higher numbers in

the 2nd half of the year, which supports our positive

forecast for 2011 full year results.”

The positive outlook is reflected in the figures

from the RFE’s ports for the first nine months of this

year. overall the region saw the throughput increase

by 8% to 94.1m tonnes. Dry cargo made up for 53.5

million tonnes of the total, representing a an 11.6%

increase while liquid cargoes grew at a more modest

3.6%. Vostochny Port, which handles the largest

volumes and includes Kozmino oil Terminal, saw

throughput rise 11.3%. only nakhodka experienced

a significant fall in cargoes, down by 7.5% to 11.1

million tonnes.

While the recovery in demand for raw materials

is prompting an upturn in the fortunes of the

RFE’s shipping-related businesses, government

intervention remains controversial. mr Us observed

that monopolistic practices were being encouraged,

particularly in the bunkering industry where he predicts there will eventually

be only two or three suppliers left.

Reflecting the views of smaller players in the industry, mr Us continued

“Shipping companies, in the full sense of this word - those involved in

shipping large cargoes of metal, oil, coal or containers, are practically

non-existent in the Russian Far East. most of these cargoes are shipped

by the foreign-flag vessels. bigger companies which were left without state

support after the collapse of the Soviet Union were forced to move to flags

of convenience.”

He continued: “This situation has been caused by the bureaucratic

approach to business in Russia, an unfavourable taxation system and

all sorts of inspections and impositions at all levels. That is why the local

companies still operating in the shipping sector are either bunkering and

service companies or fishing vessel owners. in my opinion there is no

reason for optimism in the area. The state gives no support, the fleet is

ageing and the owners are struggling to afford to maintain their vessels.

meanwhile the large companies continuously unite in conspiring to force

the competition out of the market. i am personally not too optimistic

about the future. However, i am confident that our company will carry on

standing our ground and developing our business.”

Looking upAfter suffering during the recession the russian far East’s

maritime economy appears to be regaining its strength though

state policy towards competition remains controversial.

Vietnam

Hong Kong

Thailand

Sri Lanka

Russia

Philippines

PapuaNew Guinea

Palau

Nepal

Mongolia

Malaysia

Singapore

Laos

S. Korea

N. KoreaJapan

Indonesia

India

East Timor

China

Cambodia

Burma

Brunei

BhutanBangladesh

Australia

Azov

Sakhalin

Ohotsk

Petropavlovsk-Kamchatskiy

SovetskayaGavan

VostochnyyVladivostok

PrimorskNakhodka

Canberra

SASCO Main Office:18a, Pobedy Str., Kholmsk, Sakhalin Island, 694620, Russia

Tel: +7-42433-66208 Fax +7-42433-66020

E-mail [email protected]

SASCO Intermodal (SASCO Moscow Office): office 7, 44/28, Sivtsev Vrazhek Str., Moscow, 119002, Russia

Tel: +7-499-2415125Fax +7-499-2418069

E-mail [email protected] agent at Vladivostok (SASCO Vladivostok): +7-4232-497828

SCL agent at Shanghai (Wallem Shipping (China) Ltd.): +86(21)6330-1041

The Sakhalin Shipping Company (SASCO) was established in 1945. Its main area of activity is in the Russian Far East, which is one of the fastest developing regions of the country, and a key hub for inter-national commercial relations due to the rapid growth of Asia-Pacific and South East Asia economics.

SASCO has a fleet of 21 container, Ro-Ro and general cargo vessels, and a team of around 1,000 employees. The company’s annual revenue is US$ 90 million, with EBITDA at US$ 12 million. Every year it carries 3,000,000 mt of various cargoes, 70,000 teu, as well as about 60,000 pas-sengers. It is a member of the BIMCO, Union of Russian Shipowners, Russian Association of Shipping Companies and International Coordination Council on Trans-Siberian Transportation.

SASCO has been repeatedly awarded as best regional employer for occupational safety and health, and as best regional charity and best regional partner for its pension system by the regional govern-ment. Further awards include best federal partner by Russian Railways and best fed-eral customs carrier by the Russian Cus-toms Authorities.

For several decades, SASCO has been the largest Russian domestic sea carrier, with regular container and Ro-Ro carriage being its main strategic activity for over thirty years. SASCO’s network of regular shipping lines now covers main Far East-ern Russian overseas regions such as Sakhalin Island, Kamchatka Peninsula, Chukotka Peninsula (jointly with Trans

Line Logistic Services, Vladivostok) and the Kolyma Area. Eighteen voyages are fulfilled that way weekly from the Russian mainland ports of Vladivostok and Vanino.

SASCO is also operating five own-liner services: SSL (SASCO Sakhalin Line) between Vladivostok and Korsakov, SML (SASCO Magadan Line) between Vladivostok and Magadan, SPL (SASCO Petropavlovsk Line) between Vladivos-tok and Petropavlovsk-Kamchatsky, SVL (SASCO Vanino Line) between Vanino and Magadan (these four services are both for containers and general cargo) and SFL (SASCO Ferry Line) between Vanino and Kholmsk (Ro-Ro services for railway wagons, trailers, cars and passenger services), and maintains a service to Chu-kotka between Vladivostok and the ports of Chukotka Peninsula (Anadyr, Egvekinot, etc) during the summer period only due to strong ice in this area from November through to May.

The next step of this strategy is to de-velop regular international feeder lines.

SKL (SASCO Korea Line) has been in operation for the last fifteen years. This service connects the Russian port of Korsakov (Sakhalin Island) with the South Korean port of Busan (the fifth biggest container port in the world). It was a major route for materials and equipment being imported into Russia for production-shares projects develop-ing shelf oil and natural gas fields oper-ated by “Exxon Neftegaz Ltd” (affiliated with ExxonMobil, SODECO, ONGC and Rosneft) and “Sakhalin Energy” (affili-

ated with Shell, Mitsui, Mitsubishi and Gazprom).

But the real star of current business is SCL (SASCO China Line), which opened in late 2010. This service connected Chinese Shanghai (the biggest container port in the world) with the Russian port of Vladivostok (the biggest Russian Far Eastern terminal container port). From day one the line has provoked intense from importers and ex-porters, not only from the Far East, but also from the whole of Russia. In response to the demands of distant customers, SASCO has quickly extended this service to Vos-tochny, the biggest Russian Far Eastern transit container port. The first year’s ex-perience showed that most of the cargoes being carried by this line were directed to Russia via Shanghai from Ningbo (the sev-enth biggest container port in the world). Therefore, Ningbo has been added to the SCL rotation since October, 2011.

Obviously the carriage of cargo between Shanghai/Ningbo and Vladivostok/Vostochny is not unique, it’s a standard route for mutual trading between Russia and China, Russia’s biggest foreign com-merce partner. But only Sasco arranges the direct carriage without deviation and transshipment in interim ports, thus providing the shortest duration of voyage and offering unmatched flexibility and efficiency for Sino-Russian trading. Only three to five days are necessary to deliver the cargo from the Chinese seller to the Russian buyer, and the cost of carriage is very reasonable: from USD 530 (SOC) and USD 850 (COC) per teu to Russia, and

from USD 300 (SOC) and USD 350 (COC) per teu to China.

SCL cargoes are handed over in Shang-hai at WGQ4 terminal, in Ningbo at MSCT terminal, in Vostochny at VCT terminal, and in Vladivostok at VSCT terminal. The operator of the last terminal, together with Vladivostok Fishing Port, are key partners of SASCO for feeder and liner services. Partners are now developing the hub for uninterrupted operation with foreign and domestic cargoes that arrive, depart and transship. This hub consists of berths, warehouses, connected high-ways and railways, all the necessary infrastructure for supplying cargoes to and from Korsakov, Magadan, Ningbo, Petropavlovsk-Kamchatsky and Shanghai. It is very convenient for Russian import-ers at Kamchatka, Kolyma and Sakhalin that SASCO is the first Russian sea carrier who was attested as Customs Carrier due to the new Customs Code of Customs Un-ion. This status allows SASCO to arrange carriage for the majority of imported car-go from the transshipment port to its final destination before customs clearance and without onerous formalities.

To allow for flexibility and convenience of services, SASCO is permanently increas-ing its owned and leased container stock. Clients can receive and return contain-ers for carriage both in China (Shanghai, Ningbo and Qingdao) and Russia (all the biggest cities such as Moscow, Saint Petersburg, Novosibirsk, Yekaterinburg, Nizhny Novgorod, Samara, Vladivostok and others).

www.sasco.ru

Sakhalin Shipping Company (SASCO)

Routing to Russian Far East


china special report Shanghai Shipping Exchange

The Baltic: The SSE has developed a lot in 14 years. What do you

now see as the primary role of the SSE?

President Zhang: SSE serves as the tie between government and

market. As the institution sponsored by the government, SSE takes

missions assigned by the government, for example, accepting freight

filing of liner companies and nVoCC, credit assessment, national

ship trading information platform, that help government authorities

with decision making; meanwhile SSE also collects and distributes

information to enterprises, reports their needs to the government, helps

them better understand and implement new regulations and policies,

and provides members with a series of general and tailor-made services,

such as information, trading and consulting.

The Baltic: The Shanghai (Export) Containerised Freight Index (SCFI)

has become widely accepted. Do you have an indication of how

many companies make practical use of the SCFI and how influential

it has become?

President Zhang: SCFi is available free of charge on the second

working day after the date of publication and quite a few authorised

brokers, exchanges and data providers are allowed to distribute the

data. So it is hard to estimate the accurate number of practical users. All

SSE members and SSEFC traders are using or looking at the index and

the number might be several thousands.

SCFi serves as solid evidence for decision makers of maritime and

trade circles and has been the important benchmark of market trend

for port and shipping enterprises, trading companies and financial

institutions. The ministry of Transport, ministry of Commerce and State

Administration of Energy designate officials to track the indices and

report to the State Council of China. World-renowned media groups,

such as bloomberg, Lloyd’s List, JoC and domestic mainstream media

like CCTV and people.com also cite the index data in their news stories.

SCFi is now used as the benchmark for settlement of container

freight derivatives. in the past 20 months since January 2010, the SCFi-

linked oTC transaction volume reached 40,000 lots. on June 28, 2011,

the SSEFC (a centralised platform of electronic derivatives trading) was

established. The first month saw the transaction volume of over 400,000

lots and the daily volume is close to 100,000 lots.

A crucial link with the market

The president of the increasingly influential shanghai shipping Exchange,

Zhang Ye, answers The Baltic’s questions about how the ssE operates

now and its role in the future

Zhang Ye


china special report Shanghai Shipping Exchange

The Baltic: Opinions differ within the liner industry about container

shipping derivatives. How does the SSE see this market developing?

President Zhang: The development of the container shipping derivatives

market is inevitable. As with the evolution of other derivatives, like

commodities, the new market will have to go through the same growth

cycle. Large and dominant enterprises will be against this new product

and will not be willing to participate. So in the early stage, the backbone

and force in the market will be the medium and small-sized players.

but for the existing box shipping market, the medium and small-sized

shippers need the risk management tool most because they are weaker

in terms of pricing ability. only when the market has sufficient liquidity

can it attract large companies. A derivative product is better than many

conventional hedging tools. We are currently in the infant stage and it will

take three to five years to attract the large global enterprises.

The Baltic: The SSE has three main objectives: “to standardise

the transactions, to adjust the freight rates, and to

communicate information on the shipping market.” How has the

SSE achieved these?

President Zhang: i’ll explain these three main objectives respectively:

To standardise the transactions: since the founding, SSE persists in

the doctrine of “openness, fairness and justice” and tries to standardise

the market from many aspects, for example, from freight filing to

eliminate any extremes of rates, second-hand ship sale and purchase

contract format and nVoCC format b/L.

To adjust the freight rates: SSE cannot directly intervene in market

pricing but gives guidance by co-ordinating the market participants. The

container and dry bulk freight index guides the market tendency.

To communicate information on the shipping market: the ministry

of Transport and Shanghai municipal government set up the Shanghai

international Shipping information Center at SSE. now we offer what we

call “triple Three” all-time information products. This is made up of: three

websites, bilingual www.chineseshipping.com.cn for comprehensive

shipping information, www.shippinghr.com for human resource and

www.cn-eship.com for sale and purchase of vessels; three books,

the Whitepaper Shipping Book on behalf of the Chinese government,

weekly journal of Shipping Exchange Bulletin and the most up-to-date

information from the Monthly Shipping Report for the government and

membership, and three indices (CCFi, SCFi and CbFi). i believe our

information covers the three fundamental elements of the shipping circle:

people, ship and cargo.

The Baltic: Can you give some indication of how large the SSE is

now, in terms of membership and/or use of services?

President Zhang: SSE has 80 members of staff at its headquarters

and about 300 employees in its subsidiaries, such as the magazine,

advertising, customs brokerage, industry, and SSEFC. SSE has set up a

contact network covering all major ports in China reporting data of freight

index, and several branch offices. SSE now has around 200 members

including container lines, shipping agents, freight forwarders, shippers,

financial institutions and brokers.

The Baltic: What plans does the SSE have for the future?

President Zhang: SSE is dedicated to offering first-class and up-to-

date shipping information, shipping standards and shipping platforms.

Shanghai Shipping Exchange has a staff of 80 at its impressive headquarters


china special report Law

Shipping is no longer

sealed with a hand-

shake, if indeed it ever

was. The strength of

a company’s commercial posi-

tion normally depends on the

contractual rights it negotiates.

if these are not honoured, then

it depends on the company’s

ability to effectively enforce

those rights.

in trade involving China,

disputes are increasingly

bringing parties within the ambit

of Chinese law and arbitration.

Yafeng Sun, a partner with

the Wikborg Rein law offices

in Shanghai, says, “Today,

Chinese interests are using their

growing international power and

influence to insist on contracts governed by Chinese law, and on the

resolution of disputes in China. This can have serious consequences for

the unwary or the unprepared.”

He explains: “Companies invest significant time and effort in negotiating

and securing commercially favourable contracts. but these contracts are

only as good as the counterparty’s willingness to perform. The dispute

resolution mechanism is all too often ignored and ends up as a neglected

clause at the end of the contract.

The moment a problem arises, however, all eyes turn to the dispute

resolution clause. it is the mechanism for resolving a contractual dispute

and will govern how and where this happens. Parties often fail to realise

the importance of this clause until they are faced with a potential claim.”

There are a variety of dispute resolution mechanisms available,

including such modern forms as mediation, arbitration and the use

of binding expert opinions. The two main mechanisms are (i) trial in a

country’s courts of law; and (ii) dispute resolution by an arbitration tribunal.

geir Sviggum, head of the Wikborg Rein office in Shanghai, says,

“most people are familiar with resolving disputes in a courtroom before

a judge. many fail to realise, however, that a judgment issued by, say,

a norwegian court is unenforceable almost anywhere outside the EU.

Should your opponent be domiciled in the China, Singapore or the US,

for example, you must start the process all over again. This can quickly

become extremely expensive and time-consuming.

“An arbitration award, however, can typically be enforced in most foreign

jurisdictions. China, norway, Singapore, the US and approximately 140

other countries are signatories to the new York Convention of 1958, which

provides that these member countries are under an international obligation

to enforce arbitration awards rendered in another member country.”

in practice, the unique

enforceability of arbitration

awards makes arbitration the

only truly effective dispute

resolution mechanism in

international business.

While costs associated

with international arbitration

can sometimes exceed those

of an ordinary trial, and a

losing party typically cannot

appeal an unfavourable award,

commercial parties around

the world still overwhelmingly

favour international arbitration

simply because of its

enforceability.

“A number of issues should

be kept in mind when drafting

an arbitration and choice-of-law

clause,” says Yafeng Sun. great care should be taken in choosing the

location and arbitration venue. Different venues follow different arbitration

rules, and these can affect the cost and quality of the process. London,

Singapore and Hong Kong, for example, are common, well-respected

arbitration venues.

“The choice of law is also important, because the arbitration tribunal

will interpret the terms of a contract through the lens of a particular

country’s law – and some countries’ laws will undoubtedly be more

favourable than others. Some arbitration clauses also require an

escalation provision whereby the parties’ senior decision-makers must

first meet, or the parties must attend mediation, before they can go to

arbitration or start litigation. it is wise to involve legal counsel in each of

these steps.

“many jurisdictions have strict criteria governing the validity of

arbitration clauses. in China, for example, an arbitration clause that fails

to specify a particular arbitration venue (a so-called ‘ad-hoc’ arbitration

clause) is invalid and will not be enforced. You may then face the spectre

of litigation in a Chinese court against a Chinese party.

“With their growing power and confidence, many Chinese companies

today insist that foreigners accept contracts governed by Chinese

law with dispute resolution within China. This need not be worrying.

The China international Economic and Trade Arbitration Commission

(CiETAC) either in Shanghai or beijing, is by far the preferred choice.

“but, to be on the safe side, it is always wise to secure experienced

legal advice to review the dispute resolution provisions of any contracts

before they are signed.”

Traps for the unwaryYafeng sun and geir sviggum of shanghai law firm Wikborg rein

explain how companies can enforce contractual rights in china

Geir SviggumYafeng Sun


china special report Classification

The rapid growth of smaller private shipowners in China is creating

opportunities for classification societies according to italian-based

RinA. its general manager (marine) Asia, michele Francioni, says,

“The newbuilding market came alive again last year and we were

right in the middle of it, with contracts to class newbuildings for Chinese

owners being built at Chinese shipyards. Almost 15 per cent of RinA’s fleet

is now Chinese-owned and we have strong recognition amongst Chinese

shipowners as a class society which cares about them and is willing to

take the time to work with them. Experience with some big conversions

and vessels sold by our European clients to emerging Chinese owners

helped build those relationships. now they know our surnames, they know

our first names, they know where we live and they know they can depend

on us. They know that if they have a problem anywhere in the world they

can call us in China and get the help they need. That sort of connection

is the key to growth in China, and hopefully we will continue to grow more

in 2011 and 2012.”

RinA’s marine business in China has expanded dramatically together

with the local shipping community and shipyards. RinA’s classed Chinese

fleet has grown to more than 120 ships, and RinA has over 40 new

building projects in China, totalling over 4m gt. many of China’s emerging

shipowners are turning to RinA for support, including Jimei Hua Shipping

and Tuofu ocean Shipping, both having several vessels classed with

RinA, and each also building kansarmax

bulk carrier newbuildings to RinA class.

“A lot of the owners who come to RinA

in China have small fleets, less than five

ships, but are keen to grow internationally,”

explains Francioni. “They are used to the

idea of service and they want to work

with a class society which can transfer

expertise and can respond to them as a

family company. So in China we span the

spectrum from classing very large ships

for international owners at big yards, to

working with the whole sector of emerging

shipowners, hungry for expertise and

international markets. it is very exciting.”

RinA is classing ships building at leading

Chinese shipbuilding groups CSSC, CSiC,

new Yangzijiang, new Time, STX Dalian

and Shanghai Waigaoqiao Shipbuilding,

including a 300,000 dwt ore carrier and a

206,000 dwt bulk carrier.

Those looking some let up in the stream of bulker newbuildings will

dismayed by the continued brisk activity at Chinese yards. TinA notes

that very recent deliveries in China include the first of a series of specially

designed self-unloading supramax bulk carriers built at Hantong Shipyard

for Coeclerici, the sixth of twenty-nine 93,500 dwt bulk carriers being built

by new Jiangsu Yangzijiang shipyard for giuseppe bottiglieri and the first

of a series of minicape bulkers to be built at Sinopacific for SnUg.

RinA says that it is also very active in conversions from tanker to bulker

and container carrier to general cargo. it says that it has successfully

converted more than 30 vessels in the last three years, in sizes from

20,000 dwt to 270,000 dwt.

Says Francioni, “We are active in every area of industry, transportation

and environmental protection in China and all over the world, and we

reach out to help companies which are also globalising, as so many are

in China. We help by bridging the gap in competency for newcomers to

boost their competitive capacity on the global market.”

RinA’s first China office was opened in late 1997 and RinA currently

employs over 120 staff in China in the Shanghai head office and in various

other key locations all over the country. RinA China is now the largest

RinA establishment outside italy, and includes also a dedicated plan

approval centre dedicated to support our local clients. There are plans for

further expansion.

Class opportunitiesWhile many in shipping are hoping for a lull in newbuilding construction the

classification societies report a surge in activity driven by demand from chinese

owners, as rinA reports.

Michele Francioni


china special report Ship management

Some Western companies see the emergence of new Chinese

shipowners as a threat. Cardiff-based graig group does expect

China to soon dominate not only shipbuilding, but also ship

owning and crew supply. graig, however, sees only opportuni-

ties in that.

“growth in every area of shipping in China, and continued high growth

across the Asian economies creates real opportunities at a whole number

of levels,” says Hugh Williams, graig ceo. “it is not just growth, it is the

way the economies are changing from state control to a fragmented

private sector majority. That creates demand for expertise and demand

for service.”

graig says that it has responded to that demand on different interlinked

levels. “Like others, we have ordered ships to be built in China,” says

Williams. “but we look beyond the newbuilding to a wider Chinese

dimension. A key part of that project is working with a high capacity and

growing Chinese yard that wants to develop into new ship types. We are

using Chinese bank finance and expect Chinese owner investors to join

us in the project.”

Knowing which yard to choose comes from graig’s established

newbuilding supervision business in China. That is also changing, from

helping Western owners looking for a presence on the ground in Chinese

yards to safeguard their newbuildings, to helping Chinese owners who are

expanding quickly and need shipbuilding expertise. Shanghai-based graig

China has recently won a 10-ship order to supervise newbuildings for

Chinese leasing company minsheng Financial Leasing Co Ltd, and a four-

ship order for SiTC Development group Co to supervise the building of a

76,000 dwt bulk carrier and three 1,100 teu containership newbuildings

at China Yang Fan shipyard. The supervision contracts bring to 26 the

number of Chinese-owned vessels building in Chinese shipyards under

the supervision of graig.

The minsheng contract is to supervise the construction of ten 76,000

dwt bulk carriers to be built at Jiangsu Rong Sheng Heavy industries Co

Ltd with delivery of the final vessel scheduled for the first quarter of 2012.

The 10 are in addition to the eight vessels already under construction

under graig supervision for minsheng at the same yard.

graig China is also supervising the construction of four 45,000 dwt

bulkers for Shanghai Xiang An Electric Power Shipping Co being built at

Chengxi Shipyard.

in addition to the 26 ships now under supervision for Chinese owners,

graig China is currently supervising around 50 vessels on behalf of 10

international owners.

“building ships for ourselves and others in China are first steps,” says

Williams. “Then we can go on to manage the ships after delivery, and to

use Chinese crews when possible.” The first Chinese owner has already

contracted with graig for ship management. graig Ship management

Limited (gSm) has taken delivery of the 79,600 dwt bulk-carrier King

Peace, for which it is providing full technical management and crewing

on behalf of Shanghai-based Zhong An Shipping. The vessel was built

at China’s Wu Jia Zui Shipyard under the supervision of graig China Ltd.

gSm has expanded its Chinese ship management expertise by

employing three new staff in the graig Shanghai office. gSm has also

formed an alliance with beijing-based Sinocrew maritime Services to

employ Chinese crews and has employed its first Chinese officer cadets.

Chinese growth creates opportunities

The idea that a uK-based company might supervise newbuildings in a

chinese shipyard for a chinese owner and then technically manage

the vessels would once have seemed far-fetched, but it is happening

now says hugh Williams, ceo of graig group

in another sign of the scale of orders now with the Chinese yards,

graig has also ordered a series of up to 26 fuel-efficient new

generation mARLin 2000 blue design container feeders to be built at

the major Jin Hai shipyard complex. The bangkok-max vessels have

been designed with the Asian feeder trades particularly in mind The

first two vessels are scheduled for delivery in August and September

2013 with subsequent vessels to be delivered in pairs every two and

half months.

graig ceo Hugh Williams says, “This series responds to the industry’s

needs. There is a gap in the container ship market for quality, fuel

efficient, competitively-priced and environmentally-friendly feeder ships

to service the ultra large containerships now being brought into service

by the major lines. This advanced mARLin family of designs will fill that

gap, and we expect this order to be the first of a series of larger capacity

future-proof vessels, backed by the strength of the mARLin consortia.”

Noble Group (SGX:N21) is a market leader in managing the global supply chain of agricultural and energy products, metals and minerals.

We manage and control integrated supply chains across a diversified portfolio of commodities by creating continuous links between suppliers and buyers. Our products are processed through our owned and operated mines, ports, storage and production facilities worldwide and transported on our own or chartered ships - adding value at every link in the supply chain.

Noble Group is driven by the dedication and expertise of our people who ensure that all areas of our organisation share the same dynamic spirit - one of true entrepreneurialism.

Noble Group Limited

18th Floor, MassMutual Tower38 Gloucester Road, Hong Kong

Tel +852 2861 3511 Fax +852 2527 0282

www.thisisnoble.com


china special report Hong Kong

Over the past decade or so there has been a perception that

other shipping centres, including Singapore, have been grow-

ing at Hong Kong’s expense. While it is true there were some

high profile moves away, Hong Kong remains a very large

shipowning centre which is continuing to attract owners, particularly from

mainland China.

Shipowner members of the Hong Kong Shipowners Association own a

total of 1,877 ships of an aggregate 114.3 million dwt. About half of these

vessels fly the flag of the Hong Kong SAR while the rest are spread over

a large number of flags.

Hong Kong is also a major shipmanagement centre and SAR-based

companies currently control or manage about 10% of the world fleet by

tonnage.

The chief executive officer of Hong Kong-based shipping company

Wah Kwong, Tim Huxley, was quoted earlier this year as saying that Hong

Kong is better placed geographically than Singapore for China and north

Asia and that was why Chinese companies were still moving into Hong

Kong. He added that Hong Kong was a leader in shipping finance and

had a recognised legal framework supporting it.

The HKSoA says that Hong Kong’s SAR status, and its considerable

autonomy, allows the international nature of Hong Kong to develop at the

same time as exploiting its uniquely close links with the mainland and its

business sectors.

The role of Hong Kong as a maritime centre will be underlined during

the SAR’s China maritime Week, which will run from 28 February to 2

march 2012.

The event will feature a major international maritime exhibition plus a

range of conferences covering vessel operations, the marine environment,

ship financing, shipbuilding, ballast water treatment, vessel enclosed

spaces, and tugs and offshore vessels.

The organisers says China maritime Week is aimed at developing a

broad range of forums and events, and networking opportunities focused

on Hong Kong’s role as a maritime gateway to China.

Chairman of China maritime, neil baird, said: “Hong Kong’s global

reputation as a shipping hub and its connections to China has positioned

the city as one of the world’s leading maritime centres. China maritime

Week will provide an opportunity for the whole maritime community

in Hong Kong and China to come together and welcome maritime

professionals from around the world.”

Confirmed events during China maritime week include a nautical

institute conference, a half-day seminar organised by the Hong Kong

Young Shipping Professionals, an interferry regional conference, an ACi

Conference on Tugs and Harbour Craft, Clean Shores, Clean Seas, Clean

Ships maritime environment conference, a Sailors Society Charity Dinner

at the Shangri-La Hotel, a ballast Water Treatment Seminar, and a marine

money Conference.

Underlining the China dimension of Hong Kong’s continued success

as a maritime hub, event organiser Kishore navani noted: “our first three

exhibitions evinced little interest and support from Chinese companies

which found Hong Kong too complicated to reach and more expensive

than government supported events on the mainland. i’m delighted to note

a complete change of heart on the part of a large number of Chinese

companies.”

nevertheless, there has been a feeling within industry and government

that action is needed to promote Hong Kong more vigorously as a

maritime centre.

Earlier this year 24 industry groups came together to set up the Hong

Kong maritime Forum, which is intended to assist the development of the

shipping and logistics sector.

meanwhile the government committed itself to undertake a new study

on how maintain and enhance Hong Kong’s status as an international

maritime centre, building on a similar study completed in 2003.

Current concerns include the lack of double taxation agreements with

other jurisdictions, something which is seen as particularly hitting shipping

companies, and the need to compete with other maritime centres such

as Singapore.

Gateway to ChinaWhile other maritime centres are growing in strength, hong Kong

still retains many advantages, not least its status as a

special Administrative region of china (sAr).

Mainland Chinese companies are still moving to Hong Kong

For more information on these companies and to view this publication online using the latest Page-Turning technology, visit:

www.thebaltic.com

Chinese Maritime Transport Ltd

Clarkson Asia Pte Ltd

Class NK

Lloyd’s Register Asia

Maersk Broke Asia

Nanyang Business School

Noble Group

Parekh Marine Agencies Pvt Ltd.

Rightship

SASCO

@


china special report Taipei

When the conversation turns to Taiwan-based shipping one

name usually dominates: Evergreen. The giant Taipei-based

container carrier is as close to being a household name as

any shipping company is likely to be.

Evergreen group’s chairman and founder Chang Yung-Fa has been

widely recognised for his pioneering role in developing containerisation.

most recently he was presented the honour of Commander in the order of

orange-nassau in recognition of his contribution to the port of Rotterdam

and the development of the Dutch economy.

Evergreen’s links with Rotterdam date back more than 30 years when

the group’s shipping division, Evergreen marine Corp, broke the monopoly

of Far Eastern Freight Conference on the Far East - Europe container trade

and made its first vessel call at the port of Rotterdam; a reminder that Dr

Chang was for many years regarded by many as a controversial figure.

As well as Evergreen, there are a number of other Taiwan-based

container shipping companies, notably including Yang ming. With

expectations of continued low freight rates and overcapacity few are

expecting an easy ride in 2012.

However, the island is also the base for a large number of other

owners, especially of dry bulk vessels. While the dry bulk market has

picked up somewhat recently, one of Taiwan’s major bulk operators

recently conceded tough times lay ahead. The president of U-ming marine

Transport Corp, CK ong, was quoted as saying: “next year there will be

another wave of big ships coming in.” He added that it was “going to be

a difficult year”.

However, U-ming owns a diverse fleet, including cement carriers,

bulk carriers ranging from handysize to capesize vessels and one VLCC.

Currently U-ming owns and operates 29 vessels and has nine bulk carriers

under construction.

According to a report by FT.com prospects for another bulk carrier

owner, Chinese maritime Transport (CmT), look good despite worries

over capesize freight rates, with investment analysts predicting that the

company will outperform the market.

Founded by CY Tung, CmT can trace its beginnings to Shanghai in the

1940s and now, together with its subsidiaries, operates bulk carriers and

inland container transportation and terminals. CmT owns and manages

four capesize bulk carriers and has four more on order. it also engages in

bulk chartering and tanker brokering.

Yang ming’s bulk carrier subsidiary, Kuang ming Shipping Corp, is

continuing to expand its fleet and is scheduled to have more than 20

vessels by 2013 as part of a strategy to become Taiwan’s specialist

panamax bulker fleet.

Another well known name is glory navigation, which started by

transporting logs some 30 years ago. The company has evolved into a

specialist in the transport of bulk cargo within Asia, with a 22-ship fleet.

While the emphasis may be on container and dry bulk shipping,

Formosa Plastics has steadily built up its shipping subsidiary Formosa

Plastics marine Corp (FPmC) to become a major tanker operator. Recently

FPmC has also diversified into bulk carriers and containerships. it now

has a fleet of three chemical carriers, seven oil/chemical carriers, four

VLCCs, five product tankers, two gas carriers, six bulk carriers, seven

containerships and various harbour craft.

meanwhile Taiwan-based tanker charterers found out recently that they

will not be able to charter foreign single-hull tankers from 2013, two years

earlier than expected. in october, government transportation officials said

the new policy would be formally announced at the end of the year but

there would be a grace period of 12 months.

Taiwan has until now taken advantage of the concession in international

maritime organization (imo) regulations phasing out single-hull tankers,

allowing states to extend the deadline for a ban on such vessels from

2010 to 2013.

Difficult year aheadWith a focus of container and dry bulk shipping, Taiwan’s

shipping industry can expect testing times ahead.

Taipei is the base for a dynamic and diverse shipping industry


company profiles

classnK Founded in 1899, Tokyo-based classification society ClassNK has grown to become

not only Asia’s top classification society, but the world’s largest classification

society on a tonnage basis. As the only classification society with more than 190

million gross tons on its register, ClassNK has emerged as a leader in the maritime

arena, combining a commitment to serving the maritime industry with a dedication

to cutting edge R&D. To learn more about ClassNK’s activities, we sat down with

ClassNK Chairman & President Noboru Ueda.

classnK is a heavy investor in efficiency research and development, mainly in the Japanese project to cut vessel emissions by 30%. since the programme is due to report next year, can you advance some conclusions already? ClassNK has committed more than US$28 million to supporting 19 of

the 22 projects being carried out as part of a Japanese national program

to reduce maritime GHG emissions. As this program is not slated to be

completed until 2013, many of the projects are still very much ongoing,

and therefore the final results have yet to be released.

Nevertheless, interim results have already been released for some of

the projects which we feel have the greatest potential, namely research

into the application of air lubrication systems on commercial vessels, and

the development of new hybrid energy systems for maritime use.

Air lubrication systems have already been installed on two heavy

lift vessels owned by NYK Line, and they were shown to reduce CO2

emissions on the vessels by more than 10% during sea trials. While

further research is necessary, this technology is slated to be installed on

three Kamsarmax bulk carriers ordered by grain major ADM at Oshima

Shipbuilding. We are confident that it can be applied to other vessel

types as well.

Another Project showing impressive results is a project to develop

a new hybrid power system using Kawasaki Heavy Industries’ Gigacell

battery technology. This new hybrid system, being developed jointly by

NYK Line, MTI, and Kawasaki Heavy Industries, with support from NK,

has been installed on NYK’s eco car carrier the Auriga Leader in order to

carry out onboard testing of the system. The system works with the Auriga

Leader’s existing solar power systems to create a stable, safe, and green

energy source for use by the vessel.

We will release further results for all of our GHG related R&D projects

as this programme nears completion.

last year, classnK had one of its most successful years ever. What are the expectations for 2011? As 585 newbuildings totaling a record 17.8 million GT joined the ClassNK

register in 2010, last year was one of our most successful years ever.

In January 2011, we became the world’s first classification society to

have more than 180 million gross tons on our register, and the register

topped 190 million gross tons at the end of September 2011. So we have

high expectations for this year, as well. As more than 486 newbuildings

totalling more than 14.8 million gross tons have already been added to

our register in the first nine months of this year alone, we expect that

this year’s total additions to our register will to rival last year’s figures.

I think that our consistent growth reflects the great amount of trust that

the world maritime industry places in ClassNK and our services, as well as

our unmatched commitment to supporting the growth and development

of the maritime industry.

classnK is working with iBM Japan to develop new cloud-based infrastructure to help the industry meet new requirements included in the international Maritime organization’s goal Based standards. What are the advantages of this partnership and what improvements will the users experience? With each new regulation, the paperwork and time required for compliance

continue to grow. In addition to green shipping issues, one of the most

important tasks for classification societies will be helping the maritime

industry address the burden of new regulations. Our hope is that we can

develop IT systems to help reduce the time and expense necessary for

compliance and in so doing, reduce costs for owners and promote the

development of the maritime industry.

One area where we hope to make a large contribution is with regards

to the Ship Construction Files required by the IMO Goal Based Standards.

As part of the Goal Based Standards, vessels will be required to maintain

a Ship Construction File, including information on how the GBS have

been applied to the vessel. As this file will include ship’s plans and other

information that will be necessary for ship repair, it is expected that these

files will be also maintained at onshore archive centres as well.

As ship’s plans and other data are extremely sensitive intellectual

property, these archive centres will need to be both accessible and

highly secure. By developing the ClassNK-SCF Archive Centre as a

cloud-based system, we are able to take advantage of IBM’s latest

developments in IT security systems, including not only the latest data

encryption technology, but also appropriate restrictions on printing,

copying, and other secondary measures for preventing data leaks,

and combine that technology with ClassNK’s extensive experience and

reliability in protecting client information.


company profiles

You stepped down as the international Association of classification societies chairman, at the end June. Did you accomplish your main goals and what are iAcs’ plans for the future? When I became IACS Chairman in July of 2010, I set out three main goals

for my term:

• Faithfully enacting the IACS commitments to the EC and completing

the transition to a more open and transparent IACS.

• Positively contributing to technical discussions at the IMO.

• Better reflecting the needs of the global maritime industry.

I am proud to say we made incredible progress on each of those

goals. With the addition of the Croatian Register of Shipping (CRS) and the

Polish Register of Shipping (PRS) we have now welcomed our 12th and

13th members to IACS, and are a stronger and more robust organization

than ever.

With each such new addition to our membership, IACS proves its

commitment to openness and transparency, and I am proud to have been

part of this transition.

We have also made excellent progress addressing issues related to

the IMO’s EEDI scheme. As one of the ways of improving the EEDI score

of vessels is to reduce design speed, IACS’ environmental expert group

has been working to develop a minimum speed requirement to ensure

that EEDI implementation doesn’t affect ship safety. Finally, in order to

better include the opinions and insights of the wider maritime industry

in the development of the EEDI new regulations, IACS helped establish

a new Joint Working Group, including representatives of class societies,

shipyards, and shipowners to establish joint industry guidelines for EEDI

interpretation. The EEDI will have a tremendous impact on the design of

new vessels, and by bringing this group together we can make sure that

these new regulations can be implemented quickly and effectively.

As for the challenges that remain, one of the most important is the

harmonised Common Structural Rules. We have made tremendous

progress on harmonising the bulk carrier and tanker CSR this year. Yet

while I am confident we will be able to submit the completed, goal-based

standards compliant rules to the IMO prior to the end of 2013, there is still

much work to be done.

Do you really believe that the Energy Efficiency Design index (EEDi), as it stands today, will lead to better ships in the future? Aren’t you concerned that it may lead to underpowered ships because the easiest way to have a low EEDi is to reduce design speed? I’m a firm believer in the EEDI, and I think it will have a tremendously

positive effect on our industry. The beauty of the EEDI is that it mandates

improvements in efficiency, while leaving room for innovation. As a result

I think we will see a revolution in new green maritime technology over the

coming years.

As you mention, however, very valid concerns have been raised about

the potential to build underpowered vessels. Our role as classification

societies is to address just such technical complications, and the IACS

Expert Group on Environment has been hard at work to develop minimum

power requirements for inclusion in the final EEDI. Furthermore, in order

to make sure that concerns like this are given a proper hearing, as well

to ensure the smooth and balanced implementation of the EEDI system,

IACS established a new EEDI Joint Working Group (JWG) with leading

maritime organisations from throughout the industry. I have made it my

mission as IACS Chairman to improve the communication and cooperation

between IACS and the wider industry, and the establishment of this JWG

and our work on the EEDI are some of my proudest achievements as

IACS Chairman.

Global Reach with Local Expertise Whilst Maersk Broker believe the Asian influence on the global shipping markets will continue to increase, other geographical areas are simultaneously showing accelerating developments.

Volatile and at the same time changing global markets will require expansion and further diversification within the global shipbroking industry.

In terms of business volume and global market coverage, Maersk Broker have come a long way since 1914, when the company was founded by Mr. A.P. Møller as a small, independent Danish Shipbroking operation. Today Maersk Broker’s proactive ap-proach to the market is demon-strated by having offices in all relevant geographical locations including growth areas like Viet-nam, India, the Middle East and very shortly South America.

Local market presence is keyEntry into new and potential markets or business segments remains an integral part of the global Maersk Broker business

philosophy, also when it comes to future business development. Anders Hald, Chief Executive of Maersk Broker Asia, explains: ”Last year we opened an office in South Africa and shortly we will open our first Maersk Broker

representation in South America. The ability to be at the forefront when it comes to market intelli-gence, delivering business rele-vant information of high quality combined with direct access to local business is of paramount import-ance to our clients wor-ld-wide. In terms of shipbroking we now have 17 offices around the world and thereby have an unparalleled information and business development network.”

Anders Hald also admits that this is obviously not the cheapest way to run a shipbroking operation, but the advantages are very clear and the benefits for the clients obvious.

”Our strong market presence has enabled Maersk Broker to de-velop a very active broking net-work servicing all segmenets of the global shipping market. Maersk Broker’s emphasis on establishing close working relationships with our customers locally enable us to better understand their needs and preferences, whilst simul-taneously being able to share our views, analyses and interpretation of global trends and developments as applicable in specific business contexts. We have for many years opted for a different business development philosophy compa-red to our competitors. The level of success can obviously only be judged from the amount of business Maersk Broker conclude

globally and the overall income thereby generated; based on these measurements it seems we are doing something very right…”

Business developmentIn terms of business activities, Maersk Broker are today involved in all major market segments providing a full range of services within chartering, contracting of newbuilding and sale & purchase of second hand vessels.

At present, considerable resources are being invested within project development which includes ”tailor-made” combination trans-actions comprising newbuildings and/or second-hand tonnage, their financing and employment. By combining all services of the global Maersk Broker organi-sation, the aim is, according to Anders Hald, to develop in-novative consolidated business opportunities.

”Our services in relation to all main tonnage segments include development of attractive ship financing models for newbuil-ding projects and second-hand tonnage, as well as long term employment structures.”

Research adds value As an integrated part of the associated services available to clients, Research is considered amongst the most important. � is is done diff erently than most

other major broking houses, as Maersk Broker does not consider research and market intelligence something they wish to sell.

”By providing our clients and our global organisation with high quality market information, ana-lyses and tailor-made business studies, Maersk Broker Research is an active partner in our – and thereby our clients – day-to-day business development.” explains Anders Hald.

Internal Shipbroker educationAs with most other shipbroking companies, the employees are the most valuable asset to Maersk Broker. To attract and retain the right individuals in a dynamic and changing shipping world, the continuous training and personal development of all staff within the global organisation is consi-dered essential. In addition to this, Maersk Broker have since 2005 conducted its own 2-year inter-national trainee programme for aspiring shipbrokers world-wide.

”The programme aims to educate future world-class shipbrokers with a truly global perspective on the business.” explains Anders Hald. ”The last couple of years the majority of our trainee gra-duates were from Asia, and we are now very pleased to have a number of our Asian brokers actually perusing a career within our offi ces in Europe, representing Asia in the global Maersk Broker equation. We need to develop the talent, but also potential leaders of the future within our organisation.”

Maersk Broker AsiaLooking at Maersk Broker Asia specifically, the operation is the largest integrated shipbroker in the region, with nine offices employing close to 150 brokers and staff. In the past decade more than 700 newbuilding orders have been placed through Maersk Broker Asia with yards in China, Korea, Japan, Singapore, Vietnam and the Philippines and in addi-tion hereto, the company enjoys a very solid position within regional dry cargo and container vessels chartering.

According to Anders Hald addi-tional resources have lately been invested into a more focused approach to second-hand sale & purchase and tanker chartering, resulting in improved results and a continuously expanding market position. In addition, effort has

also been put into catering for the increasing local demand for more specialized tonnage including PCTC, heavy lift and offshore support vessels, as well as dedi-cated tonnage for the installation of windmills at sea.

”The future will undoubtedly offer many opportunities across the various market segments – we have to ensure that we are prepared and ready to efficiently and professionally engage for the benefit of our clients.” finishes Anders Hald.

It’s all about trust

“We now have 17 o� ces around the world and thereby have an un-paralleled information and business develop-ment network”

Maersk Broker offi ces worldwide

City: Opened in:

Copenhagen 1914London 1951Tokyo 1963Taipei 1980Hong Kong 1983Seoul 1986

Singapore 1995Beijing 1996Shanghai 2001Athens 2001New York 2005Hanoi 2006

Hamburg 2007Mumbai 2008Dubai 2008CapeTown 2010Buenos Aires 2011

Photo: Anders Hald.


company profiles

clarkson Asia Pte ltdFEW national anthems can have more appropriate titles than “Onward

Singapore”, which truly encapsulates the economic momentum and

vitality of this city state. One of the Asian Tigers, Singapore has a history of

sustained and exemplary growth plus a proud maritime heritage, so it was

the natural choice for Clarksons when we established our Asian presence

there 30 years ago.

In 1981 Clarksons berthed in the Asian market in a joint venture with

two other brokers - Aall & Co of Tokyo and Charles R Weber of New York.

Together with a local trading company, Seadragon Maritime Inc Pty Ltd

was founded, which focused on the fledgling tanker sector in Singapore.

The company then employed between 5 and 10 brokers throughout the

1980s.

That small foundation has borne significant fruit and today in the region

Clarksons has three offices in Eastern Asia, one in India, and a further four

in Australia. From the handful of brokers 30 years ago we now employ

110 within the region and our expertise has been extended from the initial

specialisation in tankers to focusing on all the major facets of shipping.

In line with the culture of Clarksons, the clear remit for each office is to

understand the needs of its local shipping community and to provide it

with the group’s renowned quality and depth of service.

We are able to deliver this service thanks to the unrivalled support

base of Clarksons’ 18 global offices and nearly 600 brokers, all backed

by the group’s unparalleled shipping research business. Thirty years ago

world seaborne trade was estimated to be about 3,700,000,000 million

tonnes per annum, but powered by the rise of importing and exporting

economies, such as China, this year it is estimated to reach 9,005,000,000

million tonnes. This huge bottom line growth, with an estimated 90% of

world trade now transported by sea, has fuelled demand for our services.

In the same 30-year timeframe, Asia’s position in the global economic

order has shifted dramatically and, as volumes have grown, so has the

diversity in the types of ships needed to meet this demand. As a result

both the capacity and depth of services needed to support the shipping

businesses of Asia have similarly changed and we have risen to the

challenge with the breadth and scope of our offer.

In recent years, Singapore has established itself as the primary hub

centre for shipping in Asia, in part due to its favourable geographical

position at the centre of the world’s major trade routes. Alongside the

ships, the maritime community in the region has established a thriving

home base as global operations seek the most suitable location to

represent their interests within the world’s fastest growing region.

Our long-established position in Singapore, and the experience of

developing our offer in response to the growth of the region, means that

Clarksons is uniquely placed to help clients. By combining local and global

knowledge and employing many different nationalities on our broking

desks we are able to offer clients the expertise and experience that they

require to advise and support their shipping exposure in this exciting

region.

Underpinning this is the Clarksons Research resource, which is

recognised throughout the maritime world as the most comprehensive

and reliable provider of intelligence on the shipping and offshore industries.

Used by shipping, shipbuilding, insurance, banking and investment

interests across the globe it is produced by our in-house team of

researchers and analysts at offices in the UK and Shanghai. The Shanghai

office is part of the formidable team that we have built up in the Asia region

and our fully integrated approach has enabled us to deliver a best-in-class

service offer to our clients.

We were delighted earlier this year to be awarded Best Maritime

Service Provider at the 2011 Singapore Maritime Awards, organised by

the Maritime and Port Authority of Singapore.

Asia today is home to more than 60% of the world’s population and,

despite the immediate global economic outlook, we are confident that it

will continue to build on its position as the primary global manufacturing

centre, while at the same time growing its already substantial consumer

base.

Both shipping in the region and Clarksons involvement at a local level

have come a long way in the last 30 years, and the wind looks set fair for

a vibrant future.


noble group (sgX: n21)Noble Group (SGX: N21) is a leading, diversified natural resources sup-

ply chain group with worldwide activities in mining, farming, process-

ing, ports, shipping and marketing of metals and minerals, energy and

agricultural products.

We manage a diversified portfolio of essential raw materials and

also transport these commodities through our own extensive chartering

operations. By owning and operating key assets, we manage integrated

supply chains from origination to final delivery to our industrial and

commercial clients.

EnergyAs one of Noble’s fastest-growing and most dynamic pipelines, the natural

resources handled by this segment encompass the spectrum of energy

inputs, right through to the distribution of electricity. Our products include

the entire range of thermal coals, gas and ethanol. We are also leaders in

clean fuels initiatives and we are a major producer of ethanol and electricity

from bio-mass in Brazil.

AgricultureThis business unit, accounting for the majority of the Group¹s self-owned

assets is a little over 10 years old. It has emerged over that time to become

a leading player in linking low cost origination markets, in locations such as

South America and the Ukraine, to emerging markets with high demand

growth.

This segment’s integrated pipelines store, handle and process the

spectrum of key agricultural products from oilseeds and grains, palm oil,

cotton, coffee to cocoa, while Noble has also emerged to become a top

tier operator of modern sugar and ethanol mills in Brazil.

Metals, minerals and oresAs one of the world’s top suppliers, Noble has operations stretching from

India to the United States, Australia to Europe giving us critical mass at

key origination and delivery points. Products include iron ore, ferro alloys

and aluminium.

company profiles

Parekh Marine Agencies Pvt. ltd.

Parekh Group of Companies, wholly owned by the Parekh Family, was

founded in 1951 to diversify the activities of the family from trading to

shipping and related activities. Over the years, the Group has evolved into

a multifaceted service provider actively involved in all aspects of shipping

and logistics in India. With the changing face of the business environ-

ment in India since 1980, the Group has now emerged as an established

integrated service provider to domestic as well as international shipping

interests, with services ranging from handling a small LCL parcel to a

heavy over-dimensional single-piece machinery or a full shipload of cargo.

Over five decades of experience in the shipping field, gained through

a mix of hands-on approach combined with technological advances and

continuous inputs from professionals, has today brought the Group to a

commendable stature within the Indian shipping and logistics industry.

Today the Group is proud to be associated with some leading names in

the international shipping and logistics field.

With operations spread over 17 cities and all major and minor ports and

ICDs of India, the Group has a truly national presence and infrastructural

set-up to effectively service any client. Well-networked offices in all

locations enable the Group to provide real-time information and value-

added services to its customers. Some of the services provided by

Parekh Group are shipping agency, multimodal transportation, chartering

& brokering, freight forwarding, off-shore services, CFS and warehousing,

and supply chain management.

From 1 April 2008, the agency division of the Group, Parekh Marine

Agencies Pvt. Ltd., has had the distinction of representing India as the

Indian representative member of the prestigious worldwide Multiport Ship

Agencies Network. This association with Multiport Network provides

Parekh Group with an international outreach and an enhanced opportunity

to serve a larger client base.

In the current business scenario of rapidly advancing India, the Parekh

Group today is well poised to take the tide at upswing, ready to contribute

to and participate in the progress.

Parekh GroupParekh Marine Agencies Pvt. Ltd. Wakefield House, 1st Floor Sprott Road, Ballard Estate Mumbai – 400001, India Tel: +91 22 66344444 Fax: +91 22 22652003 E-mail: [email protected] Website: wwwparekhgroup.in

Asia-Pacific shipping 2011/12 www.thebaltic.com

Events

48

24 November Singapore

Tradewinds offshore MarineFollowing the success of the TradeWinds offshore marine conference held in oslo during nor-Shipping 2011, this high-level event comes to the Asia-Pacific, and will be held in the maritime hub city of Singapore.www.nhstevents.com/events

6 December Beijing, China

oil spill response Workshop osrW The workshop features discussions on innovations and best practices across oil spill response strategies and brings to the audience the most update technology and cost-efficient solutions to contain oil spill. The course directors, panelists and audiences will be inter-reactive in their discussions so as to drive home the smart resolution to oil spill beyond its causes.www.topcoevents.com

16-17 January, Singapore

freight Derivatives & shipping risk Management coursewww.balticexchange.comSee page 17 for more information

18-19 January, Singapore

Advanced freight Modelling & Trading coursewww.balticexchange.comSee page 17 for more information

28 February – 2 March 2012, Hong Kong

china Maritime Week The event will feature a major international maritime exhibition plus a range of conferences covering vessel operations, the marine environment, ship financing, shipbuilding, ballast water treatment, vessel enclosed spaces, and tugs and offshore vessels. www.bairdmaritime.com

08–11 February

shipping, Marine & Port World Expo 2012

Mumbai, indiaShipping, marine & Port World Expo 2012 is an international exhibition and conference shipping, maritime and port industry. The event will gather together leading marine, shipping, ports and logistics service providers and manufacturers from across the country and overseas. http://events.hellotrade.com/tradeshows/shipping-marine-ports-world-expo/

14–16 March 2012

Asia Pacific Maritime 2012, singaporeAPm is the one-stop market for the region’s maritime community, showcasing the latest in marine engineering and port technology. This 12th APm will be featuring shipbuilding and marine, workboat and offshore segments. www.apmaritime.com

04-06 April

sMM india, Mumbai, indiaThe Smm india exhibition covers includes Shipbuilding / Shipyard industry, maritime services, Ship sections, Ports / Port technology, Shipyard installations and equipment, offshore technology, Prime movers / Propulsion systems, Cargo handling & logistics, Dredging, maritime and training institutes, Ship operation equipment, information technology / Software, Electronics / Communications, Research organizations, marine technology, marine equipment, navigational equipment & aids.www.biztradeshows.com/trade-events/smm-india.html

18-20 April

sea Japan 2012, Tokyo, JapanSea Japan is the biggest event of the Japanese maritime industry calendar. Shipbuilders, shipowners, marine equipment suppliers and providers of financial, technical and operational services gather to exchange information and do business.www.seajapan.ne.jp

What’s on where

A round-up of conferences, exhibitions and events

in the shipping world

The heart of global shipping

Clarksons

www.clarksons.com

Celebrating 30 Years of Clarksons in AsiaClarkson Asia +(65) 6339 0036

Best Maritime Service Provider, Singapore, 2011

Africa . Asia . Australasia . Europe . Middle East . North America

We have an international network of more than 7,000 experts

the marketplace and the technical developments shaping today’s marine industry. It also ensures that, wherever you are, we will be nearby and able to apply a genuine understanding of local issues and help you operate more safely and sustainably.

Learn more about our global network – go to www.lr.org/marine

Closer relationships for a saferworld.

Services are provided by members of the Lloyd’s Register Group.

asia-pacific shipping 2011/12

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