Seafarers still on their own

Seafarers still on their own

T H E I N T E R N A T I O N A L S H I P P I N G W E E K L YAugust 28, 2003 - Published weekly since 1883 - Price £7.00

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Contents

Volume 348 - Issue 6240, August 28, 2003 Web: www.fairplay.co.uk 1

Company Index

ìThere is so little fairplay in the world. If our own efforts succeed, we shall have taken the fi rst steps towards promoting the habit of calling things by

their right name and of looking at them through uncoloured spectacles.î

FAIRPLAY, MAY 18, 1883

The International Shipping WeeklyHead Office:

Lombard House, 3 Princess Way, Redhill, Surrey, RH1 1UPUnited KingdomTel: +44 1737 379000Fax: +44 1737 379001 Web: www.fairplay.co.uk

Publisher: John Prime

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Managing Editor: G Paul Gunton Editor: Patrick Neylan-FrancisSenior Editor: Richard ClaytonEditors: David Hooper, Rob Willmington

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Law: Ann Moore

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Fax: +1 305 262 2006Email: [email protected]

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LOOK OUT __________3-6

NEWS _____________ 7-14

COVER STORY ____ 16-18

NEWS FO CUS _____ 19-26China kicks off mega port project_ 19Singapore yards canít get the staff _ 20New H&W structure pays off _____ 21Agreement close on open ships ____ 22The way we were ________________ 23Doing it the Syrian way __________ 24Portland returns to favour ________ 25You canít hide behind a face lift ___ 26

FEATURES _____________27-41P&I ________________________ 27-34Sri Lanka ___________________ 35-41

MARKETS_________ 42-51

SHOES & SHIPS ______52

Abercrombie & Kent 25All India Transport & Dock Workersí Union 12All-India Port and Dock Workersí Federation 12APL Lanka 35, 41Arab Shipping Chambers Union 24Assante Di Cupillo 16Australia Wheat Forecasters 47Australian Maritime Safety Authority 11Birka Line 14BLG Automobile Logistics 13Bohai Shipyard 43BP Shipping 26, 43Britannia Club 29Cape Town Port Control 7Ceylon Association of Shipsí Agents 41Chevron Texaco 13China Shipping Haisheng 43China State Shipbuilding Corp 10Clarkson Research Studies 51Colombo Dockyard 37CSAV 43Daewoo Shipbuilding 43Damen Group 3, 13Dauphin Tankers 22East-West Bunkering Services 41

Euroship Services 21Fratelli DíAmato 22Frontline 6, 45Furetank 43Gourdomichalis 45Greenlanka Shipping 35, 41Hansa Kreuzfahrten 5Harland & Wolff 21Hutchison 19Hutchison Port Holdings 11International Chamber of Shipping 31International Council of Cruise Lines 8International Transport Workersí Federation 16Intertanko 25Japan External Trade Organisation 10Japan Ship Exportersí Association 43Jinchuan Group 47Jinhui Shipping and Transportation 43Jo Tankers 13Kansas City Southern 43Lanka Marine Service 41Lanka Maritime Services 41Latakia, port of 24London P&I Club 27, 29Maersk 19

Majestic International Cruises 5Mediterranean Shipping Co 45Milford Haven Port Authority 13Mitsubishi HI 43Miura Shipbuilding 43Moore Stephens Insurance Industry Group 30Neptune Orient Lines 10Nokbong Shipbuilding 43North of England P&I Club 31NYK 43Orient Overseas International 10Oshima Shipbuilding 43P&O 19P&O Nedlloyd Keells 35, 41Petroecuador 8Philippine Coast Guard 11Port Canaveral 8Portland port 25Precious Shipping 12PSA Corp 19, 20Registro Italiano Navale 22Richards Hogg Lindley 34Rio Grande port 43Rotterdam Association of Shipís Agents 22Samama 45

Front Cover: Only nine countries have signed the convention protecting seafarers from being left abandoned and destitute (photo: Joachim Affeldt)

Samsung Heavy Industries 43Seamenís Church Institute of New York & New Jersey 16Shanghai Edward Shipbuilding 43Shanghai Port Authority 19Shipping Australia 10Silja Line 14Smit Marine 7Sonap 43South Asia Gateway Terminals 35Sri Lanka Ports Authority 35Standard & Poorís 27Standard P&I Club 34Straits Resources 47Swedish Club 32Swiss Re 28Sydney Ports Corp 34TMM 9UK P&I Club 28US Ship Management Inc 7Videotel Marine 31Viking Line 14Visakhapatnam 12Wallenius Wilhelmsen 13West of England P&I Club 31Western Mining Corp 47

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NOTICE TO EXPORTERS

Export Control Organisation

Department of Trade and Industry

Notice 19/03

August 2003

1. The Department of Trade and Industry wishes to remind exporters of its earlier Notice 14/03 of

July 2003, advising of a proposal dated 30 December 2002 submitted by the European

Commission for a new Council Regulation concerning the trade in certain equipment and

products used for capital punishment and torture. A copy of Notice 14/03, the Commission

proposal and the Department’s draft Regulatory Impact Assessment (RIA) is available via the

ECO website.

2. Industry views on the proposal, possible impact and associated costs were invited to be

submitted by no later than 31 August 2003. That deadline has now been extended until 30

September 2003.

3. Any comments on the Commission proposal and/or the draft RIA which, will be treated as

confidential, should be sent for the attention of:

Mr J Bouttell

Department of Trade and Industry

Export Control Organisation

Bay 401

4 Abbey Orchard Street

London

SW1P 2HT

Fax: 020 7215 0511

Email: [email protected]

4. This notice is for information purposes only and has no force in law. Please note that where legal

advice is required exporters should make their own arrangements.

EUROPEAN COMMISSION PROPOSAL FOR A COUNCIL REGULATION CONCERNING TRADE IN

CERTAIN EQUIPMENT AND PRODUCTS WHICH COULD BE USED FOR CAPITAL PUNISHMENT,

TORTURE OR OTHER CRUEL, INHUMAN OR DEGRADING TREATMENT OR PUNISHMENT.

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Look Out

August 28, 2003 www.fairplay.co.uk Email: [email protected] 3

Look Out

THERE but for the grace of God go I. Almost every seafarer nowadays must worry that when his employerís business goes belly-up, he (or she) will suffer more than almost

anyone else. Yet in 1987, the International Labour Organiza-tion amended the Repatriation of Seafarers Convention, which should have guaranteed that seafarers at least get home.

So who has signed up to this convention during the intervening decade and a half ñ a period of time that has given us OPAí90, STCWí95, the Donaldson Report, Erika II, the ISM Code, the ISPS Code and the Stockholm Agreement? Australia, Brazil, Bulgaria, Guyana, Hungary, Luxembourg, Mexico, Romania and Spain. None of these countries are major flag states any more (if they ever were), and two of them are landlocked. Yet govern-ments are clambering over each other to enforce stricter rules against ship operators in the case of environmental mishaps, but few can find the time to take care of the human victims of shippingís financial failures (see page 16).

This is one of the most embarrassing and shameful aspects of this industry. Failures cannot be prevented, because taking the financial risk out of the adventure would stifle the industry. But regulations to protect the innocent human victims are easy to enforce, especially when one considers that many countries haveequivalent protection for employees in land-based industries. If you donít believe us, try sacking a Dutchman.

On the surface, itís hard to see what the problem is. Ship owners, after all, should bear the expense of ensuring their crews can get home, through an additional levy on registration. But that would make a register less attractive, and thereís the rub. Once again, we come up against the regulatory function of a ship register taking second priority behind its revenue-earning potential.

We thought the registry industry was cleaning up its act. It is, but it still has a long way to go. The charitable institutions that look after abandoned seafarers are doing a fine, often heroic job, and we salute them. But a modern industry like ours should not be relying on charity. The sight of grubby, destitute, professional seafarers leaning over the rail where their national fl ag hangs doesnít seem to embarrass many nations. Shame on them.

Clearing out Europeís yardsLast week brought together two products of the Damen group, the Wappen Von Bayern (behind) and the container newbuildingAlassa, the first of four units ordered atDamen’s Okean yard in Nikolayev. Afterbeing towed from Ukraine to Cuxhaven,the 1,100-TEU vessel is now being fittedout by Mützelfeldtwerft at Cuxhaven andis to be delivered to Thien & Heyenga. Six vessels of the 19-kt type had earlier been built by Santierul Naval Constantza, which delivered its last unit, the Tharos, to Thien & Heyenga in December last year.

Only the first two units of the new series from Nikolayev are to be fitted out byMützelfeldt, while the remainder are to be completely built at Okean. In all projectsthe German Ferrostaal company, part of the MAN group, has been acting as the main contractor. Okean is the largest yard in the Dutch Damen group and has a dry dock for building vessels of up to 300,000-DWT – in case anyone ever builds ships this size in Europe again (photo: Ralf Witthohn).

What not to doContinuing shame of abandoned seafarers

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August 28, 2003www.fairplay.co.uk Email: [email protected]

Look OutNokbong knocked outKoje builds a bridge too far

IF Helen was the face that could launch a thousand ships, South Korea can truly be said to possess the supreme art of building thou-sands of faceless ships. Yet the plight of Nokbong Shipbuilding in the famed peninsula is such that even the inspirational powers of a Helen may be insufficient to launch ships from the yard. One might not exactly fall off the bridge in a laughing fit, but the twist in the tail of the slipway may cause some wry amusement.

The operative word in this case is clearly ìlaunchî. Nokbong may not instantly ring a bell ñ like Hyundai, Daewoo or Samsungñ but like other Korean yards it must be building good ships, since it manages to keep picking off newbuilding contracts while others struggle. But alas, what use is building ships if you cannot launch them?

And it appears this is precisely what Nokbong cannot do at the moment from one of its slipways. The orders are there for the taking ñ all of six juicy chemical tankers (see page 43) ñ but theyseem to be slipping away literally so to speak because, incred-

ible as it may sound, the slipway at the Koje island facility has turned out to be quite useless.

The stumbling block appears to be a bridge that the city ad-ministration is building. Ships cannot be launched because, according to Nokbong vice-president Han Jae Jin, the low, looming and uncompleted bridge is blocking ships from slidingoff the ramp because the vessels do not have free access for the prescribed 600 m. Nokbong wants the city administration to foot the bill ñ estimated to be W5Bn ($4M) ñ to relocate the slipway, but this demand is being resisted. Nokbong claims that the administration did not consult the yard before build-ing the bridge.

It could be that the city fathers did not grasp the technical loopholes while going ahead with the project. But why did Nokbong not bring the matter up before the damage was done? Or did its pleas fall on deaf ears? Much in the same way as its electronic giants, shipbuilding is the visible manifestation of the economic success of South Korea. The Nokbong fi asco demonstrates that even a shipbuilding-savvy nation can slip on the slipway.

suppliers in the first half of this year were around 25 per cent greater than the same period last year, although it is clear that first-half 2003 ore exports did not (or could not?) accelerate further. Anecdotally, there is plenty of evidence that Australian and Brazilian exporters have been kept just as busy in the intervening months this year, but are they any more busy? If not, we might have seen the top of the current bulker boom, supported by a near two-month periodof high, but stable, freight rates.

Signs of a topThere’s no apology from Fairplay for underlining oncemore just how important China is to the bulk markets.Our graph this week tracks combined Australian andBrazilian iron ore exports and supports the notion thatthe bulk shipping markets took off last year almost at the same time as this iron ore trade, driven primarily by China. From a combined 126M tonnes in 1H02, exports shot up to 170M tonnes in the second half of last year after a massive initial surge in Brazilian volumes. Exports from these major

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Look Out

August 28, 2003 www.fairplay.co.uk Email: [email protected] 5

Good news is no newsWaving the fl ag for Tricolor salvors

IT is going so well that removing the car carrier Tricolor from the North Sea mud seems routine.Every few days, another update arrives in the Fairplay office ñ and, no doubt, thousands ofother offices across the world ñ with the latest developments.

Apart from weather delays ñ in-evitable in any salvage job ñ and a small, as-yet-unexplained fi re on the first section to be brought ashore, the news is of steadyprogress.

Journalists ñ maritime andmainstream ñ are often accused of ignoring good news, of hang-ing around like vultures waiting for disasters to happen. But we all expect the best from people, which is why it is news whensomething goes wrong; the day when the fact that a tanker com-pletes a voyage without spilling any oil is newsworthy will be a sad day.

So the team recovering Tricolor might be disappointed by thecoverage they have received so far. Since hosting an impressive public viewing when the fi rst sec-tion broke the surface, it has pro-vided its updates and occasional pictures of the extraordinarywork; the most recent e-mailincludes a close-up photo of the cutting wire that is doing all the hard work.

Viral marketingViruses are not confined to computers these days, though the latest ‘sobig’ has made a nuisance of itself in the past week. Fairplay’s editorial department has this week received 630 e-mails generated by the virus, though we have not been infected ourselves (and any variation purporting to come from us is a fake). But an old-fashioned organic virus can still cause problems in the industry. Three passengers on the Madeira-registered cruise liner Ocean Monarch have come down with legionnaire’s disease after they got off acruise that ended at Cuxhaven on August 22. Six more people are under observation, suspected of being infected, since radio reports during the week-end requested thepassengers to visit a doctor if they were suffering from influenza-like symptoms.

The 526-berth liner has been on charter since May to Hansa Kreuzfahrten, which hasexpressed interest in chartering the ship again next year from Majestic International Cruises of Greece. The Ocean Monarch left Cuxhaven on Friday for Harwich, where UK gave the ship a clean bill of health, concluding that the virus was probably picked up in Iceland. The 15,833-GT ship has been chartered by Hansa for six cruises from Cuxhaven and Kiel to the Baltic, Norway, Iceland and Greenland. In February the veteran underwent a six-week refi t at Odessos repair yard in Varna, after being laid up at Chalkis since March 2002. It switched register from Panama to Madeira only this year. Originally built by Swan Hunter in Newcastle, UK in 1955 as a general cargo ship, the vessel was rebuilt at Chalkis yard in 1974. In 1996, it became the Switzerland, and in 2002 the Ocean Odyssee (photo: Ralf Witthohn).

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August 28, 2003www.fairplay.co.uk Email: [email protected]

Look Out

QUOTESìThe P&I clubs have never been a friend

of seafarersîJohn Bainbridge, ITF representative at the IMO

(page 16)

ìEverything is under controlî Officer on duty on the bridge of the Sealand Express before running aground (page 7)

A giant beaching

News reaches us this week that the world’ssecond-largest shiphas been sold forscrap (see page 45).Sea Giant, formerlythe Hellas Fos, hasbeen laid up sinceMay last year. Having missed the marketspike in the winter and spring, owner Frontline clearly decided thatfuture prospects were less tempting than the reported $230/LDToffered by scrappers at

Gadani Beach, which should certainly have the space now. The beaching should be an impressive sight. This leaves the Jahre Viking out on its own – 100,000 DWT larger than the next biggest ship in the world (photo: Eric Houri).

And it is this sort of detail that makes the job remarkable. The notion that a reinforced wire could be used to saw through an entire ship and everything in it ñ hardened steel propeller shaft included ñ would seem fanciful, had it not been for its successful work on the Kursk. Yet the wire is doing its job, it hasnít broken, there have been no further collisions with the ship and pieces of it are emerging from the seabed in a regular fashion.

So it poses a problem for the recovery teamís publicity strategy. They want to tell us that they are doing a skilful and ground-breaking job, so must be tempted to use all the superlatives in the dictionary. But they also want to convey the idea that this is all in a dayís work for a skilled and experienced salvage team, which suggests a more laid back ñ ìwell, what did you expect?î ñ style of coverage.

On the website detailing the project (www.tricolorsalvage.com, since you ask) there is a section of frequently-asked questions. ìIs lifting a section of the Tricolor a difficult operation to per-form?î is one on the list. ìYesî, is the siteís simple answer, before detailing the challenges that the team faces. No drama, no hype. Just information.

So you wonít read much more about the project in the media until the work is complete and the whole ship is gone. That might be frustrating for the salvage companies involved but, in reality, it is the best reporting they could hope for.

Fast first aid Is there a doctor in the house?

FERRIES running close to land are not obliged to carry a medicalteam on board. On one level this makes sense: the chances are the vessel can make port in time to carry a patient to medical care or at least prepare itself to effect a lift-off by helicopter.

Members of the crew can be given a basic training for most even-tualities. It is also likely that on a vessel with several hundred

passengers on board, at least two will be fully trained medics. But not necessarily.

And this means that where a request for trained medical staff fails to attract even one doctor, nurse or paramedic, the patient might be left gasping for breath while the helicopter is readied at the nearest land-based rescue station. On a fast ferry caught half way between two ports three hoursí apart, it might prove one cost saving too many.

Just such a scenario occurred last week on the English Chan-nel when a request brought forth two doctors, one nurse and a nurse who had last scrubbed up more than a decade ago. The patient was stabilised and given full medical care for the remaining two hours of the journey. An ambulance was wait-ing at the destination.

For her time and training, towards which the fast ferry operator had not paid through taxes, the nurse was given a large bottle of wine. Ironically, it was the patientís penchant for alcohol that had been the source of the trouble in the fi rst place.

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Headline News

August 28, 2003 www.fairplay.co.uk 7

THE salvage team attending the stranded container ship Sealand Express, whichwent aground in Table Bay, South Africa on August 19, intends to start removing less risky hazardous cargo this week.

Cargo is to be unpacked from containers on board the ship and transported in small parcels, using a five-tonne payload Mi8 helicopter fl own specially to Cape Town. The operation will be conducted underthe watchful eye of a hazardous materials technician with a specialist paramedic on-board at all times, said Smit Marine. Smitís salvage team gained valuable experience last September in similar conditions off the KwaZulu Natal coast when they removed hazardous cargo from the burning and grounded ro-ro vessel Jolly Rubino.

Other hazardous cargo considered to pose the most risk will remain on board where it is being constantly monitored by anon-board chemist.

So far about 1,500 tonnes of the 3,700 tonnes of fuel oil have been removedfrom the shipís tanks, including those tanks likely to be at most risk if the ship breaks up. The remaining oil is located in higher-lying portside tanks and on the starboard side of the ship. The salvage team hopes to recommence removingthis oil as soon as the weather and sea condition permits, but since the weekend a high swell has been running.

Meanwhile preliminary inquiries into the grounding by the SA Maritime Safety Au-

thority have confirmed an earlier claim that Cape Town Port Control warned the ship by radio that it was dragging its an-chor and was in danger, but was advised by the officer on duty that everything was ëunder controlí. Port Control issued three warnings from about 0400 before the ship went aground between 0600 and 0700.

The navigatorís handbook Africa Pilotwarns ships not to anchor during winter during a north-easterly blow, as the sandy bottom of Table Bay does not provide secure anchorage. Several other ships in Table Bay on the night of August 18/19 raised anchor and moved out into deeper water until the blow was over.

Smit Marine says its main objective re-mains the refloating of the ship, which will next be attempted at the high spring tide at the end of this week. A shallow-draughted dredger, Ham 316, which iscapable of moving about 9,000 tonnesof sand an hour in favourable weather, has been taken on charter to assist. The dredger will attempt to remove the sand bar that has built up around the port shoul-der of Sealand Express.

The first phase of refloating the ship will be to pivot it on its stern and as close to an offshore heading as possible. The second phase will involve direct attempts to pull it off the current position in the sand and out into the bay.

Meanwhile, the captain of the Sealand Ex-press, Frederick Allen, has been relieved

Race to rescue grounded box ship of his duties and is to be replaced with a captain appointed by US Ship Manage-ment Inc, which owns and operates Seal-and Express. Allen will not be allowed to leave South Africa as authorities want to question him. His crew remains on board the stricken vessel.

The South African Department of En-vironmental Affairs & Tourism said it was satisfied with preliminary plans to remove the hazardous cargo from the ship and to ensure the safety of the public and protection of the environment. The deputy minister, Rejoice Mabudafhasi, visited the scene on Monday and saidshe was pleased with the co-operationof the public, who have heeded calls to stay clear of the area while the operation is in progress.

Last week it emerged that the vessel was carrying 50 tonnes of uranium ore concentrate destined for processing inthe United States. The ore is packed in high-integrity drums in three industrial containers and poses a risk only if theship begins to break up or if containers are lost overboard, said Nuclear FuelsCorp of South Africa.

The uranium ore is a by-product of South Africaís gold mines and is regarded to be of low radioactivity content in itspresent state. The ship is also known to be carrying a number of containersof hazardous chemicals and explosives. Information about the chemicals onlybecame available after the Departmentof Environmental Affairs & Tourism took legal action to obtain a copy of the shipís cargo manifest.

Salvors are racing against time to remove hazardous cargo and refloat the Sealand Express before the weather closes in (photo: Andrew Ingpen)

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August 28, 2003www.fairplay.co.uk8

Americas News

The state assembly passed the bills ear-lier this year and they are now before the Senate appropriations committee. They would prohibit cruise ships from dump-ing grey water, ballast water, sewage and other wastes into state waters, and require vessels to burn only California highway diesel out to 25 miles.

“Why don’t we attack the overall issues as opposed to targeting a minuscule part of the problem?” Michael Crye, president of the International Council of Cruise Lines, declared last week. The ICCL also said the bills would “do little to advance the shared goal of clean coastal waters” and “single out an industry that represents justover one per cent of all ships calling on California ports.”

But lawmakers said they are fed up with industry promises. “The industry says‘trust us,’ but we’ve got to the point where ‘trust us’ isn’t strong enough,”

Joe Simitian, an assemblyman from the coastal city of Palo Alto and author of two of the bills, said last week.

! Florida’s Port Canaveral has risen to be-come the second-busiest North American cruise port, according to new US Maritime Administration fi gures. The home port to Disney Cruise Line has overtaken FortLauderdale in the second quarter, con-tributing to a seven per cent increase in cruise passenger numbers across all North America over the same quarter last year.

The two ports, together with number-one cruise base Miami, accounted for almost 46per cent of all passengers. Vancouver and New York elbowed out San Juan and Tam-pa respectively as number 4 and 5 cruise ports. The western Caribbean, including Mexico and Central America, remained the most visited destination. The fi gures reveal that six- to eight-day cruises from North America are the most popular.

Ecuador oil export pipe completedECUADOR’S second oil pipeline has been completed, paving the way fortest pumping that will ultimately boost the country ’s crude oil exports. The consortium behind the $1.5Bn project, OCP Ecuador, comprises oil companies AEC, Agip, Occ idental , Petrobras, Perenco, Repsol-YPF and Techint . Crude oil will be carried by the 500-km pipeline from the country ’s Amazon fields to the Pacific oil export facility of Balao.

Test runs will be conducted over the next few weeks before the pipeline formally opens in October. State-owned Petroecua-dor, which is still deciding if it will be use the private facility, says oil production this year is likely to rise to about 162M bar-rels, almost half of which will come from private oil companies.

The new facility, parallel to that of a state-owned pipeline, is expected to dou-ble the country’s crude transport capacity and generate more export potential. OCPwill manage the pipeline for 20 yearsbefore handing it to the government. Oil provides Ecuador with about 40 per cent of state income.

! Venezuela’s president Hugo Chávez is pushing his plan to create a LatinAmerican version of Opec. His gov-ernment has already signed bilateraloil accords with Ecuador to work to-wards formation of a Latin cartel and is seeking similar arrangements withBrazil and Colombia. Both Venezuela and Colombia rely on oil for the bulk of their export earnings.

Under President Chavez’s so-called PetroAmérica plan, the region’s state-owned energy companies would form a strategic alliance with a view tosecuring greater control over pricingand shifting the focus of supplier reli-ability from the Middle East to South America. Chávez says Venezuela’s PDVSA, South America’s largest oil company, would put its expertise at the disposal of nations willing to participatein PetroAmérica.

DOMINICAN Republic authorities havearrested the Panama-fl agged ro-ro MayaExpress (formerly Agia Galini) following a crewing dispute en route to neighbouring Haiti with a cargo of 22 vehicles. The 1973-built, 9,588-GT vessel is moored in Santo Domingo while the local port authority tries to extract several months’ port fees.

A local agent told Fairplay last week it was one of the messiest cases he had seen in the country, involving owner, charterer, sub-charterer and a private US fi nancial institution. He said some of the 22 Ukrain-

Cruise fights California legislationTHE cruise industry is lobbying furiously in California to defeat three bills that would impose the toughest state laws ever enacted to regulate an international industry.

ian crew, claiming back pay to early 2003, began selling the cargo to recover costs. The ITF says the crew has since been repat-riated and received $30,000 “so far”.

The port authority is negotiating withNew York charterer Peter Karouta Kennedy, whose Monarch Shipping Lines transports second-hand vehiclesto Haiti. Another Kennedy company, Kennedy Funding, is understood to have a lien on the Maya Express, which, under Dominican law, cannot be sold while it still has cargo aboard.

Ro-ro held in ‘messiest’ crewing dispute

Californiaís lawmakers have lost patience with cruise industry promises

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Americas News


In a strongly worded statement, theUS rail giant said it was ìexploring its rightsÖ and its legal options under US and Mexican lawî. It added that it would prosecute ìall appropriate legal or ad-ministrative action against any persons or entities involved in interfering withKansas City Southernand its agreements with TMMî.

TMM shareholders rejected the sale,ignoring the ësellí recommendation of millionaire chairman JosÈ Serrano, thus disrupting the groupís fund-raising strat-egy to avoid possible debt default.

On August 13, TFM won a six-year court battle, opening the door to a potential$900M tax-plus-interest refund from the

The Mexican flag continues to fly over the troubled maritime

and logistics group: but for how much longer?

Mexican government, a factor that might have swayed some shareholders to cling to the company.

The Mexicans agreed to sell their valu-able TFM investment for $412M in cash and stock to Kansas City Southern, which planned to rename it Nafta Railway. TMM raised additional cash this year by sell-ing the majority stake in its ports andterminals division to partner Stevedor-ing Services of America.

Big Chilean turns the cornerCSAV, Chileís largest shipping group, has reported a $40.1M profit for the fi rst six months of 2003, a dramatic turnaroundfrom its $598M loss for the same period lastyear. The recovery, reported to the Chilean stock exchange, was seen in consolidated sales of $1.04Bn and a 22 per cent increase in containers moved this year, compared with the first half of 2002.

The company attributes the about-turn to anumber of factors, primarily growth in its export trade on the West and East coasts of South America. That contrasted with 2002 when a combination of weak export demand and international over-supply of transport, caused in part by new tonnage, contributed to CSAVís poor result.

CSAV, the Claro familyís fl agship mari-time investment, has singled out Chinaís export growth as a significant factoramong general international pick-upthis year. The group says its Libra de NavegaÁ„o, Montemar MarÌtima andNorasia Container Lines subsidiarieshave all improved their performancessince last year.

Customs strike clogs key Brazil portIMPORTS and exports at the southern Brazilian port of Rio Grande are being de-layed by up to 20 days because of a strike by customs tax collectors. The port, in Rio Grande do Sul state bordering Uruguay, has reported that its warehouses are full and ships are waiting at anchor to dock.

Under normal conditions, cargo can wait for three days to be unloaded but thestrike has virtually paralysed operations. Transport lines have formed outside the terminals, awaiting delivery of cargo, with the Tecon terminal appearing to be worst hit. The customs agentsí union said its

striking members had set up a panel to determine ëspecial casesí for cargo to be released, primarily perishable or danger-ous goods.

However, the dispensation is freeing barely ten per cent of Rio Grandeís cargo backlog. Angry customs brokers, repre-sented by their own union ñ Sindicato dos Despachantes Aduaneiros ñ say storage costs have trebled because of the strike and are threatening to break some busi-nesses. The union has called on Brasilia to ìdo whatever it takesî to get the tax collectors back to work.

Kansas City explores TMM optionsTMM, the troubled Mexican maritime and logistics group, is facing further problems, only a few days after an apparent financial windfall. Its rail partner Kansas City Southern (KCS) is considering legal action against TMM after the Mexican company reversed an April decision to sell KCS its controlling stake in rail subsidiary TFM.

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Asia Pacific News

Australian toughness questioned

MARITIME or-ganisation ShippingAustralia (SAL) has expressed seriousconcerns at draft Aus-tralian governmentport and ship-related security legislation,suggesting that itsprovisions are farmore stringent thanthose of the IMOís ISPS Code.

ìWe want the legis-lation to reflect the

ISPS Code work as closely as possibly to ensure international standards for the maritime industry,î SAL chief executive Llew Russell said. It is understood that Shipping Australia is especially worried

about some of the heavy non-compliance penalties contained in the draft Australian rules. ìThey donít deÞne a port facility, for example. Any differences in wording can cause disputes and misunderstanding and cause the regime to be less effective,î Russell said.

The shipping association suggests itwould be preferable to adjust the legisla-tion to make it workable by the govern-mentís September 17 deadline, than to see the Australian Senate obliged to introduce a host of amendments.

Australiaís port industry association has also reportedly expressed concern with the draft legislation, and called for adelay so that it can be reconsidered with further input from industry and the Aus-tralian states.

Asian liner operators exceed expectationsSINGAPORE-listed Neptune Orient Lines(NOL) exceeded analysts’ expectations to surge to an $88.7M net profit for the first half of 2003.

The Þnancial results were a dramatic turnaround from the same period in2002 when the liner major had slumped to a $155.7M loss. Forecasts of netproÞt had ranged from $50M to $70M. Turnover rose 19 per cent to $2.6Bn.

The performances for the year areexpected to be even better, as beneÞ ts of the sale of tanker division American Eagle Tankers to Malaysia International Shipping Corp kick in. ìThe resultsshow that at the operational level there has been a fundamental shift acrossthe group,î chairman Cheng Wai Ke-ung said.

New group chief executive David Lim ñ a former cabinet minister ñ refusedto be drawn into market talk about amerger with container terminal opera-tor PSA Corp. ìWe donít comment on rumours,î he said. Expectations of astrong performance had sent NOL stock soaring to a three-year high of S$2.03 this week from a low of S$0.60 just ten months ago.

! Orient Overseas International, par-ent of container liner operator OOCL, reported a record interim proÞt for the Þrst six months at $79.5M, comparedwith just $1M for the same period in2002. A strong rise in container liftings and higher rates boosted OOCL to 1.25M TEU and raised OOIL turnover by about 27 per cent to $1.44Bn.

On the promising outlook for thesecond half, chairman Tung Chee Chen said consumer demand in the US and Europe remains relatively strong. As a result, container volumes are growing at 7-8 per cent per annum.

ìWe are experiencing the almost unprecedented situation, certainlyin recent times, of all sectors of theshipping industry simultaneouslyenjoying prosperous times,î he said.

CHINA State Shipbuilding Corp (CSSC) has announced plans to build anotherlarge shipyard in south China by com-bining the facilities of three smaller ones ñ Guangzhou Shipyard, Guangzhou Wen-chong Shipyard and Guangzhou HuangpuShipyard ñ in the Pearl River Delta.

CSSC president Chen Xiaojin said thenew facility would be located on Longxueisland in the delta near Nansha. The island has also been earmarked for a big deep-water container port.

Hong Kong-listed Guangzhou Shipyard International, the largest modern inte-grated ship builder in south China, also

repairs ships and makes containers. It has three building berths and can build ships up to 60,000 DWT.

The new yard will be one of Þ ve big complexes that CSSC, which controlsabout a dozen yards, proposes to build to make itself the worldís largest shipbuilder by 2015.

Last month, CSSC signed an agreement with the Shanghai government to build the worldís largest shipbuilding complex on Changxing island in the Yangtze river and relocate two of its larger Shanghai shipyards, Jiangnan and Hudong-Zhon-ghua, there.

CSSC moves towards shipyard goal

Shipping Australiaís Llew Russell: differences in wording can cause disputes

China-Japan trade hits record TRADE between China and Japan rose 34 per cent in the Þrst six months to a record $60.4Bn, according to the Japan External Trade Organisation (JETRO). Japanese exports to China rose 49 percent to $25.8Bn, and China shipped goodsworth $34.7Bn, up 24 per cent, marking a turnaround from last yearís 0.8 per cent decline. Leading Japanese exports were electronic parts for personal computers, mobile and other phones, industrial ma-chinery and automobiles.

Reßecting some Japanese manufacturersíshift of production to China, Japaneseimports of ofÞce equipment leapt 63 per cent, while imports of audio-visual equip-ment jumped 23 per cent. Chinaís share of Japanís global trade in the period reached an all-time high of 15 per cent. Although the US continues to be Japanís top export market, with China second, the Chinese market is gaining prominence. Japanese exports to the US slipped 1.1 per centyear-on- year.

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Asia Pacific News


October 2

September 11

September 18

September 25

October 2

UK Shipping

Maritime Cyprus / Dutch Caribbean

Germany / Taiwan

Paints & Coatings / South Africa

Australia warns on crew standardsTHE Australian Maritime Safety Authority is examining options to strengthen co-operation with cargo and charter interests to weed out sub-standard shipping. AMSA chairman Dr Ken Moss told a maritime industry workshop in Fremantle last week that cargo and charter interests must avoid being associated with unsafe and potentially polluting ships.

However, AMSA chief executive Clive Davidson told Fairplay that while thestandard of ships calling at Australian ports had improved markedly, there had been a noticeable decline in the compe-tence of visiting shipís crews.

Davidson said that tackling the ìhuman softwareî problems in shipping was far more challenging. ìHuman error is a con-stant feature in accidents,î he said. ìThereare all sorts of issues such as fatigue as a result of the pressure on crews.î

Philippines issues safe lanes mapTHE Philippines has issued a new Ves-sel Traffic Routeing map designating sea lanes for domestic shipping, in an attempt to prevent the frequent collisions that havealready claimed thousands of lives. The Philippine Coast Guard and NationalMapping and Resource Institute Authority issued the map to ship owners, operators and masters plying inter-island waters during a seminar on August 20.

The traffic routeing scheme is intended to improve safety mainly in four critical areas: the entrances to Manila and Subic Bay, Daan Bantayan in Cebu and Cape Verde Island in Batangas. The PCG says these areas are critical because they fea-ture narrow passages potentially risky to vessels entering and exiting ports, but at the same time they handle more than 60 per cent of vessel traffic. Violators of the traffic lanes will be prosecuted and penal-ised, the PCG added, while still also beingliable to administrative and criminal casesfiled by the victims of casualties.

Ports boost Hutchison bottom lineTHE ports division remained the mostprofitable for Hong Kongís largest con-glomerate, Hutchison Whampoa, which has reported interim profit of HK$6Bn ($769M) for the six months to June 30. Turnover totalled almost HK$66Bn, of which Hutchison Port Holdings contrib-uted one-sixth; 17 per cent up on 2002. Throughput at its 32 ports around theworld increased 19 per cent to 19.5MTEU in the period.

Although the company did not give pre-cise figures for individual ports, it said throughput at flagship Hongkong Inter-national Terminals was stable, although earnings fell. Star performer was Yantian, which handled 30 per cent more contain-ers and saw earnings rise by 38 per cent. In Europe, throughput of the UK ports andEurope Combined Terminals in Rotter-dam was stable, but the cost of improving productivity in the UK hit earnings.

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Middle East / South Asia News

Visak accused over docker deathsFOUR port workers died at Visakhapatnam, India last week when about to unload timber from the Thai-flagged cargo ship Tharinee Naree. A port spokesman said the men, three employed by a stevedore company and the fourth by the port, probably died after breathing in chemicals used to fumigate the ship. The vesselís hatch was open at the time.

While police investigated the incident,DK Sarma, additional general secretary of the All-India Port and Dock Workers Federation and a trustee of the port, ac-cused the port trust authorities of viola-tion of the Workersí Safety, Health and Welfare Regulation Act. He pointed to a clause of the act that prohibits dock work-ers from entering any shipís hold or tank unless all possible steps had been taken to remove poisonous gaseous cargoes and it is certified that everything is safe for the dock workers to enter the hatch and commence work. This clause had clearly been violated, he alleged.

New potential for trade corridorINDIA is backing the candidature of Oman and Tajikistan to join the North-South Corridor Agreement, which envis-ages a trade route linking India to Europe via Iran and Russia. The two states are expected to join current signatories tothe Agreement, Iran, India, Russia, Ka-zakhstan and Belarus.

The Iran-Russia Joint working group met in Tehran recently to examine mutual co-operation on the corridor. Discussions included building container terminals in Iranian and Russian ports, investment in Caspian Sea shipping and synchronising customs duties and taxation at Caspian ports. Both sides called for a boost to theirown national transport infrastructure. The North-South Corridor extends from Mum-bai to Moscow via Bandar Abbas, Tehran and Badar Anzali in Iran.

India to make cruising attractiveINDIA is to halve its vessel-related port charges for cruise ships in a bid to make the Indian cruise circuit cost effective, a senior government official said last week. Charges at Indian ports are very high com-pared to competing ports, he said.

The government will also provide fi nan-cial incentives to revenue-generatingcruise infrastructure projects at ports.Grants will be available equivalent to 26 per cent of the equity, to a maximum of Rs100M ($2M). Private investors setting up cruise terminal infrastructure projects will be allowed to operate such facilities for a maximum 50 years on build, operate and transfer (BOT) or lease terms. Ac-tor-turned-politician Shatrughan Sinha, now Indiaís shipping minister, is keen to promote cruise tourism in the state-ownedmajor ports of Mumbai, Mormugao, New Mangalore, Cochin and Tuticorin.

A government spokesman said: ìThere is great potential for cruise traffi c in India, which is expected to double in the next ten years. The current Indian passenger base of 30,000 in 2002 and industry size of Rs600M are likely to expand substan-tially,î he predicted.

The Visakhapatnam dock workersí union, which is affiliated to the national federa-tion, urged the port authority to tighten safety measures to prevent similar ac-cidents, and sought compensation for the victimsí families.

A port offi cial confirmed that the captain of the Tharinee Naree, owned and oper-ated by Bangkok-based Precious Ship-ping, had been detained.

Seafarers and dockers face strike banA LANDMARK ruling by Indiaís Su-preme Court outlawing strikes by gov-ernment employees has put the lid on the frequent industrial action by port workers and seamen on Indian-flagged ships as a lever for wage increases.

The court ruled on August 6 that govern-ment employees had no right to strike, even for a just cause, but the implications for government employees in maritime sectors only began to sink in last week. Port workers employed by Indiaís 12 government-controlled major ports and

Precious Shippingís Tharinee Naree: master detained after dock worker deaths

seamen employed by Indian ship owners claim they are exempt from the ruling, butexperts say the court ruling is clear.

ML Bellani, general secretary of the All India Transport & Dock Workers Union, emphasised that it would not affect port workers as they are governed by the 1947 Industrial Disputes Act, but he is worried because the court does not differentiate between government and private em-ployees. ìThe verdict is a matter of great concern to us. In principle, we oppose it,î he asserted.

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European News


Texacoís late claim revealedMILFORD Haven Port Authority re-vealed last week that it is facing a second legal action in respect of the Sea Empress grounding in 1996, from Chevron Texaco. MHPA chief executive Ted Sangster told Fairplay that the legal process in respect of this and the International Oil Pollution Compensation fundís £38M ($60M) claim were progressing.

The port authorityís annual report for 2002, published on August 20, made note of a $16M claim by ChevronTexaco lodged in February 2002, just days before

the deadline for such actions regardingcompensation for loss of cargo and other related costs.

ìThe claim was made to protect our posi-tion over the Sea Empress,î a Chevron Tex-aco spokesman told Fairplay. The oil company confirmed the action against MHPA and Milford Haven Pilotage, saying that the offi cial UK Marine Accident Investigation Branch inquiry into the incident found that pilot error contributed to the grounding.

Sangster said the port authority was pre-paring for the legal mediation stage where a mediator is appointed in the hope that the claims will be dropped or a settlement agreed. ìThis will start in October, but if that is not successful, then court time has been booked for next June/July.î

DUTCH builder Damen ShipyardsHoogezand appears to have clearedremaining obstacles in its plans for a sale toneighbouring Shipyard Waterhuizen. The sale will provide the additional capacity Waterhuizen needs to complete its order book of eight inland chemical tankers.Earlier sale attempts were delayed when 47 Damen workers refused to acceptemployment with Waterhuizen, despite the fact that Hoogezand was completing its last vessel.

Waterhuizen owner Diette Doesburg forced the workersí hands by announcing she would sub-contract construction of hulls to other yards instead of the Hoogezand facility. The deal could now be salvaged following an improved offer to the 47 Damen workers. Damen Hoogezand,which currently employs about 70, willcontinue as main contractor for vessels to be constructed at Damen yards in Romania,Ukraine and China.

JOHAN-Odvar Odfjell, managing director of Norwegian group Jo Tankers, confi rmed last week that the departure of Rick van Westenbrugge, MD of the companyís Dutch division, was unrelated to the EU competition investigation into chemicalcarrier operators. Jo Tankers said van West-enbrugge was leaving his post because of ìdifferences in opinion with regards to the future of the companyî.

European News

SCANDINAVIAN ro-ro carrier Wallenius Wilhelmsen is negotiating with Germanyís BLG Automobile Logistics about form-ing a joint company to run a dedicatedcar-handling terminal in Bremerhaven. The Swedish-Norwegian ship operating group accounts for about 45 per cent of the 1.4M cars a year handled by monopolyoperator BLG.

BLG spokesman Hartmut Schwerdtfeger said no decision had been taken as regards employment structure and location of the

Jo Tankers departure unrelated to probe

Sea Empress at Milford Haven in 1996: Chevron Texaco is keeping the port authority on its toes over compensation

Odfjell said he would not be replaced.Hugo Finlay, currently marketing and con-tracts director, will assume the post of sales and operations director, reporting directly to Odfjell. European Commission offi cials raided Jo Tankersí offices in Bergen and Rotterdam in February in connection with suspicions that the company, along with other leading chemical carrier groups, had violated EU competition rules.

terminal, and a joint company is unlikely to emerge before late September, if at all. Car imports and exports are currentlyhandled at different port areas in Bremer-haven, with imports at the Kaiserh‰fen and exports at the Nordhafen.

Wallenius Wilhelmsen, which already runs its own terminal at Zeebrugge inBelgium, only last month purchased50 per cent of Bremerhaven stevedorecompany Atlantik Hafenbetriebe, which carries out on-board lashing.

WWL in Bremerhaven talks

Damen yard deal salvaged

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European News

France presses on with Le Joola probearmy �for having accepted too many passengers on board the ships through a massive and unreasonable sale of tickets�. The transport minister has also ordered disciplinary measures againstthe Director of the Merchant Marine, Abdoul Hamid Diop.

President Wade explained the late sanctions as being triggered by the end of criminal proceedings in the case. �As long as the penal proceedings were continuing, we could not resume administrative and disciplinary procedures,� he said.

Prestige cost could outstrip ValdezTHE damage and costs incurred by the sinking of the Prestige could be greater than those of the Exxon Valdez sinking in Alaska in 1989, according to a report published by the private Galician research institute Fundación Barrié de la Maza.

�Damages are likely to exceed those of the Exxon Valdez becauseof the extent of the pollution � as far as Northern France � and because of the importance of fishing zones in the area which havebeen badly hit by the accident,� the report says. Clean-up costs already amount to �2.5Bn ($2.7Bn), compared with �2Bn for theExxon Valdez, without counting compensation payments.

The Institute reiterated heavy criticism of the Spanish govern-ment�s handling of the crisis. �The authorities said that once the oil is locked in the ship�s tanks below the surface it will become solid and will not leak any more. The statement is wrong and was made without any scientific backing,� it says.

Finnish Swedes back home flagMEMBERS of Parliament in Finland�s Swedish People�s Party want a revision of Finnish shipping policy to forestall an exodus of passenger vessels from the national fl ag.

Shipping issues affect party voters because Finland has a Swed-ish-speaking minority that lives mainly in western coastal areas and on the Åland islands. The party has two ministers in the Finnish government. Its parliamentary group is urging Hel-sinki to introduce tonnage tax based on the Norwegian model, whereby profits earmarked for investment in new tonnage wouldbe exempt from normal corporate tax.

The party claims that, under current policy, owners only recoup half the tax and social security payments they make on behalf of their seafaring staff, compared with Sweden and elsewhere. Viking Line�s largest cruise ferry, the 46,300-GT Cinderella, has been re-flagged to Sweden to start a Stockholm-Mariehamn cruise service. Silja Line plans to switch its 35,000-GT Finnjet to a new eastern Baltic service later this year, and a Silja offi cial told Fairplay that the ship will probably drop the Finnish fl ag.

Birka Line, the Mariehamn-based ro-ro and short cruise ship-ping group, warned this week that stiffer competition from ships with lower operating costs would cut its revenues and profi t level for the full year.

FRANCE is to continue judicial investigations into the sinking last September of the Senegalese ferry Le Joola in which more than 1,800 people died. This is despite the decision earlier this month by Dakarís Attorney General to end penal proceedings because the dead captain of the vessel had been found largely to blame.

A preliminary investigation was opened in Paris because about 30 Europeans, including French nationals, also died. The as-sociation of victims� families welcomed the French decision as they do not consider the master�s death suffi cient reason to close the case. �The Technical Commission put in place a few weeks after the tragedy clearly concluded that the sinking was the result of multiple negligence at all levels,� the victims�families group declared. �Many people are responsible� The ship master cannot bear responsibility for everyone.�

Earlier in the week, Senegal�s President Abdoulaye Wade imposed heavy penalties on high-ranking military personnel involved in the operation of the ferry, while the Merchant Ma-rine director was suspended from duty. General Babacar Gaye was officially relieved of his duties for �slowness in organising assistance and wrong evaluation of the situation�. Disciplinary action has been taken against eight other military personnel.

Amadou Ndiaye, responsible for the ferry�s call at Ziguinchor, has been suspended for 60 days and faces exclusion from the

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Cover StoryCover Story

ABANDONED seafarers feel a little like the maritime industryís rape survivors ñ victimised, traumatised

and unlikely to encounter much sympathy. Relatively few of the worldís 1.2M merchant seafarers are abandoned, but the helplessness and sense of betrayal that engulf the victims remain a festering sore on shippingís underbelly. Responsible owners, somewhat understandably, see it as someone elseís problem. Most flag states, with notable exceptions, shut their doors. Governments, for the most part, point the finger at owners and fl ag states.

Only nine countries have ratifi ed the International Labour Organisationís (ILO) Repatriation of Seafarers Convention since it was revised in 1987 (see page 18) While the ILO and the IMO earnestly press ahead with discussions and negotiations for measures to protect seafarers, the human pillaging continues relatively unchallenged with a frequency fuelled by competition in shipping that cuts corners, prunes profit margins and spits out crews unfortunate enough to be unpaid and unprotected when their employer either folds or becomes strapped for cash. A few thousand seafarers are abandoned each year and there is little to suggest the practice will diminish in the short term.

The International Transport Workersí Federation (ITF) is usually one of the first ambulances to arrive at the scene. John Bainbridge, the ITFís representative to the IMO, says things are getting worse, not better. ìThe more the FOC process comes in, the worse it gets,î he says. ìAbout five to ten per cent [of owners] are the speculators. They come in on a boom, buy a ship or ships, make a few trips and go bung, sometime deliberately.î Bainbridge says the ìgoodî owners donít like them either because ìit gives owners a bad name and these fl y-by-nighters also drive down rates.î

He says the ITF, tired of being branded ìrabble rousersî and not taken seriously, is about to start issuing annual reports on abandoned ships and crews to give to the ILO-IMO. ìWeíve narrowed it down to three basic criteria which our inspectors in more than 130 countries will use ñ the master is not given support by the owner, repatriation is sought but not acted upon within a month and crew are not paid for two pay periods.î Bainbridge says he hopes the reports, to become quarterly, will put more heat on crooks and help arm authorities fighting the practice. ìAt the moment weíre like the ambulance at the bottom of the cliff and weíd prefer it if the accident never happened.î

Owners, represented by the ISF, are more inclined to wait for the ILOís International Marine Labour Convention which is expected to be adopted in 2005, calling the abandonment issue ìprobably very smallî. The federation recognises that many flag states do not intervene in cases of abandonment and says none has executed ILO-IMO recommendations from 2001 to require shipping companies to guarantee repatriation. The guarantee would be provided

through fi nancial certificates, to be cashed in the event of insolvency. Given the general laissez-faire attitude of fl ag states, the ISF says it ìhas been exploring means of obtaining such certificatesÖ given that P&I clubs have indicated that they will be unable to provide them.î

ìThe P&I clubs have never been a friend of seafarers,î says the ITFís John Bainbridge. ìIím surprised they havenít taken a greater interest and used moral judgement on outfi ts that use Mickey Mouse classifi cation. They should take a harder line.î

One recent case, admittedly atypical, has touched the spirit of a nation, Slovenia, and may result in some of the toughest, national, anti-abandonment legislation in the world. The 1977-built, Madeira-fl agged Sines, on arrival in the Slovenian port of Koper on September 11, 2002 to load iron and timber for Algeria, was ordered by PSC to make repairs. The ship and its 11 crew went to the local Izola dockyard where it gathered debt until PSC detained it in January 2003, at which point Italian owner Michele Assante Di Cupillo abandoned the crew.

The unpaid crew of six Ukrainians, three Romanians and two Italian offi cers took their plight to the Slovenian people through the media and appeals to president Janez Drnovsek and prime minister Anton Rop. They were sustained by donations from locals, unions, journalists covering the case and ITF inspector Branko Krznaric. The union official led a movement for law reform which attracted media attention in Italy. ìWhen the owner saw this [in May] he came quickly to Slovenia,î Krznaric told Fairplay, ìbecause he feared his ship would be arrested.î Following negotiations between Assante Di Cupillo, the ITF, the crew, the Ukrainian consul and an Albanian company interested in buying the ship, the crew agreed to accept 70 per cent of their back wages (total $72,000) and repatriation costs. Krznaric says the case was something of a breakthrough because parliament is now considering strict laws that would

The industryís shameSeafarers still being abandoned as convention goes unsigned

New Jerseyís Reverend Francis Cho says foreign seafarers calling at the US are barely hanging on, suffering unprecedented immigration restrictions that are turning them into ëprisonersí (photo: Seamenís Church Institute of New York & New Jersey)

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Cover Sto ry


protect seafarers. The law would be based on what Krznaric calls Portugal’s “good” law that deems a ship state property after being abandoned for 13 days.

On the other side of the world, the Reverend Francis Cho says foreign seafarers visiting the US are facing unprecedented hardships. SCI chaplain at the International Seafarers’ Centre in Port Newark, New Jersey, Cho says while abandonment is rare, immigration restrictions imposed on some nationalities are making seafarers “very upset, angry and disappointed”. The minister, who escaped Communist North Korea on foot as a 12-year old with his family in 1950, says: “It’s so hard every day trying to help people who are really locked up. I’ve been doing this work for 18 years and I have known for a long time a lot of the people who are saying ‘no’. They tell me: ‘Sorry, we don’t like doing this, but we have to.’ I’m grateful to be able to help. [Seafarers] need us more than ever and I feel our ship visits are more recognised as valuable.”

months of a crew’s wage. If the US were to make that mandatory, it would have a world-wide effect, even if only by example,” he believes. “We could look like the good guy.”

Stevenson gives measured support to the approach being taken by the international authorities. “It’s great that the IMO and ILO have brought the issue to the table. It’s a big step forward. It’s one thing to have solutions on paper, but it’s not working. The IMO

A Burmese crewman died after contracting malaria and hepatitis and his colleagues subsisted on food handouts. The master and crew, ignoring ITF recommendations, refused to leave because they said were owed $400,000 in pay over a 17-month period. Only the chief engineer was willingly repatriated. Cyprus disputes crew claims that Piraeus-based manager Argosy Shipmanagement abandoned the 1977-built vessel. Questions remain about money which Argosy says it sent but that crew members say did not reach them. The fate of the Aqua Sierra and its sugar cargo, laid up in Monrovia, remained unclear as Fairplay went to press.

The crew of the Panamanian-fl agged, 1971-built Chemical Rubi, mostly Ukrainians, was abandoned in Dakar,

Senegal, for seven months. The shipwas owned by Monaco’s Vita Marine SAM, and its plight caught onlookers unawares. Says the ITF: “The bankruptcy really took the crew by surprise: the ship was not a complete rust bucket, and the nerves of the crew were intensively tested at outer anchorage.” The ITF secured repatriation and almost half of the men’s back pay.

Eight Russian crew members of the Russian-fl agged Argun were repatriated to Vladivostok last April, almost a year after being left in the lurch in South Africa’s Cape Town. Vladivostok-based Oil Compact managed the ship. The Russians kept body and soul together largely with the help of ITF affiliates. Eight other seafarers were left aboard the vessel, which is likely to be sold in November.

Latest excerpts from the book of shameLiberian troops last month forcibly removed remaining crew from the Cyprus-flagged dry cargo vessel Aqua Sierra, stranded off the Liberian coast since January after a generator breakdown.

A happy ending for a Lithuanian crewmen and his colleagues aboard the Reliable II, abandoned at New Yorkís Staten Island in 2002. Seamenís Church Institute director Doug Stevenson helped repatriate the crew (photo: Seamenís Church Institute of New York & New Jersey)

Triste in Trieste: stranded Sea Serenade crew gave locals a clear message: ìShame! We want to go homeî (photo: Branko Krznaric)

One beacon of hope for seafarers is technology. Laptops and satellite telephones have punctured seafarers’traditional sense of isolation at sea. The tools give them instant access to information, advice and help. A text message from one of the crew of the Sines to the cellular telephone of the ITF’s Branko Krznaric helped raise the alarm.

Doug Stevenson, director of New York’s Center of Seafarers’ Rights, agrees: “To say the federal government has become preoccupied with terrorism and security is too mild. They just don’t care about anything else. There are a lot of well-meaning people who see their job as just protecting Americans.” The former US Coast Guard commander says that preoccupation with security and terrorism has blinded US legislators to the broader issue of abandonment. “A solution is for foreign enterprises in the US to provide proof of financial security, a bank letter or like, as well as providing two

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Cover Story

canít enforce anything. We need to raise the bar for crooks.î

He singles out Cyprus as a model ß ag state for helping abandoned seafarers, joining Norway, the Marshall Islands and some European states as innovators. Stevenson says seafarers also have to help themselves. ìThey have some responsibility, too. I mean, if you havenít had wages for two months, you start taking some action.

Bainbridge laments that many big companies no longer have an afÞ liation to the sea or seafarers, employing casual labour and sacking workers who become ill or encounter immigration problems. ìItís too easy to treat people harshly and a lot of seafarers donít even know who their shipís owner is,î he says. ìThings may change as a result of the Enron scandal. If chief executives become the big issue and some start getting jailed, that could make a big difference.î

Article 41. It shall be the responsibility of the ship owner to arrange for repatriation by appropriate and expeditious means. The normal mode of transport shall be by air.2. The cost of repatriation shall be borne by the ship owner.3. Where repatriation has taken place as a result of a seafarer being found, in accordance with national laws or regulations or collective agreements, to be in serious default of his or her employment obligations, nothing in this Convention shall prejudice the right of recovery from the seafarer of repatriation costs or part thereof in accordance with national laws or regulations or collective agreements.4. The cost to be borne by the ship owner shall include:(a) passage to the destination selected for repatriation in accordance with Article 3 above;(b) accommodation and food from the moment the seafarer leaves the ship until he or she reaches the repatriation destination;(c) pay and allowances from the moment he or she leaves the ship until he or she reaches the repatriation destination, if provided for by national laws or regulations or collective agreements;(d) transportation of 30 kg of the seafarerís personal luggage to the repatriation destination;(e) medical treatment when necessary until the seafarer is medically Þ t to travel to the repatriation destination.

5. The ship owner shall not require the seafarer to make an advance payment towards the cost of repatriation at the beginning of his or her employment, nor shall the ship owner recover the cost of repatriation from the seafarerís wages or other entitlements except as provided for in paragraph 3 above.6. National laws or regulations shall not prejudice any right of the ship owner to recover the cost of repatriation of seafarers not employed by the ship owner from their employer.

Article 5If a ship owner fails to make arrangements for or to meet the cost of repatriation of a seafarer who is entitled to be repatriated-(a) the competent authority of the Member in whose territory the ship is registered shall arrange for and meet the cost of the repatriation of the seafarer concerned; if it fails to do so, the State from which the seafarer is to be repatriated or the State of which he or she is a national may arrange for his or her repatriation and recover the cost from the Member in whose territory the ship is registered;(b) costs incurred in repatriating the seafarer shall be recoverable from the ship owner by the Member in whose territory the ship is registered;(c) the expenses of repatriation shall in no case be a charge upon the seafarer, except as provided for in paragraph 3 of Article 4 above.

IT has been 12 years since the ILO’s amended Repatriation of Seafarers Convention entered into force, revising the 1926 version. Hailed at the time as the best international measure to protect abandoned seafarers, the convention has been ratified by only nine countries – Australia, Brazil, Bulgaria, Guyana, Hungary, Luxembourg, Mexico, Romania and Spain. Two of the convention’s 13 Articles contain the prime arrangements:

A few good countries

The Seamenís Church Instituteís tiny office in New Yorkís Manhattan borough deals with a sea of faces seeking assistance (photo: Seamenís Church Institute of New York & New Jersey)

Time to pay up. Left to right: representative of the new Albanian owner, a Romanian seafarer and vendor Michele Assante Di Cupillo settle an eight-month dispute over the abandoned Sines in Slovenia (photo: Branko Krznaric)

FRPED030828012.indd 18 21/8/03, 17:11:50


News FocusNews Focus

China kicks off mega port projectCHINA began work this month on a mega port project aimed at addressing Shanghaiís limitations and promoting Chinaís biggest port as a major container hub for export cargo from the north and north-east that is now being transhipped at foreign ports.

Being a river port, Shanghaiís draught is not sufficient to take in large size container ships. Though dredging works have increased the draught to 8.5 m this is still not adequate to receive box ships of the future.

It is for this reason that the Shanghai Municipal Government decided to build a new deep-water port on nearby islands. The $14Bn Yangshan deepwater container port project has kicked off with the driving into the seabed 1,800 piles, each 60-m long. The entire project on the islands of Da Yangshan and Xiao Yangshan and some other smaller islands will include construction of 70 berths, a 26-km bridge connecting the islands to the mainland and an 80 sq km city on the seaside.

By 2020 the Shanghai Port Authority, which is vested with the responsibility of completing the project, plans to build 33 berths. Part of the population residing in the islands has already been relocated. The first phase includes building six berths on the smaller island of Xiao Yangshan and is scheduled to be completed by the end of

2005. Investment for this phase, estimated to cost $1.7Bn, has been tied up with Shanghai Tongsheng Investment Group signing a loan for $2Bn with a Chinese banking consortium comprising ten banks.

Completing the bridge in the short time span is a challenge as rough weather conditions mean that only 180 days in a year are available for work. Even when the berths are completed it would mean that there would be days in the winter season when it would not be safe for ships to anchor because of the swell caused by winds whipping in from the north-west. According to Shanghai Vice-Mayor Yang Xiong, under such conditions vessels would have to divert to Beilun in Ningbo, 130 km south of Shanghai.

At the moment Ningbo competes with Shanghai for box cargo, but Yang Xiong emphasizes that the increased fl ow of container cargo would mean that there would be sufficient volumes for both ports. The real issue, he pointed out, is easing congestion since Chinaís expansion is expected to result in a surge in box volumes. Ningbo too has the same draught problems as Shanghai and has also chalked out plans to build deep-water berths at nearby islands.

Yangshan has begun to attract foreign interest though Chinese authorities do not consider that direct foreign investment is necessary during the first phase when foreign participation, if any, would involve operating the berths. Senior municipal government offi cial Zhang Huimin said negotiations regarding operating the berths in the first phase and possible investment in the subsequent expansion are being held with 21 logistics companies and terminal operators including P&O, Hutchison, PSA Corp and Maersk. In the latest development giant liner operator China Shipping, which is the largest user of Shanghai accounting for more than a million TEU a year, has tied up with Hong Kongís Modern Terminals for participation in the Yangshan port project. ëDown to earthí negotiations with foreign investors are expected to begin by the end of this year when the exact nature and procedure for foreign participation in what is Chinaís biggest port development project would be revealed.

The $14Bn Yangshan deep-water container port project will enable Shanghai to take larger container ships

Negotiations regarding operating the berths and possible investment

in the subsequent expansion are being held with 21 logistics

companies and terminal operators including P&O, Hutchison, PSA

Corp and Maersk

FRPED030828004.indd 19 21/8/03, 10:38:22


News Focus

dinner in November last year. The emergence of low-cost centres for ship repair, ship and rig building has meant that competition has become intense, traditional businesses have migrated and margins eroded, he said.

These views were echoed by National Trades Union Congress (NTUC) secretary-general Lim Boon Heng in his National Day Message. ìAlthough shipyards are doing well now, you have to be mindful of the competition coming from China, and maybe Vietnam,î he cautioned though drawing attention to the fact that yards have the luxury of time to restructure and cope with emerging competition and thus remain a vital source of employment.

The NTUC in fact has identifi ed shipyards among its chosen 50 employers with whom it will co-ordinate in employing Singaporeans who until now appear to be choosy about jobs. It hopes to close what Lim calls the gap between workers looking for jobs and employers looking for workers.

Singapore yards canít get the staffSINGAPOREíS shipyards continue to boom and remain a major source for em-ployment potential as other sectors struggle in an economy that is heavily reliant on external trade. While major government linked enterprises such as container terminal operator PSA Corp prune staff and restructure wages, the Keppel group shipyards, which have been merged under the Keppel Offshore & Marine umbrella, have as many as 215 vacancies waiting to be filled.

August 9 that opinions about yard jobs are changing. He expressed confidence that the 200-odd vacancies in the group would be filled soon. Salaries are on the high side and should attract local talent, he observed. Across the board basic monthly salaries for employees ranging from crane operators to engineers vary from S$850 to S$2,600. The figures exclude annual bonuses and overtime pay. ìWe should not have too much difficulty in filling up the vacancies,î Beng said.

Beng claimed that with 16 yards around the world, Keppel has grown along with Singapore to become one of the leading offshore and marine engineering services groups. In 2003 alone it expects orders up to S$1.5Bn. Keppel O&Mís expansion plans include setting up an offshore and engineering facility in Kazakhstan to cater to prospecting and drilling in the Kazakh sector of the Caspian Sea. The first phase development of the 50-hectare facility is estimated to cost US$20M.

While prospects for yard jobs in Singapore are bright in the short term, executives are wary of the future and have already begun to serve veiled warnings. ìWhile we are optimistic that the world will continue to need our services on the oceans, we are facing increasing worldwide competition,î Beng said, pointing out that China, Vietnam and other developing nations are developing their own marine and offshore industries.

Heng, who is deputy president of another Singapore yard major ñ SembCorp Marine ñ is more forthright. ìThe continued success of the industry must not be taken for granted,î he had declared at ASMIís 34th anniversary

According to the Ministry of Manpower, the total workforce of Singaporeís marine industry comprising yards specialising in ship repair, conversion, shipbuilding and offshore construction touched 37,477 at the end of 2002 with recruitment rising by over seven per cent.

Order books for the yards for the next two years are ìhealthyî according to Heng Chiang Gnee, president of the Association of Singapore Marine Industries (ASMI). Total turnover in 2002 rose by eight per cent to a record S$4.4Bn ($2.5Bn).

Yet yards have experienced diffi culties in filling vacancies even during times, such as now, when jobs are scarce.

This is because, as Keppel O&M chairman and CEO Choo Chiau Beng put it, Singaporeans have been choosy in working at yards because ìyou must be prepared to work in the sun to a large extent.î There is also a perception that shipyard jobs, whether they relate to engineering or supervision or welding, are not ìcleanî.

In fact, ASMI has plans to kick off an ìimage enhancementî programme to attract ìsufficient talentî to provide what Heng called ìcritical massî to not only sustain but also support the growth of the industry.

Beng, however, noted at Singaporeís 38th National Day celebrations on

Choo Chiau Beng, Keppel O&M chairman and CEO: Singaporeans see shipyard jobs as dirty

ìAlthough shipyards are doing well now, you have to be mindful of the competition coming from

China, and maybe Vietnamî Lim Boon Heng, National Trades Union Congress secretary-general

FRPED030828003.indd 20 21/8/03, 10:36:30


News Focus

Last week H&W won a contract from the Royal Fleet Auxiliary (RFA) to refurbish a Ro-Ro ship owned by Cobelfret to its pre-charter condition following seven years working with the RFA. The 23,986-GT vessel Celestine built in 1996, was called Sea Crusader during its charter with the RFA, the supply service of the Royal Navy. It has a capacity of 635 cars and 160 trailers and will now operate on Cobelfretís Zeebrugge-Immingham service under the management of Euroship Services, as its her five other sisters and the rest of the companyís fl eet.

During its seven year charter the Celestine has been operating globally. The refurbishment project was won

New H&W structure pays offHARLAND & Wolff (H&W) is a name synonymous with the British shipbuilding industry and as the latter has died so the fortunes of the Belfast shipbuilder have also waned. However, following the most recent streamlining of H&W comes news that suggestion it is still very much a player in the ship repair business.

in a competitive tender against a tight deadline. No value has been placed on the contract but it is understood to be worth in the region of £400,000 ($637,000). Returning the Celestine back to an ëas newí condition involved a mechanical overhaul and an internal and external repaint to put it back in Cobelfret colours.

To fulfil the contract H&W took on 100 sub-contract workers including painters and electricians from a pool that is available in Belfast. The Celestine is the first RFA vessel that H&W has worked on in 14 years and it is understood that the contract was won in on price, in part, because of the competitive edge that using subcontracted labour provides.

Refurbishing the Celestine was described by Jim Shaw, H&Wís project manager on the four week project, as ìparticularly demandingî as both chartererís and ownerís superintendents were on-site, although Rob Cranstone, chief offi cer with the RFA, said that he was very pleased with the work being done.

Ship repair and conversion work is one of the three strands of the new streamlined H&W as introduced earlier this year. Following the Celestine, the company is working on the 100,000-DWT Panamanian tanker Teseo including new pipe work and upgrading deck machinery. This is a contract that was won in face of competition from the Portuguese Lisnave yard.

The other two strands are civil engineering, where H&W is doing a lot on bridge building, and design engineering, focusing on developing designs for commercial ship types or offshore vessels such as FPSOs. Here H&W is co-operating with Nassco on an 185,000-DWT tanker design of which four have been ordered by BPfor delivery in 2004-06. H&W has also provided a Chinese shipyards with designs for a Suezmax tanker and FPSOs.

RFAís chief officer Rob Cranstone (left) and H&W project manager Jim Shaw working together to refurbish the Celestine, which had been on charter to the Royal Auxilary Fleet as the Sea Crusader

FRPED030828003.indd 21 21/8/03, 10:36:46


News Focus

A specially chartered supply ship, the Seabulk Martin I, docked in Monrovia on August 15 and is now providing a base for a team of WFP staff to co-ordinate relief operations. A new port captain, who is part of the team on board, will assess the condition of the port. It sufferred some damage during the Þghting, which will hamper the arrival of relief ships. Also aboard are representatives from UNHCR (United Nations High Commissioner for Refugees) and Oxfam.

“With the extra staff on the ship, we can now re-establish a full presence on the ground very quickly,” said Justin

Bagirishya, WFP’s country director for Liberia recently. Tens of thousands of people have had little or no access to food, he explained adding that malnutrition rates are alarmingly high. The WFP says it requires about 9,000 tonnes of food aid per month until the end of December.

The Seabulk Martin I, equipped with essential communications and logistical equipment on board, will ferry additional cargo – including port machinery and relief items – from Ivory Coast to Liberia every fortnight.

Prior to the Þghting, WFP had pre-positioned more than 10,000 tonnes of food aid in the port, but most of this was looted. In particular, WFP lost its entire stock of Corn Soya Blend, pulses and vegetable oil. To alleviate the situation, the WFP says it is already in the process of shipping food in from Guinea Bissau, Guinea Conakry and Sierra Leone and has also diverted supply ships to Liberia.

WFP homes in on MonroviaTHE recent arrival of peacekeepers into Monrovia has been the catalyst for a dramatic scaling-up of a relief operation by the World Food Programme (WFP) to avert a human tragedy in the Liberian capital. Its target is to provide food aid to 500,000 needy people in Liberia.

Seabulk Martin I is the nerve centre for WFP and other aid agencies in the race to feed Monrovia’s hungry population (photo: World Food Programme)

Menno Duin of the Rotterdam Association of Ship’s Agents (VRC) explained to Fairplay that, being hatchless, open vessels can also discharge and load much faster than conventional container vessels, an important factor for 1,000-1,500-TEU feeders that call at several ports each week. Moreover, smaller feeder designs

such as the Dongedijk, which capsized in August 2000 off Port Said, are being shunned because of their low freeboard and poor stability.

The Dutch authorities, having initially maintained that the Dongedijk was a safe vessel, now admit – as a result of a further study by the Technical

University of Delft – that its stability and the allowed freeboard were at the absolute minimum when fully loaded.

Apparently, it is not only the classiÞ cation societies that have optimised designs together with shipyards, as alleged by Greek ship owners, but also the responsible authorities. While the reduced GT currently applies only to vessels registered in the Bahamas, Fairplay understands that the Dutch ministry of transport is studying a request from P&O Nedlloyd (PONL) to have its open vessels under the Dutch ßag measured in the same way as those of V-Ships.

FOLLOWING the success of V-Ships in reducing the Gross Tonnage (GT) of its Shire-class con-tainer ships , short-sea operators are showing an interest in ordering open container vessels. Major lines are also attracted by the lower port costs offered by lower-GT open ships.

Agreement close on open ships

Scerni, a renowned ship agent with past experience as an owner, is Dauphin’s chairman. He was a minority partner in ship owner Premuda Genoa between 1994 and 1998. The ßeet is headquartered in Genoa but commercially and technically run from Naples. It comprises

RINA’s man of many parts REGISTRO Italiano Navale (RINA) president Gianni Scerni has set up a 50:50 joint tanker venture, Dauphin Tankers, with tramp spe-cialist Fratelli D’Amato of Naples.

RINA president Gianni Scerni (left) with CEO Ugo Salerno, has added a tanker venture to his extensive portfolio (photo: Angelo Scorza)

ProÞ le

FRPED030828002.indd 22 21/8/03, 10:34:10


News Focus

V-Shipsí Oxford (formerly Norasia Salome) at Zeebrugge. Gross Tonnage has been reduced by 35 per cent (photo: Joachim Affeldt)

Having much larger vessels than V-Ships, PONL will not benefit to the same extent. Preliminary calculations indicate that GT will be reduced slightly less than ten per cent compared with 36 per cent for the V-Ships vessels. Not a large amount, but it will still go some way to reducing harbour costs. More important, if open ships regain favour among ship owners, their low resale value ñ the most serious disadvantage ñ will disappear.

Further progress in this direction may result from Germanyís initiative, supported by the Netherlands, to ask IMO to study whether the Load Line convention needs to

Called As it Was ñ and kindly refrain from adding ëis now and ever shall beí ñ its sub-title describes it as the Highlights of Hydrographic History, from The Old Hydrographerís Column, ëHydro Internationalí Volumes 1-6í. This is a collection of all the ëAs it Wasí columns written for Hydro International by former hydrographer Steve Ritchie and fellow writers. The columns highlight hydrographic history, describing how things were done before the advent of such aids as electronic ship fi xing, GPS and side scan sonar.

From the first issue of Hydro International in 1997, ëAs it Wasí has featured as a regular column in the magazine. Steve Ritchie selected 48

The way we were

four 72,000-DWT product carrier newbuildings commissioned from Hudong of Shanghai, an investment worth $140M. Deliveries started in early 2003 at three-month intervals for completion before the end of the year.

In April, Scerni was also confi rmed as president of Genoaís Council of Inter-modal Shipping Consultants. He became chairman of Italian class society RINAa year ago. ìI was very honoured by my designation, as RINA is a keystone of the Italian maritime cluster,î he commented. RINA also appointed Ugo Salerno, former MD of Coeclerici Armatori & Logistics, as CEO. Says Scerni: ìOur goal is to restore visibility and the historic role that RINA deserves, relying on the high motivation and great skill of a dynamic young manager such as Salerno, who is the real key man in RINAís renovation process.î

be amended to make the new measurement method applicable to all vessels. This will take time, but ship owners can take some comfort in that many ports are nowadays more flexible and are prepared to look into problems of relatively high port dues for special types of vessel.

Rotterdam, a major port of call for feeder vessels, has confi rmed to

Fairplay that it has informed the VCK that it is open to suggestions regarding a revision of port dues for open container vessels.

highlights in the 2,000-year-old history of the hydrographic and oceanographic profession, but also invited other professionals to contribute, including two guest contributors covering surveying in the early days of the offshore oil and gas industry.

The collection is set out chronologically and is accompanied by beautiful illustrations and photographs.

As It Was by Steve Richie with contributions by other writers, published by GITC, PO box 112, 8530 AC Lemmer, Netherlands. Tel: +31 514 561854; e-mail: [email protected]; website: www.gitc.nl/bookstr.htm. Price: Ä34,00 (ISBN: 90-806205-5-6)

THOSE who have been in the shipping industry more years than they care to remember tend to hanker from time to time for the good old days. If that describes you, then a new book from GITC, publisher of Hydro International, might be just what you are looking for.

Review

FRPED030828002.indd 23 21/8/03, 10:34:22


News FocusAbdul Hai, the reforms carried out so far had already attracted foreign assistance. There is a $67M loan from Japan to develop Latakia Port, and $50M from the European Investment Bank to renovate the port of Tartous, the bulk of which would be spent on purchasing handling equipment. There are plans, of course, to upgrade the third Mediterranean harbour, Banyas.

The plan is for Banyas to specialise in Iraq oil exports, said one government official who asked not to be named. Politics is obviously involved here, as Syria has to mend fences with the US if it wants a slice of post-war business with Iraq. The official did not elaborate further, but said that the renovation of ports in general is meant in a major part to enable the facilities to cope with Iraq trade.

Pre-war figures indicate that Syria enjoyed over $1Bn in trade with Iraq in 2002, after ties were restored between Damascus and Saddam Husseinís regime in early 1990s. This trade has been drastically reduced by the war in Iraq and the US-demanded border closure with its neighbour. According to some reports, US forces are now easing the strict monitoring of goods flowing from Syria into Iraq, and besides, as one analyst philosophically put it, ìSyria is a survivor, and can work it out.î

The philosophy behind Syriaís maritime reforms appears to be based on the public/private partnership model and Sabra stresses that the state will not relinquish its upgraded ports. Restructured port administration will remain in the governmentís hands and Sabra reveals that two state-run companies have already been set up at Latakia and Tartous ñ the Public Company for Latakia and the Public Company for Tartous. They will have expanded responsibilities and would benefit from the expertise of foreign organisations and the private sector but nevertheless, there would be a separation between ownership and management. The private sector would undertake management of port services, infrastructure and operations of the ports. A Syrian shipping agent put it this way: ìSyria is ready to develop in all fields, provided that its political pillars remain intact. So, caution is the name of the game.î

Doing it the Syrian wayIN his first public speech as president, Bashar al-Assad told his country in June 2000 that it would pursue democracy, but one ìspecific to Syriaî. Three years on and that translates into some economic liberalisation wedded to political status quo. This ëSyrian wayí is also being applied to its maritime reforms.

Abdul Qader Sabra, Syriaís representative at the Arab Shipping Chambers Union (ASCU) told Fairplay that Syria was now undergoing ìa huge development process in the maritime transport sector and portsî. He cited a presidential decree issued in late 2002 to sanction private sector shipping agencies. Since then, more than 20 such firms have come into existence and Sabra says they are doing a good job: ìThey are serving incoming and outgoing ships with a better quality and lower charges,î compared to the previously sole government-run company undertaking the job.

According to Sabra, Syria has agreed to join an ambitious regional plan to link Arab ports along the North African coast

and the Levant, starting from Morocco, through Algeria, Tunisia, Libya, and Egypt, through to Lebanon and Syria. The project is ìa step in the right directionî, says vice president of AUSC, Mohammad Dalabih, adding that if integration between Arab ports is achieved, other general reforms would follow. Two months ago, port authorities in Syria announced a discount of 25 per cent in in-transit fees to attract more shipments bound for Iraq, followed one month ago by another 25 per cent discount.

A leading fi gure in Syriaís maritime sector told Fairplay that the law endorsed in July allowing private banks to operate in the country after 40 years of state monopoly on the banking sector, and another that eased restrictions on foreign-currency transactions, have had a profoundly positive effect.

In the past, only the Syrian pound was allowed, said Syrian assistant minister of transport for maritime affairs, Emad Abdul Hai, who added that private banks would extend a helping hand in a project to maintain an old fl eet of 326 Syrian-fl ag ships. According to

Syrian maritime reforms include the upgrading for ports

such as Latakia

ìSyria is ready to develop in all fields, provided that its political pillars remain intact. So, caution

is the name of the gameî Syrian shipping agent

FRPED030828001.indd 24 21/8/03, 10:27:26


News Focus

According to the European Commission a tightening of current legislation is urgently needed to plug regulatory gaps in the area of criminal pollution offences. The Directive targets any person (including the master, the owner, the operator, the charterer and the classification society), who has been found to have caused or contributed to illegal pollution, ìintentionally or by means of gross negligenceî.

While industry groups have welcomed the general principle that those responsible for ship-source pollution should be subject to the appropriate sanctions, the directive itself has thrown up a number of potential problems. Intertanko, together with the International Chamber of Shipping, the European Community ShipownersíAssociation and the Oil Companies International Marine Forum, have submitted a joint position paper to the Parliament, setting out their position and raising a number of points.

The paper explains that some of the criminal sanctions proposed would create problems by undercutting the internationally agreed standard. It also suggests that enforcement of some of these provisions would be in direct conflict with the Marpol and Unclos Conventions ñ a problem that is likely to entail legal difficulties with the national laws of member states. Even outside the issue of criminal sanctions for polluters, industry representatives have been vigorously defending the accepted use of an international regime to enforce standards, rather than opting for regional measures. In the case of the new penal sanctions, the

Industry balks at criminal sanctions WHILE the single-hull debate has grabbed the headlines since the Prestige sinking, an EU directive prescribing criminal sanctions for ship-source pollution has been quietly bubbling away within Brussels. Now due for considera-tion at the European Parliament, the shipping industryís major bodies have questioned the value of a new directive and voiced seriousconcern as to whether it will contribute to the environmental protection is seeks to bolster.

Portland played host to two vessels within a period of only five days during June, the first of which was Explorer, chartered by Abercrombie & Kent, and seen above entering Portland harbour. Inbound from the Brazilian port of Belem, the 100-passenger ship usually spends the European winter in the South Atlantic before returning for the summer to cruise around the British Isles, Ireland and Northern Europe. It stayed for three days, taking on 91 passengers, including Americans on a fly cruise, who had fl own into

Bournemouth International Airport from the US earlier in the day. Its cruise took in the Scilly Isles, Ireland, Scotlandís Western Isles and Dundee.

The second vessel, Hebridean Spirit, arrived at Portlandís Britannia Terminal on its first visit to the port. Owned and operated by Hebridean Cruises, this 90-m, 4,200-GT ship offers five-star luxury for up to 80 passengers. Hebridean Spirit follows the sun in a year-long schedule that takes in the Mediterranean, the Indian Ocean, Northern Europe and the Baltic.

THE English south coast port of Portland is rapidly becoming popular with visiting cruise ships, and from May next year the port is optimistic that it will attract a regular flow of vessels.

Portland returns to favour

(photo: Don Crighton)

(photo: courtesy of Hebridean Island Cruises)

FRPED030828005.indd 25 21/8/03, 11:24:50


News Focus

The trend began with the Exxon Valdez incident, when the marriage of Exxon and Mobil soon after witnessed the disposal of most of the latterís fl eet,

You canít hide behind a face lift

Ringbakken: While the industry in no way condones illegal operational discharges, it was compelled to point out that it did not seem appropriate to introduce yet another layer of regional sanctions

INDUSTRY observers may not have missed the irony in BP Shippingís decision to expand its fleet of owned and managed tankers carrying its livery and bearing their ëtraditionalí British names. It flies in the face of the recent trend for oil majors such as Mobil to divest themselves of their owned or managed fleets to avoid the bad publicity involving oil spills.

many of which were immediately chartered back in new livery and new names. Sale could not have come soon enough for Sylvan Arrow, which is

now called the Achilleus and fl ies the Greek flag. On August 19, Mobil was fined A$1M ($661,000) at a Melbourne court for an oil spill in December 1999, during tank cleaning while the Sylvan Arrow was passing south of Wilsonís Promontory, a national park on the south-eastern Australian coast. Unluckily for the ship, a New Zealand warship was passing, spotted the slick and followed it to its source.

No doubt the logic of selling off ships appeared sound at the time but is the wheel about to turn full circle? BP Shipping, which, like Shell, never abandoned management of its own carriers entirely, now believes that having no involvement in the direct management of chartered vessels can have negative side effects. Governments, when their shorelines suddenly become a sticky black quagmire, will ask embarrassing questions about whose cargo it is and how much the responsibility the charterer has for the vessel it has chartered.

position paper states that its adoption would lead to a legal uncertainty by establishing an additional regional layer on top of the international and national legislation.

With the recent case of the Prestige master Apostolos Mangouras still fresh in many peopleís minds, concerns have also been raised about the effects that this directive would have on the rights of the accused. The directive itself makes little reference to the rights of seafarers and the industry paper notes concern over the lack of appropriate safeguards for seafarersí rights. Furthermore the paper notes that ìthe range of sanctions proposed by the Directive [are considered to be] extreme and excessiveî.

Although the legal confusion and concern for human rights are likely to be the

main sticking points for the Directiveís progress, industry figures have also expressed a larger concern over whether the criminalisation route is going to solve anything. According to Intertanko deputy MD Svein Ringbakken there is a potential dilemma between pursuing the line of criminalisation and that of fostering a culture of transparency and of learning from mistakes. Referring to recent experiences, Ringbakken noted that it was a sad state of affairs when marine safety officials are met by ship officers and crewmembers who are only prepared to communicate through lawyers in the aftermath of a maritime incident. The major concern remains that if the Directive is passed, it could eventually end up hindering environmental protection by encouraging crew and officers to hide their mistakes, therefore making dangerous accidents ultimately inevitable.

Safety

Seen clearly beneath the Acilleus livery is the name Sylvan Arrow, which was operated by Mobil and fined A$1M for an oil spill (photo: Dale E Crisp)

FRPED030828005.indd 26 21/8/03, 11:25:28


P&I

New ART forms for P&I?P&I

ART products have been embraced by some clubs to iron out potentially volatile annual and supplementary call profi les. In an era of rapidly reducing investment returns as a result of poor equity markets, falling free reserves and a steady claims profile, club managers have found them-selves under increasing pressure. And, in moves to placate their ship ownermembers, some have signed up for such products in the hope of making the level of P&I premiums more predictable.

The concept is that such clubs can draw on an alternative facility if certain ra-tios reach defined levels. But sentiment towards these products is definitelymixed: there are those who believe that such arrangements effectively provide an additional quasi line of credit which is off the balance sheet, fl exible and very handy to have. But there are oth-ers who believe that the set-up costs of these arrangements are high and anydrawdowns on such arrangements may have to be repaid anyway. As the ar-rangements usually stand for a number of years, there are also those who feel

some club members could be left with a headache at some point in the future.

Rowena Potter, managing director of Financial Services at Standard & Poorís, which rates the financial standing ofmany P&I clubs, says that the arrange-ments have the effect of spreading risk over a number of years. However, she says, such arrangements are structuredin different ways and vary from club to club. ìWe look at them individually to see whether they add to a clubís fi nancial strengthî, she explains, adding however that such arrangements are never viewed as a source of contingent capital.

In general terms, alternative risk prod-ucts facilitate the transfer of fi nancialrisk to third parties and have beenwidely applied in recent years in thebanking sector. However, the products themselves are often specially tailored to suit a particular eventuality and are often difficult to compare.

However, ART products are mostly designed to bring together the banking and insurance sectors, to mutual ben-efit. Credit enhancement, in one form or another, is the ultimate objective, based on using the balance sheet of a highly rated insurance company to guarantee a tranche of risk, thus making a banking deal more attractive and more secure.Many believe that banks themselveswill turn to the specialised ART mar-ket in the run-up to the introduction of new banking regulations in the form of Basle II. These will require some banks to allocate a greater proportion of equity against their loan portfolios. But insur-ance experts believe that parts of portfo-lios could be financially guaranteed by highly rated third parties through ART products, thus freeing up more equity forbanks to build their loan books.

The application of ART products in ship-ping, intermediaries concede, has been

frankly limited. One relatively straight-forward example is that of residual value guarantees, which have been widely usedin the aviation industry to enhance air-craft leasing deals. In shipping, however, only five deals involving residual value guarantees are thought ever to have been completed. This is because, unlike air-craft, ship values are notoriously volatileand the exorbitant premiums demanded by underwriters effectively amount to ìdeal breakersî.

At a macro level, it is the analysis of risk that is worrying insurance analysts. In our ëpost-9/11í world, there is increas-ing concern in some quarters about the International Groupís reinsurance ar-rangements (see page 28). What is rat-tling some experts within the industry is what might happen if some catastrophic event were to involve two large, US-based cruise ships and up to 6-7,000passengers and crew, to say nothing of pollution and wreck removal. Likelychanges to the 1994 Athens Conven-tion on passenger liability, which will see sharply higher limits for death and serious injury, could well mean that existing reinsurance arrangements areinadequate. Whether or not the P&I clubs will embrace new forms of ART products, however, remains to be seen.

P&I: could be worse… possiblyThe past 12 months have been an-other extremely difficult year for the P&I clubs. The already fragile fi nancialmarkets suffered further damage by the effect of the war in Iraq and trading conditions have been diffi cult. There is little certainty at present in the global economy, which inevitably reflects in both shipping and insurance. Itis unlikely that trading conditions for marine insurers in general and forP&I clubs in particular will improve in the short to medium term. Here, rep-resentatives from the industry talk to Fairplay about the challenges ahead over the next 12 months.

“THE P&I clubs were late comers to the alternative risk transfer (ART) market”, says a prominent insurance intermediary. “But that’s not surprising – they still make deci-sions by committee so they’re still pretty slow.” Only a few of the International Group P&I clubs have ART arrangements in place, and some think them unsuitable for mutuals. However, as various third-party liability issues get addressed in the months ahead, the pressure on ship owners’ mutual insurance providers will definitely rise and renewed interest in bespoke ART products could well be generated.

Potter: ART arrangements are never viewed as a source of contingent capital

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But does it work? That is the test. Indi-vidual clubs may set up their reinsurance programmes as a stop loss ñ an insurance that limits exposure of a loss to a fi nite amount ñ in several ways. They may reinsure their share of a coinsurance li-ability; for instance their part of the fi rst $500M layer in the IG. For the UK Club, the largest of the 13-member IG based on declared tonnage, such a liability could amount to about $25M. That in itself is not such an earth-shattering amount, but

ART schoolINTERNATIONAL Group (IG) reinsurance arrangements may seem complicated toordinary members of a club. They are.But reinsurance arrangements made byindividual clubs can be even more so, like that made between the UK P&I Club and Swiss Re over three years ago. Some say that it is not reinsurance at all, but a form ofAlternative Risk Transfer (ART), although the club rejects that allegation.

Is it ART, or a cunning disguise for unmutual financial practice, or simply an invaluable tool for covering risks? (photo: Corbis)

it is the attritional claims at the lowerlevel, including the first pooling level up to $30M, that can accumulate to have a signifi cant influence on a clubís annual income and expenditure statement.

The UK Clubís ten-year re-insurance ar-rangement (2000-2010) with Swiss Retackles this by taking account of the total

picture ñ the clubís ratio of total funds for the financial year set against its outstand-ing claims, to produce its free reserves for the year. If that ratio of free reserves falls below 125 per cent, a level fixed in the late 1990s as standard, then the reinsur-ance contract is triggered, as it has been this year for the first time, Nick Whittear, marketing director for the clubís managers, told Fairplay.

However, a claim on reinsurance can only be made against claims at any level, although effectively it is the free reserve ratio that is reinsured, regardless whether the ratio changes because of an increase in claims or a fall in income (including invest-ment) or a combination of both, says Whit-tear. But the reinsurance does not subsidise membersí premiums, he is quick to point out, adding that such deals have to be car-ried through ìin good faithî. ìItís a unique arrangement,î he declares.

Now in the third year of operation, the Swiss Re reinsurance facility provides the UK Club with a potential $300Mdrawdown facility over that period ifthe free reserve 125 per cent benchmark is not attained in any financial year in the period. However, should the club have a run of poor returns resulting in the full $300M being exhausted, it would have tocontinue paying the designated premium to Swiss Re through an established con-tingency account for the remaining term, says Whittear. ìThe club is committed to the ten-year term even if the benefi t is totally used.î

The UK Clubís instrument: what happened in 2003

Contingency a/cTransfers to/from Swiss Re

Initial Accrued refund Claims Final Position and premium recovery positionTotal funds $928M -$32M - $896MOutstanding claims $759M - -$42M $717MFree reserves $169M - - $179M

Ratio 122% - - 125%

1) The initial position of total funds set against outstanding claims achieves a free reserve ratio of 122 per cent, which triggersthe reinsurance contract for a recovery that will restore the ratio to 125 per cent.2) Reinsurance recoveries reduce out-standing claims by $42M to $717M. The contract now operates as a stop-loss reinsur-ance, so that all future claims payments in excess of $42M in respect of all policy yearsup to and including 2002 will be recover-able, up to the contract limit of $300M.3) In the two previous years, the club has included in its assets the amount

to be recovered from Swiss Re if there were no claim on the contract. Because the claim now exceeds the value ofthis accrued premium refund, the ac-crual has been reversed. Its value plus the 2002 premium ($32M) is treated as reinsurance premium for the year and then offset by the $42M recovery on outstanding claims. This increases the clubís free reserves by $10M, which achieves the 125 per cent ratio.4) There is no adjustment to the premi-um payable to Swiss Re in future years as a result of this claim.

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P&I

Although several clubs accept that thecost of reinsurance has historically been low ñ and the 2000-01 policy year was particularly depressed ñ they recognised that even before September 2001, rein-surance rates were advancing again. But despite the obvious turn in the market, some clubs, like the Britannia, have been unable to hide their frustration at the un-welcome turn of events culminating in theIGís reinsurance renewal.

ìIt has long been the view of the [Britan-nia] Committee that the clubs should seek to retain more risk by increasing the [In-ternational Group] retention above the cur-rent $30M,î said club chairman Sir David Thomson, adding that it would therebybecome less reliant on reinsurance. The club believes that until the IG is prepared to increase its retention, the market will

take commercial advantage of the IGís perceived lack of ëappetite for riskí. ìThis is not a criticism of the market,î saysThomson, ìbut simply recognition of com-mercial market forces.î This stance does, however, seem to imply that IG reinsurance will be replaced by individual clubsí own reinsurance arrangements, which although beneÞting less from economies of scale canbe tailored to the requirements of those clubs and their members.

ìWe share the view voiced by Britannia,î says Paul Hinton, CEO of Bilbrough,managers of the London Club. ìMore risk should be retained,î he says, proposing thatìa smoothing mechanismî is what is need-ed. ìWe believe that the rates should reß ectthe record, instead what has happened is wehave been heavily affected by events such as 9/11,î argues Hinton. Nevertheless some

insiders told Fairplay that although the 37 per cent increase was signiÞcant, it was considerably less than the initial indication.One outcome of intense negotiations was a change in the underwriting lead at Lloydís, although the contract remained basically asit was in 2002.

Most of the real action on P&I claims is up to $30M, with individual clubs meeting the Þrst $5M of their membersí claims, while claims in excess of that up to $30M are met through the IG pooling arrangement. It is over that level that the IG reinsurance con-tract will continue to kick in, with the Þ rst layer of $500M ñ i.e. in respect of claims up to $530M ñ being met 75 per cent by the reinsurance and 25 per cent by the IG pool, although there is some reinsurance of that through BenÞ eld. This group coinsur-ance was previously just ten per cent. The next three $500M layers of a claim, up to $2.03Bn, will be met totally by the IG re-insurance contract, while the oil pollution limit remains unchanged at $1Bn, of which 25 per cent is co-insured by the clubs. Be-yond $2.03Bn, claims are back in the poolagain with individual clubís reinsurance contracts and free reserves deployed in case of such a catastrophe.

Reinsurance rates rumbledREINSURANCE rates hit the buffers this year for the International Group (IG) clubs. A resounding 37 per cent increase over the cost of the 2002 contract was the response of the IGíS underwriters for the 2003 policy year, despite the continuing good loss record on the contract, a contract that was first taken out in 1951.

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P&I

The challenges continue, however, and the most persistent of re-mains the ability to get the sums right, particularly at a time ñ as now ñ when overt reliance on investment income is simply not an option. The very nature of P&I underwriting dictates that it must be a mixture of good analysis, good risk management, good planning and good luck. But recent technological developments suggest that it is now possible to minimise the element of luck required.

Business intelligence is an important part of modern insurance industry planning, as much for P&I as for any other sector. ìBusiness forecasting, although more or less essential for most sectors, has until now been greatly underused by the insurance industry,î says John Harbor, head of Moore Stephens Insurance Industry Group. ìBut no longer. Both national and international regulators are demanding more transparency, and more account-ability, from the financial services sector.î That includes insur-ance, which in turn includes P&I.

Business intelligence widens optionsMUTUAL P&I has met some intimidating challenges throughout its long history with a mixture of flexibility, innovation, compromise and pragmatism. Despite the marketís brief flirtation with a more extensive use of fixed-premium cover a few years back, P&I remains the most credible, long-term option for underwriting third-party liabilities. Therewill always be a place for fixed-premium coverage, but demand is unlikely to reach the heights of three to four years ago.

Name: John HarborAge: 56Nationality: English

WORK HISTORY: 1980-1991: Executive/partner, Bagshaws, Insurance Division1991-date: Partner, Head of Insurance Industry Group and IT, Moore Stephens

Harbor has spent his professional career specialis-ing in the provision of consultancy and account-ancy services for the insurance industry, and is aspecialist in Protection & Indemnity insurance.

A number of P&I clubs have already embraced the concept. ìUsing the very latest analytical technology and expertise can help the clubs with forecasting and risk assessment,î says Har-bor. ìSophisticated management information systems are an essential part of professional underwriting. But their effective-ness is maximised when used in tandem with modern business intelligence systems to provide analytical functionality, to en-able data mining and to identify key performance indicators. They also need to be able to integrate with forecasting models, which should include rating models, claims reserving, and reinsurance negotiation tools.î

Without reinsurance, there would be no P&I industry as we know it. The International Group reinsurance contract is the largest and most successful of its kind in the world, but indi-vidual clubs still need to be able to identify their own require-ments for access to reinsurance outside the group cover.

ìBusiness Intelligence can help the clubs identify where rein-surance is needed,î say Harbor. It can create a level playing field by providing the clubs with access to the same level of quality analytical tools as those available to the major reinsurance providers.

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P&I

Mark Williams, director of Loss Preven-tion at the West of England P&I Club, thinks clubs should be worried. Ear-lier this year Fairplay reported that club members were becoming concerned on the issue of training SSOs with particular concern for the lack of time left to achievethis. “We’ve been giving seminars to try and get people moving as quickly as pos-sible,” said Williams.

The ISPS distance-learning courseproduced by Videotel Marine has been developed in conjunction with the IMO, the USCG, other prominent industrybodies and leading shipping companies. Club members appreciate the opportunity of being able to study on board. “It’s still a

huge training commitment and it remains to be seen whether it can be done. Some flags have decided that they want some training in accordance with their own re-quirements,” he said. For example the Isle

of Man register has said that it requires CSOs to go on a formal training course and has approved the Videotel/West of England distance-learning course.

“What we are particularly concernedwith is our position in the United

States,” said Williams. IMO rules say that only part ‘a’ of the ISPS Code is mandatory, while part ‘b’ is recom-mended. If a flag state does not require compliance with part ‘b’ when it issues its International Ship Security Certifi -cate, any ship that calls at a US port willbe detained.

There is concern that some ports will come down harder than others on mi-nor details and that there does not seem to be any uniformity to how the code should be implemented. There have been suggestions that flag and portstates are going to be in for a rough ride if they are going to get everything ready by the deadline. “As July 2004 approaches there may well be further ship’s security issues arising as a result of the introduction of the ISPS Code,” believes Tony Baker, head of loss pre-vention at the North of England. But while many before have voiced these concerns, what is more worrying isthe latest whisper among top industry people. Could the ISPS Code be just another reason to carry more cashon-board? Corrupt port officials will certainly hope so.

Only 308 days to go…THE International Ship and Port Facility Security (ISPS) Code has certainly raised much discussion since it reared its head as an amendment to the Solas Convention. It presents a huge challenge for ship managers with one of the biggest difficulties being the training of both Ship Security Officers (SSOs) and Company Security Officers (CSOs) in time for the July 2004 deadline. The International Chamber of Shipping estimated earlier this year that about 75,000 SSOs would need to be trained by the deadline.

There does not seem to be any uniformity to how the code should

be implemented

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P&I

P&I clubs, by the very nature of theirbusiness, are keen to promote a safetyculture on board their membersí vessels and have an important role to play within the maritime safety chain. Part of this con-tinuing improvement on loss prevention is risk assessment, because ultimately it does prevent accidents. By continuing to identify hazards and reviewing operation-al procedures so that hazards are reduced to the lowest possible level, the clubs hopeto raise the awareness of the crew to the dangers that surround them.

For its part, the Standard P&I Club believesthat risk assessment is the only technique that will help to prevent accidents, if pro-fessionally applied. Through application of these techniques, the club is setting out to pre-vent accidents causedby unsafe working,unsafe procedures andunsafe design.

ìWhat we do at theWest of England Club is to carry out a riskassessment on onevessel with the relevant company personnel inattendance so that they

Risk assessment worksìITíS not rocket science,î insists Mark Williams, director of Loss Prevention at the West of England P&I Club on the subject of risk assessment. ìUltimately itís the appliance of com-mon sense. Itís an inexact science.î Yet with ëcommon senseí not being one of the subjects taught in maritime colleges, it up to the P&I clubs to help us point out the dangers.

can then use this as a model to assess their other vessels. Weíve been carrying out risk assessment models principally at this stage on operators carrying passengers,î says Williams. ìWe tend to carry out the assessment between two ports and we look into possibilities ñ what might happen.î

On one particular occasion the clubís surveyors came across a vessel that had no safeguard against the stern ramp being lowered by a person on board while at sea.ìObviously the probability of this hap-pening is minimal,î Williams adds, ìbut nevertheless the consequences should it have happened would have been cata-strophic.î Risk assessment, it has to be said, will not eliminate every accident or

injury, but to be forewarned is to be forearmed.

The Swedish modelClubs also apply a riskassessment/quality selectionprocess when consideringvessels for cover or the re-newal of cover. The Swedish Club has recently introduced a refined risk assessment model for these purposes. It intends to integrate this model into its new computerised insurancesystem. The aim is to obtain a more detailed and accu-rate picture of risk exposurewhen evaluating prospectivemembers and, at the same

time, isolate and assess any negative trends in claims in-cidence and cost within the existing portfolio.

ìOur new approach to risk as-sessment addresses both hard and soft aspects of risk,î says Peter StÂlberg, director of the Swedish Clubís Loss Preven-tion and Technical Depart-ment. ìWe see a signifi cant, direct association betweenrisk exposure and factorssuch as ship type, age, gross tonnage and main enginetype, but many other factors also contribute to risk.î

ìThe model has taken some time to develop as it mustfunction at a sophisticated level,î he con-tinues. ìFurthermore, some of the factors influencing risk exposure are difficult to iso-late in monetary terms. Ship management quality is one example of a signifi cant and highly complex risk factor. Risk assessment in this area is challenging but management quality is a major issue and our work in this area has received priority this year. We are now engaged in a full review of ship management quality across the clubís entire entered fleet. We are on course to complete this task by the end of the year.î

The new model can be applied to produce a weighted risk assessment factor for aprospective member or vessel entry. While this takes no account of commercial issues, it does provide a platform for informed de-

Our new approach to risk assessment addresses both hard and soft aspects of risk

One vessel assessed ñ not the Star Wind ñ had no safeguard against the stern ramp being lowered by a passenger while at sea (photo: Hannu Laakson)

FRPED030828009.indd 32 21/8/03, 16:35:10


P&I

cision-making concerning acceptance and premium levels. The risk assessment fac-tor takes account of machinery, gear, type, trading area, flag, class, manager and build yard. The nature of the risk – hardware or software-related – is profiled and displayed in a ‘radar screen’ format. Vessel survey re-mains an essential risk assessment tool, withthe emphasis on timely performance of the survey prior to entry. The performance of condition surveys, post-entry, has much less significance in terms of risk reduction.

Other information sources, includingEquasis, have a part to play in the risk as-sessment process. These sources contrib-ute to the construction of a profi le leading to the weighted risk assessment factor, providing valuable information concern-

ing vessel, fleet, management, port state history and ‘human issues’. Perhaps the most significant single factor is the qual-ity of the ship management organisation. “We believe this is the most important issue influencing risk,” says Stålberg. “While it is possible to obtain basic informationfrom the Internet, word of mouth andother avenues, in some cases it is neces-sary to audit the ship manager. Using the club’s new risk assessment model, existing members’ management structures will be reviewed and audits will be performed as appropriate. The same principles will be applied to proposed new entries.”

The Swedish Club’s risk assessment model includes a ship management evaluationprocess. Where a third-party manager is employed, this process begins with con-sideration of the level of integration be-tween owner and manager. Budget issues are addressed – in particular, the degree of financial support for preventive action. Evidence of quality is considered, involvinga review of certification and an assessment of the manager’s approach to the ISM Code (whether an in-house ISM was produced or whether the system was produced by a consultant or purchased off the shelf).

A visitor to the ship was killed when a heavy weight fell from a stores crane. The location of the crane and its marshalling area were directly above an area where people were likely to congregate. Con-sequently, there was an injury hazard. In a risk assessment this should have been categorised as ‘extremely dangerous’ and subsequently control procedures would have reduced the threat.

Reducing the risk

A crewmember was injured when he slipped and fell. It was commonthroughout the ship for slippery surfaces to be treated with non-slip coatings.However, this particular surface had not been identifi ed as a potential slip hazard and consequently preventative measures were not taken.

Source: Standard Club

The following accidents illustrate what club’s are trying to prevent through risk assessment.

When assessing the safety and quality or-ganisation, the club takes account of staff resources in these vital areas and factors such as the number of vessels under thecharge of each superintendent. Other important factors include duty systems,maintenance and spares organisation and fuel and lubes testing practices. In a wider fl eet context, the club considers the vessel registration policy, port state record and fl eetmix (including specialisation in particular ship types). Commercial issues are included,with an evaluation of the degree of control over commercial activities and the balance between long-term and spot charters.

Human aspects are given prominence. As-pects considered here include the level of integration with the crew manager, poli-cies governing the allocation of seagoing personnel, commitment to training and theapplication of a drug and alcohol policy.

“We still have work to do in establishing and applying our new risk assessmentmodel,” Stålberg adds. “That said, the bulk of the initial work is completed and we now have a more effective framework for carrying forward our risk managementand loss prevention programmes.”

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P&I

Marine crime, for example ñ particularly groundings in the Great Barrier Reef area,oil pollution and collisions between com-mercial ships and fishing vessels ñ is very much under the spotlight in Australia and is currently being treated very seriously by the authorities.

A recent incident involved the 69,925-DWT Panamanian flag bulk carrier Asian Nova, which collided with the trawlerSassenach on May 29 this year, killing the 55-year-old trawler skipper. The ac-cident occurred 35 nautical miles north east of Townsville, while the ship was underway between New Caledonia and the Queensland port. Criminal charges were brought against the Chinese second and third deck officers, who appeared in a Townsville court the following month and were granted bail.

Although this was a particularly serious incident, involving a fatality, one senior Australian maritime solicitor points out that several other recent investigations of alleged marine offences, both navigation-al and environmental, have highlighted ìhardening attitudes by investigating au-

Frustration at heavy-handed Australians AUSTRALIA remains a relatively small player in terms of tonnage entered on P&I club books, but specific maritime-related incidents in the region often highlight broader trends in the insurance sector.

thorities and increasing involvement of the Australian Federal Policeî. He says such investigations may involve large numbers of armed agents boarding thevessel at the first opportunity and creating a highly intimidating environment.

This heavy-handed behaviour contrasts with the comparatively ìgentlemanlyîattitude towards pressing charges until recently demonstrated by Australian authorities, especially in those instances where senior officers (usually masters)were alleged to be criminally responsible for events for which they had no personal responsibility, such as pollution incidents or navigational mistakes caused by junior engineers or deck offi cers.

From an insurance point of view, solici-tors indicate that if a vessel is undergoing an investigation that may result in charges against the master or other essential of-ficers, there is a greater likelihood ofarrest, which can result in delays to the ship and additional costs. In such cases, the advice is for contingency plans for replacing shipís personnel to be imple-mented immediately.

One of the largest claims still pending in Australia relates to last yearís collision of the bulk carrier SA Fortius with a berth and coal loader in Port Kembla. Legal ac-tion is understood to be proceeding and one estimate suggests that the total claim could well be in the region of A$18-20M ($12M-13M).

Another Australian concern relates to the imposition of much higher pollution fi nes in New South Wales coastal waters, where the maximum corporate penalty has been raised to A$10M ($6.5M). In particular, Sydney Ports Corp has been especially zealous in pursuing every claim, no mat-ter how small, even if it relates to spills of only a few litres, and some sections of the shipping industry complain that the law is being applied in an overly harsh fashion. ìClearly where thereís fault the fine should be applied, but where there isnít it should be open to the courts to take a more lenient approach,î one legal source argues.

Almost seven years after the small generalcargo ship Sitka II spilled five litres of oil into the lagoon at Lord Howe Island, legal argument is reportedly still dragging on over the definition of ëdamageí under section eight of New South Walesí Marine Pollution Act 1987 ñ specifi cally whether ëdamageí can include the wear and tear

that allows oil to escape.

Gerald Ewing of Richards Hogg Lindley, the Sydney-based cor-respondent for the Standard P&I Club, says that another area ofconcern ñ highlighted by the 1999Laura díAmato oil spill in Sydneyñ is that a club undertaking can prove unacceptable as security to the SPC. It is hoped that this issue can be resolved so that in the eventof any future incident in NSWstate waters, a club undertaking ñ rather than a bank guaranteeñ will be accepted.

The federal governmentís Aus-tralian Maritime Safety Authority accepts club entry certifi cates as acceptable insurance for vesselscalling at Australian ports. ìIf youíre insisting on a cash guaran-tee, whatís the point of having the insurance?î Ewing points out.

Incidents in the Great Barrier Reef area are being treated more

seriously by the Australian authorities (photo: John Foley)

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Sri LankaSri Lankawas 169,682 TEU in July 2001. “There’s a surge in volumes,” says Sri Lanka Ports Authority chairman Parakrama Dissanay-ake, who attributes the recovery to vastly improved performance at the port’s con-tainer terminals.

Capt Maciek Kwiatkowski, CEO ofthe P&O Ports-led South Asia Gate-way Terminals, which runs the priva-tised Queen Elizabeth Quay, says the improvement in service that followed privatisation prevented a further slide in volumes. He points to the GrandAlliance, in which P&O Nedlloyd is a member, which increased its throughput at SAGT by 14.2 per cent to 102,000 TEU in February-June 2003. SAGT has clearly been driving the change for the better at Colombo.

“SAGT raised the bar in terms of perform-ance,” notes Romesh David, director of agents P&O Nedlloyd Keells. The effi -ciency improvements at QEQ has given a new impetus to the push for better pro-ductivity at the SLPA’s Jaya Container Terminal (JCT). Fairplay’s correspondent

Peace at any price?THE guns have been silent in Sri Lankaís ethnic war for over 18 months ñ except at sea. The ceasefire signed between the government and the Tamil Tiger rebels in February 2002 has largely held and paved the way for peace talks designed to end the war for a separate Tamil state. At a time when much of the rest of the world is struggling to come to terms with the reality of terrorism, Sri Lanka, where the Tigers earned notoriety with their ëbelt-bombí suicide bombers whose tactics are now emulated elsewhere, is getting used to its longest period of peace in 20 years.

Sri Lanka at a glancePopulation 19 million GDP Rs 1,585Bn GDP growth 4% GDP per capita US$872Infl ation 9.6%Exchange rate US$ = Rs95.66Unemployment 9.1% Exports US$4.7Bn (tea, coconut products, textiles and garments) Imports US$6.1Bn (petroleum, wheat, sugar, fertiliser, textiles and clothing)

(Source: Sri Lanka central Bank, 2002)

However, attempts by the Tigers to smuggle in arms on board rebel-owned merchant ships that use flags of conven-ience and repeatedly change their names, have led to a series of clashes between Tiger boats and navy patrols. The navy maintains a blockade off rebel bases on the north-eastern seaboard and regularly challenges and inspects passing merchant ships on the high seas. Indian navy pa-trol vessels and reconnaissance aircraft co-operate in the surveillance. The most serious incident was on June 11 when navy patrols shadowed and challenged a small oil tanker suspected of smuggling arms. Gunboats sank the vessel when it tried to fl ee.

Sri Lanka’s hopes of maintaining its status as the region’s transhipment hub depend on peace. Foreign donors have pledged $4.5Bn to revive the economy over a four-year period but tied the funds to progress in the peace process.

The economy, and container shipping, have recovered from the devastatingeffects of a Tiger terrorist attack on the international airport in July 2001, and the government is pushing ahead with

plans to further improve Colombo’s ef-ficiency and build new terminals to stave off growing competition from rival ports. “Peace and stability are fundamental to the development of the container ship-ping business in Sri Lanka,” says Mau-rice J McKeating, managing director, APL Lanka. “Currently, Sri Lanka’s hub port status ensures plenty of space and very competitive rates for local ship-pers and importers. However, a return to war risk premiums could mean tranship-ment through Colombo would no longer be feasible – unless local shippers and importers covered the huge extra costs required to insure themother vessels.”

Container volumes,which nose-dived afterlines shunned Colomboto avoid hefty war riskinsurance premiumsslapped on by underwrit-ers following the airport attack, have been makinga steady recovery and hit an all-time monthly high of 185,697 TEU in July. The previous highest

Colomboís future success depends absolutely on peace (photo: Oleg Kolobon)

FRPED030828011.indd 35 21/8/03, 16:53:46


Sri Lankaobserved a palpable sense of urgency at the JCT, the main transhipment facility, during a recent visit. The hatch covers are off and containers are lifted from the hold and lowered onto prime mov-ers even before ships are berthed at JCTthese days.

Unloading gets underway while vessels are still manoeuvring alongside and even before mooring ropes are secured. Onprevious visits, box handling was mark-edly slower with gantry crane operators holding boxes until prime movers arrived underneath or vehicles idling while the cranes lifted containers from the hold.

ìProductivity and commercial sensibil-ity of the port has improved vastly in thelast year or so,î says APLís McKeating. ìNo doubt the internal competition was the catalyst for this change.î Capt AV Rajendra director of Evergreen agent Greenlanka Shipping, concurs: ìIt was the entry of SAGT that led to improved efÞciency at Colombo.î Says SAGTís Kwiatkowski: ìSAGT has shown the local industry how terminals should be run ñ by our work ethic, management systems, IT capability, reinforced by the sheer power of having modern berths and brand new cranes.î Dissanayakesays that a ëprice-product strategyí of

discounts and higherproductivity intro-duced in September2002 under whichJCT signed exclu-sive terminal serviceagreements (TSAs)with six lines ñ APL, Hanjin, Maersk Seal-and, Evergreen, Zim-Gold Star and SCIñ prevented furthererosion of volumesand ensured growth.

However, SAGT is unhappy that JCT used the TSAs to win back some of the lines who defected to the more efÞ cient QEQ when the foreign operator took over the terminal. SLPAís Dissanayake says he is about to sign three more TSAs with

Colombo port has long experience in maritime security having to deal with the threat from the Sea Tigers, the naval wing of the Tamil Tiger separatist rebels (photo: Rohan Gunasekera)

The efficiency improvements at QEQ have given a new impetus to the push for better productivity at the SLPAís Jaya Container Terminal, according to P&O Nedlloyd Keells (photo: Oleg Kolobon)

FRPED030828011.indd 36 21/8/03, 16:54:04


Sri Lankashipping lines andmaintains that hiscompetition is notSAGT but foreign ports. ìWe have to be price-com-petitive becauseweíre competingwith West Port, North Port, PTP, Singapore, Dubai,Salalah, Aden ñ our pricing has to bebetter than that ofour competitors.î

Despite the compe-tition, both SLPA and SAGT say they understand the need for each other andthe importance ofjointly marketingColombo.

Although bothterminals have offered terminal serv-ice agreements linked to volumes the absence of a common volume rebatescheme between the JCT and SAGT is worrying port users. Lines that have signed up at the respective terminalsdemand that feeder operators berth at the preferred terminal so that they can qualify for the rebate, explains Rohan Perera, chairman of the Ceylon Asso-ciation of ShipsíAgents (CASA). ìThis

creates difÞculties for feeder operators who have to shift from one terminal to another to satisfy these preferences.A common scheme is the only way in which you can get the main lines toaccept cargo at both terminals,î Perera says. ìThe terminals should considerthe overall volume via Colombo if they want to encourage transhipment.î Com-petition from rival regional tranship-ment ports and the increasing number

Kwiatkowski of SAGT: privatisation halted the slide in volumes (photo: Rohan Gunasekera)

FRPED030828011.indd 37 22/8/03, 11:20:01


Sri Lankaof direct calls at Indian ports by main lines have eroded Colomboís share of the sub-continentís container volumes and appear to threaten its hub status. However, says David of P&O Nedlloyd Keells, Colombo seems assured of busi-ness given Indiaís economic growth and increasing containerisation of cargo.

ìColombo is ideally placed to be atranshipment hub for the Asia-Europe and US East Coast trades,î adds APLís McKeating. ìHowever, there is a trade-off between satisfying market demand through direct calls and fast transits fromIndia versus the potential cost beneÞ ts

and sailing frequency of hubbing over Colombo.î The commissioning in September of the third and Þ nal stage of the P&O-run QEQ and the arrivalof new gantry cranes at the SLPA-run Unity Container Terminal will increase Colomboís total capacity to four million TEU by March 2004.

Colombo can currently service ultra-large post-Panamax vessels and plans to further enhance capacity to 5.5MTEU by 2007, after which it is pinning its hopes on a brand new port next to the present one that will be designed to cater to ëMalaccamaxí vessels. Assuming ten

per cent annual growth in future, with 5.5M TEU capacity, Colombo can man-age until 2012. ìTherefore we have to get cracking on the New South Harbour concept ñ which will have 12 container berths with a capacity of six millionTEU,î says Dissanayake. ìThe biggest challenge we have is whether Colombo could be a mega hub not only for the sub-continent but also for the MiddleEast.î Both the SLPAís Dissanayake and SAGTís Kwiatkowski see the develop-ment of Indian ports as complementary to Colombo and not as a threat.

ìOur growth is very much linked tocapacity enhancement programmes in India without which Colombo canít expand,î Dissanayake says. He points out that the catchment for Singaporeand the new Malaysian ports is South East Asia with about 50M TEU, while India, Pakistan and Bangladesh generateless than four million. ìIndia has 150M tonnes of breakbulk cargo a year which can get containerised ñ so we have a huge base.î

SAGTís Kwiatkowski says no Indian port can beat Colomboís location. ìWith its location and deep-water facilities,Colombo presents itself as the naturalgateway for Indian cargo,î he says. ìIn future, connection of Indian cargo to the East-West route will have to happen in Colombo most of the time. But thereíll always be cargo going through direct services. The growth of Indiaís economy and increasing containerisation of cargo will be quite enough to keep all of us very busy in future.î

Perera: lines must accept cargo at both terminals (photo: Rohan Gunasekera)

FRPED030828011.indd 38 21/8/03, 16:54:24


Sri Lanka

Just over a year ago, when Fairplayís cor-respondent visited the yard, the entrance to the main administration building faced a dry dock and the space in between was packed with reconditioned Japanese ve-hicles. Today, the car park, which lay in the shadow of a crane, is gone. The prime land next to the dry dock is now used for machinery. What used to be the buildingís rear has been given a fresh coat of paint and converted into the entrance.

ìWeíve allocated prime areas for pro-duction, not non-productive activity,î explains Mangala Yapa, director and general manager of the yard, which is a subsidiary of Japanís Omonichi Dock-yard. ìWeíve re-arranged our work to

Running on one leg FACED with the loss of orders from the Sri Lankan navy and the looming spectre of double-hulled tankers growing too big for its biggest dry dock, Colombo Dockyard is vigorously seeking new business and more efficient methods of work.

Colombo Dockyard is also looking todiversify its repair work, now dominated by tankers, mainly Indian-owned, and haswon a contract for major lay-up repairs to Sagar Vijay, a drill ship owned by Indiaís Oil and Natural Gas Corp.

Yapa says Colomboís strategic location makes it ideally positioned to win Indian repair work. He is lobbying under thefree-trade agreement between India and Sri Lanka to get the yard exempted from the ten per cent price protection given to Indian yards. ìIf trade is free why should there be a difference when it comes to ship repair?î he asks. The skills gained in building fast patrol boats, whose perform-ance have been proved in a very demand-ing environment ñ fighting the Sea Tigers ñ could be useful in developing similar platforms in the emerging new world of maritime security and law enforcement, such as anti-smuggling.

make it more cost-effective and effi cient,more people geared to production, more streamlined production.î

The approach refl ects the urgent need to improve efficiency and reduce costs giventhe sudden change in its business pattern that has created some difficulty but which the yard sees as an opportunity. ìItís going to be a tight year for us because of the shortage of newbuildings ñ probably not as good as last year,î says Yapa. ìCDL used to have two revenue streams. This year weíre going on one leg.î Newbuild-ings ñ tugs for the SLPA and fast patrol boats for the navy ñ used to account for over half the revenue. But navy orders dried up after the government beganpeace talks with Tamil rebels. Yapa sees that as a temporary constraint that actuallycould yield dividends in future. ìIf thereís peace it means more business, especially in tourism-related work ñ such as more demand for water-based transport. The leisure sector will open up.î

Yapa: itís going to be a tight year

Peace talks have left the yard without military orders and relying on commercial work ñ mostly repair (photo: Oleg Kolobon)

FRPED030828011.indd 39 21/8/03, 16:54:43


Sri Lanka

Man of the moment Ports and Shipping minister Rauf Hakeem

RAUF Hakeem plays a key role in the islandís political future. Not only is he a member of the government team in the peace talks with the Tiger rebels, but his party, Sri Lanka

Moslem Congress, helps prop up the ruling coalition, which has just a wafer-thin majority in the almost evenly balanced parlia-ment. Hakeemís predecessor as party leader and ports minister, MHM Ashraff, died in a mysterious helicopter crash caused either by bad weather or a Tiger rebel bomb.

It was Hakeemís withdrawal of support that caused the collapse of the previous government and brought into power the present one, which stopped the war and started peace talks. Hakeem spends a lot of time travelling to lobby for support from among the Muslim minority. Fairplay managed to catch him for a brief interview.

Peace talks: ìThis is an irreversible process. The fact peace talks have been sustained despite many setbacks is a tribute to all parties involved. The way in which it is structured, neither party can revert to war and hope to gain.î

Gains for shipping: ìCompared to the same period last year we have a significant growth in container volumes. I believe the climate of peace was a factor that contributed to this, along with our aggressive marketing.î

What about the govern-ment threat to cancel the privatisation deal thatleased QEQ to a con-sortium led by P&O?: ìPrivatisation of QEQ had certain beneficial effects by creating competitionbetween the two container terminals and helpedimprove the efficiency and profitability of state-owned JCT. However, the original agreementhad certain clauses thatwere unfavourable to thegovernment.

ìUnfortunately, because of the prospect of sending wrong signals to foreign investors when you try to review an existing agree-ment, however wrong it may be, we didnít try to renegotiate with P&O since we felt we could circumvent the disadvantages by reforms we initiated. These have brought excellent results and minimised the adverse effects.î

JCT privatisation: ìWe have absolutely no intention of privatis-ing the JCT in the way in which QEQ was privatised. We may

consider a strategic partnershipwhere the government retains majority control, if it bringsspecific commitments relat-ing to substantial volumes by

ìMost of the shipping lines are giving a raw deal to

their agentsî

A rare sight at Colombo – six cranes being used on a container vessel at the Queen Elizabeth Quay run by the international consortium led by P&O Ports. Hakeem recognises that the threat to cancel the deal with P&O would have sent the wrong signals (photo: SAGT)

With his party holding the coalition together Rauf Hakeem is a key figure in the government as well as in shipping (photo: Rohan Gunasekera)

FRPED030828019.indd 40 22/8/03, 15:34:59


Sri Lankaeither a main-line operator or a terminal operator. Many overtures have been made by several parties, which the government will consider at an appropriate time. Weíd wait for the report on the New South Port and study the port master plan, which maytake about 18 months, before we call for expressions of interest.î

Will he accede to demands by ship-ping lines for full ownership of agency houses?: ìI oppose allowing lines 100 percent ownership in shipping agency busi-ness mainly because the service industry of any country should be available to lo-cals. We would like to maintain a major share in shipping agency business with locals. In any event most of the shipping lines are giving a raw deal to their agents, maintaining the agency as cost centresand repatriating most profits by dubious means. However, we do not envisage an interventionist policy. We allow market forces to determine their own course.î

Shedding excess port staff: ìWe intro-duced a very attractive voluntary retire-ment scheme. We had no alternative as overstaffing in the port had reached ter-rible proportions. Already, weíve retired 3,000 people and hope to retire 3,000more. If we can prune the workforce to 10-11,000 then we would save Rs2Bn a year and plough some of it back to intro-duce further reforms that would make the workers more productive.î

ALTHOUGH Colombo is well placed to serve the Far East-Europe container

trades, high prices and lack of supplies almost killed the bunker market in recent years. Now, prices have begun to fall with the privatisation of the monopoly supplierand liberalisation. ìWeíre looking at a downward trend in bunker costs,î says Capt AV Rajendra, executive director of Evergreen agent Greenlanka. ìBut Co-lombo is still more expensive than Sin-gapore or the Gulf so we must encourage more private players.î

Prices dropped only with the entry of a second player, breaking the state monopo-ly of Lanka Marine Service, which tried tomaximise profit margins on low volumes. Bunker prices now fluctuate depending onthe availability of fuel shipments. Unless costs came down, Colomboís bunker sup-pliers would only cater to a captive marketñ feeder ships that serve Indiaís east and west coasts. Main-line vessels to take on fuel in Singapore or the Gulf.

Colomboís suppliers have to import bunkers since all the fuel oil produced by the CPC is used for thermal power generation. ìFrom a state monopoly [bunkering] has moved to a private monopoly and so the service pro-vider does not see the need to be competi-tive as their services have no competition,î says Rohan Perera, chairman of the Ceylon Association of Shipsí Agents. ìBut weíre aware that thereíll be new entrants into the bunker trade with common facilities being made available for the use of any operator, and with that hopefully Colombo will be more price-competitive.î

Romesh David, director of ship agency P&O Nedlloyd Keells, believes Colombo is unlikely to become a bunkering centre

Bunker barge LMS Diyaluma at Colombo: the industry is finally addressing market demands (photo: Rohan Gunasekera)

unless it has enough supply of fuel oil from excess refinery capacity. ìThere has been improvement in pricing, delivery andavailability [since privatisation],î he says.ìBut, since whoever is supplying bunkers has to buy and ship them to Colombothereís no major price advantage.î

Lanka Maritime Services, which entered the market in May, says volumes have begun to pick up following the downward drift in prices. The newest supplier is East-West Bunkering Services, which has just bought a 20-year old vessel, the 37,000-DWT Emerald Sea, from Tanker Pacifi c of Singapore for Rs300M. Chairman NahilWijesuriya hopes to further reduce margins between prices in Singapore and Colombo and attract main-line vessels. ìMargins should eventually come down to around $20 a tonne,î he told Fairplay.

Wijesuriya believes Sri Lanka should ex-ploit its position almost equidistant from Singapore and the Gulf, and entice ship owners who now buy more fuel in Sin-gapore to take on revenue-earning cargo instead of deadweight fuel, and top up on bunkers in Colombo. ìWe also hope to sell bunkers to ships offshore, without them having to enter port limits and pay port charges,î he says. He is considering doing bunkering off Hambantota, on the south coast, almost a stoneís throw from the main East-West shipping route.

ìMore competition is to be welcomed, but Sri Lanka has some way to go before it can compete with world-class bunkering cen-tres such as Singapore and Fujairah,î warns Maurice McKeating, MD of APL Lanka.

Bunkers: groping towards competitiveness

FRPED030828019.indd 41 22/8/03, 15:35:25


Newbuildings

Newbuilding orders reported week ending August 22, 2003

Shipbuilder No Price Owner/Operator Delivery Type Capacity

Bach Dang Shipyard 2 Noma Kaiun 2004 General Cargo Ship 6,390 DWT

Hyundai Heavy Industries 1 Primorsk Shipping Co 2005 Crude Oil Tanker 105,000 DWT

Liaoning Bohai Shipyard 1 China Shipping Haisheng 2005 Bulker 57,300 DWT

Liaoning Bohai Shipyard 1 China Shipping Haisheng 2006 Bulker 57,300 DWT

Miura Zosensho 3 BP Shipping 2005 Products Tanker 3,000 DWT

Miura Zosensho 2 BP Shipping 2004 Products Tanker 3,000 DWT

Shanghai Edward Shipbuilding 1 $22.00M Furetank Rederi 2006 Chemical Tanker 16,000 DWT

Contracts Pending week ending August 22, 2003

Shipbuilder No Price Owner/Operator Delivery Type Capacity

Nok-Bong Ship Building 1 Greek Interests 2004 Chemical Tanker 6,000 DWT

Oshima Shipbuilding 1 $19.25M Jinhui Shipping & Transport 2005 Bulk Carrier Ore 55,300 DWT

Samsung HI 1 Claus-Peter Offen 2006 Container Ship 8,000 TEU

Deliveries recorded week ending August 22, 2003

Vessel Shipbuilder Owner/Operator Type Delivery Capacity

AD Pegasus Nanindah Mutiara Mohammed Bin Sagar Supply Vessel Jul 03 496 GT

Avor Hyundai-Samho Geden Line Crude Oil Tanker Aug 03 112,900 DWT

Desh Gaurav Hyundai HI Shipping Corp of India Crude Oil Tanker Aug 03 114,600 DWT

Hatsu Prima Evergreen Shipyard Evergreen Marine Container Ship Jul 03 1,618 TEU

Ida Selmer Mitsui Eng & Shipbuilding Oskar Wehr Bulker Aug 03 52,200 DWT

Kakulo Damen Shipyards Group Surf Tug Jul 03 300 DWT

Krasnodar Hyundai HI Novoship Novorossiysk Crude Oil Tanker Aug 03 114,800 DWT

Leiria Estaleiros Nav do Mondego Naveiro Transportes Mar Multi-Purpose Ship Jul 03 2,590 DWT

Panam Serena Yardimci Shipyard Undisclosed Interests Chemical Tanker Jul 03 10,048 DWT

Qing Ping Lingshan Shipyard Yantai Golden Ocean General Cargo Ship Jul 03 2,600 DWT

St Marco Onomichi Dockyard Stargas Products Tanker Aug 03 47,000 DWT

Zephyr Austal USA Circle Line Multi-Hull Pass Ferry Aug 03 600 GT

FRPED030828013.p65 22/08/2003, 12:0042

Newbuildings


OOOOOVER the past week, shipbuildershave received very few orders.However, some of the larger yards

in the Far East did not use the summerholidays as an excuse and still managedto negotiate several contracts.

In Koje Samsung HI has signed a con-tract with German owner Offen to buildfive 8,000-TEU container vessels. Thereis an option for another three. Samsungbuilt the first of a series of container shipsfor Offen in 2000, with the first 8,000-TEUship being delivered earlier this year. Theyard has also clinched an order for sixPanamax container ships from Seaspan,with an option for three more.

Another Koje-based builder has signeda letter of intent with several ship own-ers including Greek interests for six6,000-DWT chemical tankers. However,Nokbong Shipbuilding has yet to putpen to paper, as there is currently a ves-sel blocking one of the yard’s twoslipways because its bridge is said tobe too large. Han Jae Jin, the Koje yard’svice president, told Fairplay that he wasconfident Nokbong would sign the con-tract and then find another slipway tobuild the vessels. Altogether the six arevalued at $63M.

According to rumours, Sonap hasplaced an order with Daewoo for twoPanamax tankers. A spokesman for theKorean builder told Fairplay that ne-gotiations have gone ahead, indicatingthat Daewoo has already won the order.However he refused to give price, de-livery date or whether there would beany options. The Chilean owner ordered

While most newbuildingactivity is in Asia, the150,000-GT Queen Mary 2 isdue to start sea trials onSeptember 11, with deliveryto Cunard expected at theend of December. The ship isprofiled in the Cruise ShipDesign feature in SeptemberSolutions (page 17), freewith next week’s Fairplay

(photo: Eric Houri)

Eastern yards weather the stormthree Panamax tankers from Daewoo in2002 and, including the two newbuilds,has another six on order.

Meanwhile China is continuing to riseand is managing to survive this periodof sparse new orders. The relationshipbetween Shanghai Edward Shipbuildingand Furetank has grown stronger re-cently after the Swedish owner firmed anorder for fifth 16,000-DWT chemicaltanker, worth about $22M. MeanwhileBohai Shipyard has won an order fromChina Shipping Haisheng to build two57,300-DWT bulk carriers. It is the firsttime that the owner has ordered fromthe Chinese shipbuilder.

Japanese yards received new orders for41 export ships during July totalling1.97M GT, according to the Japan ShipExporters’ Association, more than dou-ble the results for July 2002 but downon the record-breaking month of June.The haul included 12 container shipsand 17 bulkers. From January to Julythis year, Japanese shipbuilders haveclinched 233 export

ships totalling 10.43M GT; a 136.4 percent increase on last year.

As part of its long-running single-hullreplacement programme, NYK has or-dered two further 300,000-DWT VLCCsfrom Imabari and Mitsubishi. The deliv-ery dates are both in the first quarter of2005, suggesting that the berths havebeen reserved for some time. WhenNYK’s existing ordered are delivered, itwill own 23 double-hull VLCCs.

A large order has also been placed byBP Shipping for up to ten small producttankers ranging from 1,500 to 5,000 DWTfrom Miura Shipbuilding. It is thoughtthat the ships will be deployed in the prod-ucts and bunker trade in Singapore. Thisis the first time Miura has received sucha large order from an overseas owner.

Finally Jinhui Shipping has placed a or-der for a 55,300-DWT bulk carrier, prob-ably from Oshima Shipbuilding. Theyard has not been disclosed, but Oshimahas delivered five Panamax-beam bulk-ers to the Hong Kong ship owner overthe past two years. The vessel is sched-uled to be delivered in July 2005 andwill cost $19.25M.

FRPED030828021.p65 22/08/2003, 16:3543


Ship $ales

Container andMulti-purpose

ASIAN POLLUX (Container): sold by NYK, Japanto Lomar, UK, $10.90M. 1991. 22,735 DWT, 16,731GT, 1,182 TEU. Built Kurushima, Mitsubishi,14,413bhp/19.1kt. To be operated by Lagoa, Greece

ATLANTIC SPIRIT and PACIFIC SPIRIT(General Cargo): sold en-bloc by Roswell, Greece toChinese interests. ALTANTIC SPIRIT ex-AtlanticK: $2.10M. 1988. 16,166 DWT, 12,215 GT, 534 TEU.Built Galatz, MAN, 8,200bhp/14kt. PACIFIC SPIRITex-Arati: $2.30M. 1991. 15,240 DWT, 12,214 GT, 412TEU. Built Galatz, MAN, 8,201bhp/15kt.

AUSTRALIAN EXPRESS (Container) Tbn-YT Venus:sold by Vroon, Netherlands to Yi Tong, Taiwan, priceunknown.1989. 14,867 DWT, 9,949 GT, 750 TEU. BuiltKurushima, Mitsubishi, 9,608bhp/18.5kt.

GARDSKY (Multi-Purpose): sold by Wani Shipping,Norway to UK interests, $0.76M. 1976. 4,001 DWT,2,978 GT, 155 TEU. Built Schulte & Bruns, Deutz,3,000bhp/13kt.

GARDSUN (Multi-Purpose): sold by WaniShipping, Norway to Syrian interests, $0.80M. 1977.4,281 DWT, 3,026 GT. Built Schulte & Bruns, Deutz,3,000bhp/13kt.

GARDWAY (Multi-Purpose): sold by WaniShipping, Norway to Russian interests, $0.80M.1978. 4,145 DWT, 2,978 GT, 154 TEU. Built Schulte &Bruns, Deutz, 3,000bhp/13kt.

IMME OLDENDORFF (Multi-Purpose) ex-TasmanCrusader: sold by Oldendorff Carriers, Germany toGreek interests, $1.90M. 1968. 21,060 DWT, 14,385GT, 606 TEU. Built Elsinore, B&W, 10,980bhp/18kt.

MSC PATAGONIA (Multi-Purpose) ex-Heicon:sold by Reederei Heyo Janssen, Germany to Arcadia,India, $5.70M. 1984. 22,233 DWT, 16,517 GT, 1,160TEU. Built Bremer Vulkan, B&W, 15,050bhp/18kt.

Several product tankers have emerged asscrapped lately, including the 27-year oldMariner A; but it took $276/LDT for thePanagiotis D to meet the same fate at thegrand old age of 31 (photo: Jim Prentice)

Vessel will remain operated by MSC - MediterraneanShipping, Switzerland

PACIFIC SKY (Container) ex-Safmarine Vaal: soldby Lomar, UK to MSC - Mediterranean Shipping,Switzerland, $6.75M including time charter at$7,500/day until 2/2004. 1982. 34,098 DWT, 30,955GT, 1,855 TEU. Built IHI, Sulzer, 21,600bhp/18.8kt.

Bulkers

WANI SWAN ex-General Lim Tbn-Ramble Cloud:sold by Torvald Klaveness, Norway to Fujian Xinan,China, $3.50M. 1977. 23,777 DWT, 14,387 GT. BuiltImabari, Sulzer, 9,900bhp/14kt.

Tankers

CONFIDENCE and PERSEVERANCE (Products):sold en-bloc for $24.0M by Transpetrol, Belgium toSwedish interests. BOTH: 1990. 40,349 DWT, 22,607GT. Built Mosor, B&W, 10,409bhp/14kt.

EHM MAERSK (Crude Oil): sold by AP Møller,Denmark to Tsakos, Greece, $43.00M. 1993. 299,700DWT, 158,475 GT. Built Odense Steel, Mitsubishi,31,996bhp/14kt.

FRONT COMMODORE and FRONT TINA(Crude Oil): sold en-bloc by Frontline, Bermuda toDr Peters, Germany for $150.0M with 12.5 yeartime charter back at unknown rate. 2000. 298,620DWT, 159,397 GT. Built Hitachi/Kawasaki, MAN B&W,29,000bhp/16kt. Vessels will remain operated byFrontline, Norway

PENTATHLON and TRIATHLON (Crude Oil):sold en-bloc by Tsakos, Greece to T Konig, Germany,for $110.8M with five year time charter back at$22,800/day. BOTH: 2002. 164,286 DWT, 84,586GT. Built Samho, MAN B&W, 25,329bhp/15.5kt.Vessels will remain operated by Tsakos, Greece

UNITED PEACE (Products): sold by World-Wide,Bermuda to undisclosed interests, $5.75M. 1984.

48,238 DWT, 28,822 GT. Built Kawasaki, B&W,9,459bhp/14kt.

Reefers

SWAN LAGOON, SWAN OCEAN and SWANSTREAM (Reefer): sold en-bloc for $9.0M by StarReefers, UK to Russian interests. ALL: 1979/80.9,728 DWT, 10,424 GT, 153 TEU, 474,973 ft3. BuiltBoelwerf, MAN, 16,520bhp/21kt.

Newbuilding Resales

Hull No 502 and 505 (Ore Strengthened): solden-bloc by Cosco, Hong Kong to Target Marine,Greece for $41.0M. 2004. 52,800 DWT, 30,000 GT.Built Onomichi, MAN B&W, 11,665bhp.

Hull No 448, 449, 450 and 451 (ProductsTanker): sold en-bloc by Novoship Novorossiysk,Russia to Stena Bulk, Sweden, for $125.2Mincluding five year time charter back at unknownrate. 2003/4/5. 47,400 DWT, 27,500 GT. BuiltUljanik, MAN B&W, 12,889bhp.

Scrapped

CANDIA M (Crude Oil Tanker): sold by Styga,Greece to Indian breakers, $4.8M ($254 per LDT).1981, 97,069 DWT, 59,043 GT. Built Sasebo.

ICL RAJA RAJAN (Bulk Carrier OreStrengthened): sold by Indian interests to Indianbreakers, $2.82M ($255 per LDT). 1979, 53,507DWT, 30,809 GT. Built Mitsubishi.

MARINER A (Products Tanker) ex-Asahi Maru:sold by Ancortank, Greece to Indian breakers,$1.79M ($252 per LDT). 1975, 37,243 DWT, 19,631GT. Built Kasado.

PANAGIOTIS D (Products Tanker): sold byMantinia, Greece to Indian breakers, $1.97M($276 per LDT). 1972, 24,489 DWT, 14,358 GT.Built Evans Deakin.

STAVROS GL (Crude Oil Tanker): sold byLivanos, Greece to Chinese breakers, $9.95M($235 per LDT). 1976, 357,054 DWT, 167,349 GT.Built Kockums.

All details given in good faith but without guarantee

FRPED030828014.p65 22/08/2003, 12:0144

Sale & Pur chase


SALE and purchase activity in the bulkcarrier sector hit something of a lull last week as Greek ship owners took

their summer holidays. However, because of the shortage of suitable candidates,purchasers appear to be willing to payhigher prices for their vessels of choice and, according to brokers, potential own-ers of the few vessels available are facing considerable competition.

For example, the recent sale of the 46,000-DWT Handymax bulker Star Phoenixattracted 12 potential buyers resultingin nine offers for this 1995-built vessel before its purchase by Gourdomichalis for$14.15M, according to broker Gibsons.

Elsewhere in the bulker market, Panamax sales were limited to only one transac-tion, the 66,700-DWT Lauren E beingsold by Ofer Bros subsidiary Samama to Greek interests for $5.6M. However, it is understood that a number of enquiries are currently taking place for further tonnage in this sector. Although previously associated with new container ships, the German KG fraternityare picking up more second-hand vessels in the tanker sector, particularly for ships with long-term employment attached.Two VLCCs were concluded last week in such a deal. The 298,000-DWT sister ships Front Tina and Front Commodore were obtained by Dr Peters from JohnFredriksen’s Frontline for $75M apiece coupled with a bareboat charter-back for 12.5 years. The deal is unusual for KG transactions in that the seller willremain in charge of all ship manage-ment functions whilst Frontline has the option to buy the ships back after eight years. Broker Clarksons say that KGbuyers are currently the main source of most market speculation in tankers with seemingly endless rumours about deals under negotiation, although fi rm transac-

tions can be difficult to trace until some time after the event.

Following the pick-up in the reefer sector, helped in no small measure by the scrap-ping of elderly tonnage and a scant order book for new vessels, interest in conven-tional reefer ships is returning, particularly since the peak fruit season is due to start in two months’ time. Three ‘Swan’ class units of 450,000 ft³ capacity were purchasedfrom Star Reefers by Russia-based Baltic Shipping subsidiary Baltic Reefers. These 1982-built ships were obtained for $ 8.5M en-bloc. According to their new owners, this Boelwerf-built trio are being used to upgrade a fleet which consists of ageing 1970s-built tonnage.

Meanwhile in the liner sector, four Handy-sized cellular ships were sold and notsurprisingly Mediterranean Shipping Co (MSC) featured among the list of buyers. It has purchased the 1982-built, 1,800-TEUcapacity PaciÞ c Sky from Greek trampowners for $ 6.75M. This vessel is prob-ably better known as the SA Vaal and was originally built to serve the S Africa-Asia trades for Safmarine. Because of this herit-age the vessel has a relatively high integral reefer capacity of 510 TEU, at least for its age, although MSC is not known to be a major reefer box player.

Because of the strength of the chartermarket, transactions of cellular vesselsremain relatively few, however. Almost all recent sales have been made by tramp owners to liner companies that are lookingto expand their share of owned tonnage in order to reduce their reliance on the volatile box ship charter market.

While sales of container ships for further service have slowed down, the sale of cel-lular tonnage for demolition is also thin on the ground. Most ship brokers forecast a scrapping level of around 80,000 TEU of slot capacity for the whole of 2003 at the beginning of this year. The actual level removed from service in this way in the year to date is a mere 21,000 TEU, which suggests that earlier scrapping forecasts are unlikely to be met.

The sale of other types of ships for scrappingis also expected to slow down in the coming weeks following a decline in the Indian steelplate market. As a consequence, according to Gibson’s, the strong level of pricing seen in recent weeks is projected to soften. Nevertheless, notable demolition sales last week included the world’s second largest ship still afloat. The 1979-built, 555,000-DWT ULCC Sea Giant was sold by aFrontline-controlled company to Pakistan-based breakers for $ 230 per LDT, a further nail in the coffin of these mega-vessels, a number of which have fled the market as rates tumbled earlier in the year.

S&P pace finally ebbs

Bananas are in over-supply and prices low, meaning a slowdown in international trade, but the Russians continue to pick up ageing reefers to capitalize on an expanding domestic market for the fruit. Baltic Reefers has been particularly acquisitive over recent years and has now picked up three medium/large reefers from Swan, which also means an improvement in average age for the fleet (photo: AM Brown)

FRPED030828034.indd 45 26/8/03, 17:00:03

Fixtures


Cargo Vessel/Year Load Discharge Volume Laycan Rate Charterer Terms

Dry Fixtures

Wet Fixtures

Time Charter

Cargo Vessel/Year Load Discharge Volume Laycan Rate Charterer Terms

Consumption Vessel/Year Load Discharge DWT Laycan Rate Charterer Terms

Iron Ore Cic Capt.Veniamis,01 Tubarao Beilun & Shanghai 150000-10% Sep 1530 19.95 BM Mineral FIO;ScLd30000t&20000tIron Ore Kyushu Star, 82 W Australia Beilun & Baoshan 140000-10% Sep 115 8.75 CNR FIO;ScLd30000tIron Ore Heng Shan, 99 W Australia Qingdao 150000-10% Sep 1020 8.95 CNR FIO;ScLd25000tCoal Vine, 90 Roberts Bank Kaohsiung 110000-10% Sep 515 11.50 ChinaSteel FIO;40000tShinc28000tShincCoal Steamer,(Coe&Clerici) Prto Bolivar Rotterdam 150000-10% Sep 1730 11.60 A.E.P. FIO;50000tShinc25000tShincCoal Captain Vangelis L,92 Richards Bay Rotterdam 140000-10% Sep 115 12.35 Cargill FIO;ScLd25000tShincCoal Lowlands Longevity,01 Gladstone Dunkirk 150000-10% Sep 1530 16.75 EDF FIO;45000tShinc25000tShincBauxite Steamer, (Maruba) Pt Kamsar Stade 57000-10% Aug 1531 10.80 Coe&Cleric FIO;24000t14000tGrains Daphne, 84 River Plate Egypt Med 44000-5% Sep 515 32.50 ACTI PtC;FIO;6000t4000t

14kt32t Bunga Saga Lima, 98 Del Qingdao Redel SE AsiaViaNoChina 73144 DWT Aug 2627 16000 Day Worldlink 3035000GrnBl;Trip out14\kt58t Alpha Cosmos, 01 Del Qingdao Redel Taiwan 169770 DWT Sep 110 33000 Day Cosco Trip out14kt32t Great Bright, 98 Del US Gulf Redel CPasseroViaEgypt 73242 DWT Sep 15 17000 Day NNC TripOut+$350000Bonus14\kt30t Lake Biwa, 02 Del River Plate Redel Continent 53505 DWT Aug 2531 15000 Day Dreyfus TripOut+$300000Bonus14kt31t Sanko Rally, 94 Del So Africa Redel Continent 42529 DWT Aug283Sep 13000 Day IVS Trip out13kt32t Vancouver Victory,81 Del WC India Redel SingaporeJapan 64310 DWT Aug 1925 14000 Day NoChinaShi Trip out13kt58t Leopardi, 82 Del Mailiao Redel China 129088 DWT Aug 2529 27000 Day Transfield 5000699GrnBl;WAusRd13kt29t Sunny Ocean, 94 Del Nanao Redel Japan 68621 DWT Aug 2025 16000 Day CNR EAusRd14kt32\t Western Trader, 01 Del Hong Kong Redel Japan 74000 DWT Aug 2829 17500 Day Iino IndonesiaRd14kt28t Full Beauty, 94 Del Nagoya Redel SingaporeJapan 70198 DWT Aug 2228 16750 Day NobleChart 2800000GrnBl;2-3LadenLegTrips13kt26t Nemea, 89 Del Continent Redel FarEastViaUS Gulf 68870 DWT Aug 2530 18250 Day Trinet 2853596GrnBl;Trip out14kt32t Fu Man, 97 Del Philippines Redel ContViaKalimantan 71349 DWT Aug 2025 15000D-1st50 BHP-Billit TripOut;$17000Day-Bal14kt27t Glarus, 01 Del Kosichang Redel Atlantic Via WAus 46513 DWT Aug 2526 10500 Day F-Withy Trip out13\kt28t Oriental, 97 Del Mokpo Redel So Korea 43917 DWT Aug15 13000 Day Fednav RedDogRd13kt34t Celeste, 81 Del Sual Redel China 68427 DWT Aug 1920 13500 Day NoChinaShi 2763000GrnBl;ECIndiaRd13kt55t Sunrise I, 81 Del Shekou Redel China 138237 DWT Aug 2025 21500 Day Pioneer BrazilRd

Oil Dirty Genmar Traveller, 90 EC Mexico LOOP 145000 Sep 2 W72\ Marathon 2ConsecsOil Dirty Harmony, 03 Caribbeans US Gulf 70000 Aug 27 W135 ExxonMobil Part cargoOil Dirty Triathlon, 02 Mongstad Philadelphia 135000 Sep 16 W75 SunOil Dirty Eagle Trenton, 03 Tallinn US Gulf 90000 Sep 4 W86.25 KochOil Dirty Aegean Pride, 99 Black Sea UKContinent Med 80000 Aug 22 W105 CSSA Part cargoOil Dirty Minerva Nounou, 00 Novorossiysk UKContinent 130000 Aug 28 W82\ ChevtexOil Dirty Vukovar, 85 Black Sea Mediterranean 80000 Aug 29 W75 NaftexOil Dirty Katja, 95 Libya Mediterranean 80000 Aug 28 W80 PetroplusOil Dirty Sea Star, 96 W Africa US Gulf 130000 Sep 14 W68 ExxonMobilOil Dirty Seacross Ii, 86 W Africa Taiwan 255000 Sep 26 W43\ CPCOil Dirty New Vanguard, 98 W Africa Taiwan 260000 Sep 18 W46 CPC Part cargoOil Dirty Bunga Ke 6, 99 Yenbo Singapore 80000 Sep 13 W136\ ExxonMobil Part cargoOil Dirty Edinburgh, 93 ME Gulf UKContinent op Red Sea 275000 Sep 7 W45 op W47\ StascoOil Dirty Ness, 90 ME Gulf Durban 262000 Sep 2 W40 SasolOil Dirty Myre, 81 Jubail Singapore 80000 Sep 11 W125 StascoOil Dirty Astro Callisto, 99 ME Gulf Thailand 265000 Sep 4 W55 BangchakOil Dirty Napa, 90 Kharg Island China 270000 Sep 12 W60 ZhenrongOil Dirty Emerald Queen, 97 Indonesia Japan 80000 Aug 30 W117\ Sumitomo Part cargoOil Dirty Pacific Leo, 03 Vungtao Singapore op Pt Dickson 80000 Sep 4 230000 Shell PtC;LS;Op$240000Oil Clean Marina, 88 St Croix US Atlantic 40000 Aug 28 W205 HessOil Clean Fortuna Spirit, 82 Continent US Atlantic 73000 Aug 24 W120 VitolOil Clean Aegean Glory, 92 Klaipeda US Atlantic US Gulf 33000 Aug 30 W250 Karran Part cargoOil Clean Sibotessa, 92 Baltic UKContinent 68000 Sep 1 W135 CargillOil Clean Milleura, 03 Black Sea Mediterranean 30000 Aug 29 W230 RocoilOil Clean Rosaria Bottiglieri Yenbo Tarragona 30000 Aug 25 900000 Cepsa Lump SumOil Clean Platinum, 96 Singapore WC US 30000 Aug 25 1350000 BP PtC;Lump SumOil Clean Ganmur, 01 Taiwan So Korea 30000 Aug 31 265000 SK Shipp PtC;Lump SumOil Clean Probo Koala, 89 No China Singapore 30000 Aug 27 275000 Vitol PtC;Lump Sum

Source: Maritime Research Inc

FRPED030828029.p65 26/08/2003, 16:0046

Commodity Focus


Feeding Asiaís taste for saltPERTH-based Straits Resources may become one of the worldís biggest salt exporters if plans to produce up to 10M tonnes a year from a proposed salt project in Western Australiaís Exmouth Gulf come to fruition.

Straits Resources, which is keen to ex-ploit rising demand for salt from Asian countries such as Korea and China, is conducting a feasibility study to start up a 3M tpa salt project within three years. Straits has earmarked enough ground for a 10M tpa year project, but has initial plans for lower volume to ensure inter-national competitiveness.

The company has indicated that it intends to run the project without a deep-water port because it will use shore-loadingbarges similar to a large-scale barge loading and transfer operation it usesfor exports from its Sekuku coal minein Indonesia.

The company, which has the backing of the Western Australian government, expects to conduct a feasibility study next year and commence production within three years.

Straits chief executive Milan Jerko-vic told Australian media that sales of at least one million tonnes of salt perannum were needed to underpin the de-velopment. Jerkovic said he believed salt buyers in Asian countries would be keen to gain alternative suppliers to Rio Tinto ñ which last year produced eight million tonnes of salt from its Dampier Salt op-erations ñ and a major Mexican exporter.

China signs formore nickel WESTERN Mining Corp (WMC) Re-sources has signed a A$1Bn ($680M) deal with Chinaís largest nickel producer, Jinchuan Group.

Under the terms of the agreement, signed in China last week, WMC will supply 90,000 tonnes of nickel in matte concen-trated ore ñ on top of the 30,000 tonnes agreed to last December ñ to Jinchuanbetween 2005 and 2010.

GOOD late rains in Australiaís key grain growing areas have boostedthe wheat production forecast for

2003/04 to 23.6M tonnes, with Western Australia looking like it could equal its record crop of 9.2M tonnes.

The good news for grain growers follows a disastrous drought-affected season, in which the countryís wheat production slumped to 9.4M tonnes and exports plum-meted 6M tonnes to 10.3M tonnes. The wheat harvest has just started in Queens-land, which is the only state expected to seea fall in production; about 300,000 tonnes down owing to severe frosts.

Australia Wheat Forecastersí latest crop estimate is about 2M tonnes higher than a recent forecast by the Australian Bureau of Agricultural and Resource Economics (ABARE), which pointed to a return to more normal seasonal conditions after the2002/03 El NiÒo event.

However, ABARE said world wheat prices in 2003/04 are likely to decline

by about 14 per cent to $138/tonne, with overall global trade in wheat falling nearlyfive per cent to 102M tonnes.

ABARE indicates that in 2003/04 wheat production will recover in Australia, Canada and the US, with the three major exporters increasing production by 35M tonnes to a total of 105M tonnes. World wheat output should reach 576M tonnes, up 10M tonnes on the previous season, although this will include production fallsin Russia and Ukraine of 14M tonnes and 11M tonnes respectively.

Russia and Ukraineís lower production will see Australia, the US and Canada regain their market share lost over thepast two seasons.

Growth in food wheat demand from SouthAsia is likely to be balanced by reduced feed wheat demand from Europe, theforecaster revealed. Interestingly, global wheat consumption in 2003/04 is expectedto be 20M tonnes higher than production, leading to a 13 per cent drop in stocks

to 138M tonnes, thelowest inventory since 1995-96.

Chinaís wheat stocks are likely to fall fur-ther as the worldís most populous na-tion disposes of itslower quality grain.Chinese wheat stocks have fallen from 99M tonnes in 1999-2000to about 54M tonnesat the end of 2002/03, and a further fall isexpected in the nextten months.

Australian forecasters say the world supply ofcoarse grains will also be boosted this year as Australia and Canada recover from drought. Canadian barley pro-duction is expectedto rise 80 per cent to 13.4M tonnes, whileAustraliaís contribu-tion should double to about 6.7M tonnes.

Oz grain trade recovers

Australian grain exports should get back on track as harvests recover from drought (photo: Piotr Starenczak)

FRPED030828032.indd 47 26/8/03, 16:46:18

August 28, 2003www.lrfairplay.com48

Dry Indices

Baltic Panamax Index Baltic Capesize Index

Baltic Dry Index Baltic Handymax Index Daily Summary of the Baltic Time Charter Averages:

$/DayBaltic Capesize Index 4 T/C Routes 35,803Baltic Panamax Index 4 T/C Routes 16,304

Although some softness set in at the end of last week, the market remains very firm overall with no suggestion of sustained retreat. Galbraiths uncovers some ìsofter spotsî in the Atlantic but the Pacifi c shows few signs of losing momentum.

The Atlantic Panamax market stumbled between grain seasons, and the Pacific saw a sudden tumble in demand, although some observers point to tactical withholding of cargoes by charterers. Lull it may be, but brokers maintain the market is still tight and primed for a bounce-back.

Cape rates took a breather after their recent rapid ascent, although demand is still strong and Clarksons reports continued operator interest in short-period charters; a sign of resilient confidence that the market will not only hold but return to growth.

FRPED030828025.indd 48 26/8/03, 13:09:23

Dry Markets


Charterers have been trying to limit the effects of rapid rises in rates by delaying fixing cargoes when possible in a dan-gerous gamble, designed to get owners to concede some of the recent gains they have made. Several operators have been concentrating on major period deals,which has helped keep owners’ expecta-tions high. According to brokers, owners realise that charterers view the long-term prospects with a degree of confi dencewhich, in turn, is bolstering the confi denceof ship owners.

Consequently, while rates have stalled this week, this is expected to be short-lived as demand has not diminished. In the absenceof business, it is hard to guage where par-ticular markets are, whereas the next actualfixtures could see higher rates once again. A small dip in the market at such fi rm lev-els is not a problem for owners.

Modern Capesizes are still being fi xed for delivery in Northern Europe, with trips to the Far East via Brazil to load iron ore, at around $32,000/day, which offers an excellent return to an owner. But this is off from recent highs of around $35,000/day or more.

Activity in the Pacific has leftrates there firm, with a modernCapesize fixed last week in the FarEast for an Australian round voy-age at a very fi rm $33,000/day.

The Panamax ‘correction’ was a lit-tle more dramatic. The longer-than expected South American grain season is finally winding down,and the US export season from the new crop has yet to materialise, so the market is in an ‘in-between’phase. Owners will still be grateful that this transition will probably be very short-lived this year.

While grain is more often thannot the driving force in Panamax freight rates, the minerals sector has proved to be a very strongforce so far this month. Charter-ers have increasingly turned toPanamaxes for minerals cargoes in the Pacific when they have been

Time-out for bulkersCAPESIZE rates have undergone something of a ‘correction’ after the rapid gains since the beginning of August. Still, the market is well-positioned for an autumn revival.

unable to find Capesize tonnage, even if a substantial penalty has been involved.

In the Pacific, daily earnings of around $17,500/day are being seen for roundvoyages, down from a high of around$18,000/day, but still offering very healthy returns to owners.

The holiday weekend in London, keeping some key players away from their desks, seems to have had an impact. Charterers may well have covered some requirementsearlier, allowing a lull in the latter half of last week, just ahead of the holiday.

As we go to press, brokers say the mar-ket is likely to bounce back, especially as operators have confidence in the market, judging by the period business. Modern tonnage has been fixed at very fi rm lev-els of around $13,000/day for up to two years’ trading. While charterers will apply such tonnage to their own cargoes when ships are in the right position, the main impetus will be to try to re-let at a profi t. One-year charters have been concluded at$15,000/day. Of course, taking ships for two years at such firm rates is a signifi cantgamble. If the market turned sour, early redeliveries are highly likely.

Handymaxes also find themselves in a ‘no man’s land’ of a market. The South American market, which has been sostrong for them this year, is waning and the US grain season has yet to kick off. However, rates have eased slightly but are still very fi rm. US Gulf to Northern Europe grain runs are still producingdaily earnings of around $20,000/day. And staples, such as Black Sea to Far East steel runs, fuelled largely by Chi-nese demand, are still giving ownersaround $18,000/day.

The Black Sea is also producing more fertiliser cargoes, adding further impe-tus to rates and making it diffi cult for steel exporters, who have to consolidatecargoes with other shippers as they typi-cally ship in small lots of up to 2,000 tonnes. The latest small dip in the mar-ket is largely positional, according to brokers, and it is expected to be short-lived. The US new crop grain export season will also add support, but it couldbe another month before the market seesthe benefit of that.

Period business in this size range has been somewhat muted compared with the larger Capesizes and Panamaxes. A modern vessel was reportedly taken last week for seven months’ trading by MUR at $15,000/day, delivery ex-shipyard in South Korea in Octoberor November. This suggests a strong degree of confidence in this sector over the next year.

It had to come some time, but the seasonal dip in demand took a particular toll on Handy rates last week, although rates are still 40+ per cent better than a year ago. Most

bulker owners are still well inside the comfort zone

FRPED030828031.indd 49 26/8/03, 16:22:59

REGIONNorth West Europe

d St Petersburgd Great Beltd Hamburgd Rotterdamd Antwerpd Le Havred Falmouth

Mediterraneand Istanbuld Piraeusd Vallettad Augustad Fos d Gibraltar

Africad Mombasad Durband Lagos (offshore)d Dakard Las Palmas

Middle Eastd Kor Fakkan (offshore)d Aden

REGION 380 cSt 180 cSt MDO MGO

August 28, 2003www.lrfairplay.com50

Tanker Indices

Middle East cont’d d Jeddah (pp)

d Suezd Ras Tanura/Dammam (pp)

Asiad Tokyo Bayd Sydneyd Colombo (pp) d Singapored Hong Kongd Keelung (pp) d Pusan

Americasw New Yorkw Houston/NOLAw Cristobalw Venezuelad Rio de Janeiro d Buenos Airesd La Libertadw Los Angelesw Seattlew Vancouver

380 cSt 180 cSt MDO MGO

Bunker Prices

Latest mid-range prices listed in $ as at Monday August 25, 2003 (d - delivered, w - ex wharf, pp - posted price. Ports listed regionally, clockwise from the North East)

Information supplied by Cockett Marine Oil. Tel: +44 1689 883400

Baltic International Tanker RoutesSpot Rates - Crude OilIn what could finally mark a turnaround in tanker fortunes, a surge of charterer interest saw VLCC rates jump sharply up, rates to the East leaping from low WS40s to WS60+. Clarkson envisages a tight VL market until end September, although with little reaction in the Suezmax market, so far. Aframax demand was also reported stronger; although still taking up the slack of supply, the tone is fi rming.

Clean ProductsRates continued their recent gentle decline, and Clarkson average earnings retreated to a reported five-week low. One of the few bright spots was the Trans-Atlantic as refinery shutdowns due to power cuts encouraged some upturn in imports, says SSY. Otherwise, rates tended to fell back across the board.

137.50 144.50 236.00 252.50167.50 177.50 242.50 270.00162.00 168.00 220.00 250.00158.00 164.00 227.50 245.00159.00 165.00 237.50 242.50171.00 181.00 n/a 271.50170.00 179.00 288.50 288.50

169.00 177.00 260.00 259.00164.50 171.00 n/a 251.00162.50 173.50 n/a 262.50171.50 177.50 n/a 267.00174.00 195.00 n/a 268.00166.00 172.00 274.00 281.00

n/a 198.00 300.00 310.00n/a 162.00 262.50 272.50

217.50 230.00 n/a 322.50207.00 217.00 n/a 283.50171.50 177.50 274.00 278.00

159.50 165.50 242.50 245.00175.00 180.00 n/a 280.00

161.75 167.00 n/a 277.75161.50 166.50 n/a 322.50n/a 169.75 n/a 247.75

180.00 184.00 267.50 n/a212.00 212.00 n/a 297.50n/a 235.00 n/a 290.50

164.00 167.00 239.00 242.50178.00 179.00 236.00 252.50182.00 184.00 270.00 278.00172.00 176.00 270.00 280.00

176.00 186.00 317.50 n/a169.00 172.50 252.50 n/a168.00 179.00 265.00 n/a172.00 182.00 265.00 270.00165.00 169.00 n/a 322.00180.00 180.00 272.50 297.50180.00 191.00 n/a 363.00162.00 174.00 287.50 n/a174.50 181.50 302.50 n/a174.00 180.00 360.00 360.00

FRPED030828028.indd 50 26/8/03, 15:08:57

Tanker Markets


Some relief for some tanker ownersVLCC owners at least were a little more confident after witnessing a near 20-point rise in ratesfor AG/East cargoes in the last week as charterers covered their September programmes.

Despite a large hangover of unÞ xed ton-nage from August, totalling around 45 vessels in the Þrst half of the month, there were sufÞcient volumes to eat into this tonnage Þgure. Now, for the Þrst time in two months, tonnage in the Persian Gulf region looks tight and is likely to remain so for the rest of September.

Rates have also responded to the gradual return of Iraq to the export market throughMina al Bakr. Although exports are run-ning behind initial expectations, they are making a difference, according to some sources. Exports are now thought to be running at around 550,000 bpd, equating to a VL cargo every four days. Shipments are expected to rise up to 1.25M bpd over the next couple of months. According to Clarkson Research Studies, Iraqi exports have been crucial to VL rates. VLCC rates have risen and fallen in line with Iraqi exports ever since Iraq was expelled from Kuwait 11 years ago.

But charterers have been concentrating onÞrst-half September stems and are likely to be more laid-back with their second-half stems, although a few have already Þxed as far forward as September 20.

AG/East rates are now at around theWS60-65 mark as we go to press, while AG/West rates are around the WS55 level compared with about WS40-42.5 in both directions a week ago. Brokers are un-certain as to how long the momentumwill last.

While this is certainly an improvement over the past couple of months, it is not the type of rate spike that owners became accustomed to every month in the Þ rst half of this year.

The opportunity for optimism was more limited in the Suezmax market but there was some cheer. West African markets lifted themselves out of the doldrumsafter what had been a very disappointing August compared with the signs at the start of that month.

However, activity picked up last week, possibly the result of some US charterers wanting to cover certain cargoes ahead of next Mondayís Labor Day holiday (Sep-tember 1). Rates rose rapidly on Friday to around the WS80 mark for trans-Atlantic cargoes to the US and WS85 for stems headed for the east coast of Canada, up from around WS68.75. So far as owners were concerned the tonnage list was much improved, and they had also experienced atleast a week without any real competition from VLCCs for trans-Atlantic cargoes.

The Mediterranean and Black Sea re-mained weak, however, with the latest round of Novorossiysk cargoes proving to be something of a disappointment.Egyptian cargoes also failed to live up to expectations. On top of this came another delay to the resumption of Iraqi Kirkuk crude exports from Ceyhan. Sabotage to the pipeline that feeds from northern Iraq is expected to take a month to repair. The

pipeline had just reopened and exports may well have resumed had it not have been for this setback.

The Mediterranean Suezmax has beenill at ease ever since the start of the war against Iraq in the middle of March.

In part Aframaxes have beneÞ ted from Suezmax ills as charterers have beenconcentrating on the smaller sector inthe Mediterranean, although rates have hardly been responsive and the market is generally weak in all of the key Atlantic loading regions, with the exception ofthe Caribbean. Rates for modern tonnage have generally been stuck in a range of WS80-85 for cross-Mediterranean busi-ness, or for trade from the Black Sea for Med discharge.

However, it looks as though demand is picking up again in the region, as summer maintenance programmes come to an end,and another week of such activity could help the market rise out of its habitual range. So far ownersí conÞdence has beenweak, but we could see it return soon, ac-cording to brokers.

In the North Sea that conÞdence is dis-tinctly lacking, with oil majors easily be-ing able to push the market down around Þve points. Owners are struggling to Þ x at WS80 for voyages within the UK/Con-tinent region.

Caribbean rates were fairly steady, hav-ing brießy got up to WS130 for upcoast voyages, but the momentum dipped and rates had eased by about 2.5 points as we went to press. The market may pick up some momentum from charterers want-ing to cover ahead of next Mondayís US Labor Day holiday.

In what was a mixed week for tanker owners, there were some glimmers of hope, although they did not reach into all corners of the market (photo: Martin Wright)

FRPED030828030.indd 51 26/8/03, 16:16:50


Shoes & Ships

Shipwright and marine artist Gordon Frickers (left) with Batavia yard founder Willem Voss in the hull of the replica Zeven ProvinciÎn (photo: Gordon Frickers)

THE DUTCH seem pretty conscious oftheir seafaring heritage, and they are a practical people, too. They seem to

have no problem salvaging wrecks and, when that cannot be done, in replicating the desired vessels.

A replica VOC (Dutch United East India Company) vessel Amsterdam was built in the late 1980s and has been moored since 1990 at the Dutch maritime museum in Amsterdam. The replica East India mer-chantman was built with the help of over 400 volunteers, and actors aboard give visitors a colourful and graphic taste of the ëbad old daysí of sail. The original ship did not survive long. On its maiden voyage in 1749, it lost its helm in a heavy storm, ran aground and sank off southern England, but it lives on through its 20th-Century reincarnation.

In 1995, recently retired master ship build-er Willem Vos and a numerous volunteer corps completed the replica VOC vessel Batavia, named after a 1628 original. The ship was launched by Queen Beatrix atBatavia Werf shipyard in Lelystad.

It is questionable whether the Zeven Pro-vinciÎn ñ originally built in 1665 for the

Rotterdam Ad-miralty ñ willbe so lucky. Its doppelgangerstarted to takeshape at BataviaWerf in 1995. The shipyardwas estab-lished in 1985as a centre fortraditional shipbuilding. It also offered work experience and training to unemployed young people.

The yard was widely admired, and itself used as a model for the Jeanie Johnston Shipyard in Ireland, founded to build a replica migrant ship (see Fairplay, July 27, 2003). Work on the Zeven ProvinciÎn progressed until the end of 2000, when financial problems started accumulating. The shipyard had to stop work in 2001 because of lack of funds and shortageof shipwrights. The workforce hoped to start again in 2002, but so far nothing has happened.

UK marine artist Gordon Frickers wascommissioned to visit BataviaWerf and to produce a painting of the completed Zeven ProvinciÎn. ìItís tragic the work should be stopped in its tracks,î Frickersñ himself a trained shipwright and boat builder ñ told Fairplay. ìThe quality of work at Lelystad was fi rst-class. What theyíre doing is unique, deserves support, and should be a major part of the Dutch culturalheritage.î

Pieter BlussÈ van Oud Alblas, a maritime lawyer and a historicship fundraiser, suggests that the half-built Zeven ProvinciÎn should be completed in Rotterdam. The original was a Rotterdam vessel,and its new double would be ëathomeí there, he believes. ìMoving

it to Rotterdam would solve other prob-lems, as well,î he told Fairplay. ìIt wouldattract more attention, which might help obtain the funds needed.î

He also believes the Zeven ProvinciÎn will attract donations more easily thanthe replica 18th-Century warship DeDelft, on which construction has barely started. ìThat ship has nothing to do with Rotterdam, or its history,î says the lawyer with the collection box. ìThe project was adopted by the then alderman in Rotter-dam in prosperous times. At the start, no-body seemed to consider the real budget needed. Expenditure on maintenance,security and insurance are gigantic, apart from the cost of meeting shipping inspec-torate and fire safety demands.î

BlussÈ Van Oud Alblas thinks few people realise how expensive replica ships are. The Batavia had to be transported to Aus-tralia for a special appearance there, as the Maritime Inspectorate did not considerit fit to sail so far itself. Maintenance of the Amsterdam has cost about Ä600,000 ($665,000). ìPeople were astonished, but I for one thought it would cost twice as much.î

De Delft is about to become a fi nancial burden, even before serious work begins. The port alderman has stipulated that its building costs should not exceed Ä17.8M. He has given the Historic Vessel De Delft foundation a deadline to fill an existing budget shortfall, and warned that the mu-nicipality will stop its subsidy next year. The foundation is still confident of rais-ing the money, by making economies and fi nding sponsors. Critics, such as BlussÈ Van Oud Albas, are not so sure.

~ Janny Kok ~

History needs life

Not much danger from these men at work:ëCrewmení on the replica VOC Amsterdam (photo:

Scheepvaartmuseum, Amsterdam)

FRPED030828024.indd 52 26/8/03, 12:11:00

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Seafarers still on their own