Maritime CEO Issue 4 2014

ISSUE FOUR 2014 www.maritime-ceo.com

Mergers and premonitions Rolf Habben Jansen on the future

of the new Hapag-Lloyd

We introduced the first commercial bunker fuel testing programme for ships in 1981. Today, customers remain at the heart of our business. We operate a global network of technical experts and offices, four specialist and wholly-owned fuel testing laboratories strategically located in Rotterdam, Singapore, Houston and Fujairah, with access to 200 key bunkering ports worldwide for bunker quantity surveys. We are committed to providing services with absolute integrity and professionalism.

Veritas Petroleum Services (VPS), the leader in maritime testing and surveys, delivers solutions that help ship operators achieve measurable improvements to fuel management, fuel cost, operational efficiency and compliance with marine fuel regulatory requirements.

The Leader in Maritime Testing & Surveys

AmericasHouston318 North 16th StreetLa Porte, Texas 77571USAT + 1 281 470 1030E [email protected]

EuropeRotterdamZwolseweg 12994 LB BarendrechtThe NetherlandsT + 31 10 292 2600E [email protected]

Asia, Middle East & AfricaSingapore27 Changi South Street 1Singapore 486071T + 65 6779 2475E [email protected]

www.v-p-s.com

Veritas Petroleum Services Group

Issue FOuR 2014 1

3 At The Prow

Economy5 US6 EU7 China8 India9 Brazil

Markets11 Dry Bulk13 Tankers15 Containers17 Offshore19 Finance

Executive Debate20 Dawn of the Google Ship?

Profiles24 Cover Story Hapag-Lloyd

27 BW Group29 Shipping Corporation of India30 Great Eastern31 Grimaldi32 Swissco Holdings32 Marine Delivery33 Olympic Shipping33 Hong Lam Marine34 Rimorchiatori Riuniti35 Mandarin Shipping36 Blue Wall 37 China Navigation37 Star Bulk38 Shinyo International38 Giga Maritime39 Mediterranea di Navigazione

Recreation40 Wine41 Gadgets42 Books43 Travel44 Golf 45 Yachting

Opinion46 The Secret Procurement Officer47 The Contrarian48 MarPoll24

Manifest

WHEREVER YOU SAIL...

MARINE LUBRICANTS

provides cost efficient lubrication solutions and expert technical services to the shipping industry.

For worldwide and 24/7 high performance marine lubricants deliveries contact our global team:

UNIMARINE

[email protected]

www.unimarine-lubricants.com

KPI Marine Island.indd 1 29/05/13 11.53

Issue FOuR 2014 3

Where to start with this fascinating issue of Maritime CEO maga-

zine? Let’s dive straight over to page 20 with our Executive Debate, this time looking at the advent of the unmanned car and musing whether shipping, with its crewing short-ages, might be due a ‘Google Ship’ soon. What is clear is that shipping is years, maybe decades, behind its automotive and airline peers in terms of harnessing technology.

“We are so old fashioned we don't even realise just how far behind we are with the latest technology,” says Clarkson’s Dr Martin Stopford. Part of that problem, according to Nicholas Fisher, ceo of Masterbulk, is that it is still possible to trade profitably with minimum technolog-ical advances, if any. You, the reader, seem unconvinced about the idea of unmanned ships too, according to our latest poll, results of which can be found on page 48.

Technology can save costs, so the argument goes. So too can consolidation, say the architects of today’s merger phase sweeping through shipping. We speak with two of the main consolidators – Spyros Capralos from Star Bulk on page 37 and our cover star on page 24, Rolf Habben Jansen, the new Dutch ceo of Hapag-Lloyd. Habben Jansen thinks the merger with Chile’s CSAV will bring savings of $300m.

What with the big merger between Clarkson and Platou, there is a lot of talk about consolidation in shipping at the moment, not all of it merited however, argues our finance columnist on page 19. Among shipping lines, there’s been com-mercial consolidation, but not much ownership consolidation, something that over the years has proved to be extraordinarily difficult for owners to handle smoothly.

Finally, I commend you to go

to page 27 and read the thoughts of Helmut Sohmen, who has just retired from BW Group. He muses on how shipping has changed over the 44 years he has spent in the industry. He also looks ahead seeing plenty of potential changes such as resource production techniques and locations, the cost of fuel, environmental con-siderations, direction of trade flows, larger canals. However, all of these issues have not yet settled down and might throw up surprises, he warns.

“Owners should not make too many assumptions or believe in linear projections based on historic precedent,” he says.

As he points out, few people would have guessed only a few years ago the impact of fracking, the polit-ical decisions to terminate nuclear power generation in major industri-alised countries, or the incredible Chinese economic success story.

Years from now, we might be saying the same thing about unmanned ships.

As ever, any comments, ques-tions or quibbles, please do get in touch with me at the following email: [email protected]. ●

Sam ChambersEditorMaritime ceo

Shipping’s limited technology appetite

An ASM publication

Editorial Director: Sam [email protected]

Associate Editors: Jason [email protected]

Katherine [email protected]

Correspondents:Athens: Ionnis NikolaouBogota: Richard McCollCairo: Camelia EwissCape Town: Joe CunliffeDubai: Yousra ShaikhHong Kong: Alfred RomannLondon: Holly Birkett Mumbai: Divya LadNew York: Suzanne SmithOslo: Hans ThaulowPortland: Joshua Samuel BrownShanghai: Colin QuekSingapore: V SubramanianSydney: Ross White-ChinneryTaipei: David GreenTokyo: Masanori Kikuchi

Contributors: Nick Berriff, Andrew Craig-Bennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel

Editorial material should be sent to [email protected] or mailed to Office 701, 9 Renmin Lu, Zhongshan District, Dalian, China 116001

Commercial Director: Grant [email protected]

Sales Director:Helen [email protected]

Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email [email protected] for details

MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.maritime-ceo.com

All commercial material should be sent to [email protected] or mailed to Asia Shipping Media, 20 Telok Ayer Street, Singapore 068589

Design: Tigersoft DesignPrinters: Allion Printing, Hong Kong

Subscriptions: A $120 subscription is charged for 2014’s four issues of Maritime ceo magazine. Email [email protected] for subscription enquiries.

Copyright © Asia Shipping Media (ASM) 2014www.asiashippingmedia.com

Although every effort has been made to ensure that the information contained in this review is correct, the publishers accept no liability for any inaccuracies or omissions that may occur. All rights reserved. No part of the publication may be reproduced, stored in retrieval systems or transmitted in any form or by any means without prior written permission of the copyright owner. For reprints of specific articles contact [email protected]

Twitter: @Maritime_CEOLinkedIn: Maritime CEO ForumFacebook: ASM Maritime & Offshore News

at the prow

WHEREVER YOU SAIL...

MARINE LUBRICANTS

provides cost efficient lubrication solutions and expert technical services to the shipping industry.

For worldwide and 24/7 high performance marine lubricants deliveries contact our global team:

UNIMARINE

[email protected]

www.unimarine-lubricants.com

KPI Marine Island.indd 1 29/05/13 11.53

Licensed news, sports, movies, TV, and music, plus training, weather, and charts, delivered to onboard devices

IP-MobileCast – a unique multicasting service that delivers content directly to your vessel

Only one company

delivers one integrated end-to-end

solution.

TracPhone® Vip-series – award-winning SATCOM systems with built-in network management

mini-VSAT Broadband – the No. 1 maritime VSAT network offers global coverage

Rich Content

Content Delivery Connectivity

Hardware

Experience the Power of One

©2014 KVH Industries, Inc. mini-VSAT Broadband is a service mark of KVH Industries, Inc. KVH, TracPhone, IP-MobileCast, and the unique light-colored dome with dark contrasting baseplate are trademarks of KVH Industries, Inc.

kvh.com/powerofoneLearn more about industry-leading VSAT, training, weather, charts, and entertainment at:

Giving you the power to deliver the bandwidth your operations demand, keep your crew happy, and manage your budget... all at the same time.

Connectivity and Content

Issue FOuR 2014 5

reGULar eConoMY Us

Jobless Americans are fewer and far between– America added 214,000 jobs in the third quarter,

according to the government in what many analysts see as the latest sign of a slow but substantial eco-nomic recovery. The unemployment rate is now down to 5.8%, the lowest level in six years, as more workers entered the job market.

Low oil prices meant more con-sumption despite sluggish wages and helped the Republicans sweep the round of midterm elections recently. The recovery seems to be covering most sectors – Boeing reports higher orders than in the last decade and gadget providers like Apple are selling like hotcakes still. But America needs a stronger global economy even if Asian airlines want planes and the world’s nerds want toys.

Boosters can point to improved productivity in the US economy. Productivity, or the American economy’s output per hour of work, increased at a 2% annual rate during the third quarter as output increased. However, lower unem-ployment, more productivity and rising orders will probably lead to a round of wage demands from work-ers next year and so inflation may become, once again, a key metric for America’s economy in 2015.

Lower oil prices are, of course, good news for American manu-facturing. Businesses spending less on oil will improve their prices and profit margins, it’s hoped. Consumers spending less on utilities

will shop more, it is also hoped. Hopefully lower fuel prices will stave off wage demands and consumer spending, despite stagnant wages, could finally get a boost.

However, the trade deficit is still growing. The Commerce Department in Washington DC reported that the trade deficit rose 7.6% to $43bn in September – the first increase in four months. Weaker orders from the EU and China are largely to blame along with the dollar’s appreciation against

the euro, more than 4% in the same timeframe. US exports to China fell 3.2% (despite the iPhone craze in Asia) and accusations of Chinese currency manipulation are back and rife on Capitol Hill. US exports to the EU fell by 6.5% in September compared to August as key EU econ-omies, notably Germany, reduced their orders.

The fall in exports will be a disappointment to the Obama administration that had hoped a raft of new free trade agreements (FTAs) would boost spending on American products and services. Despite FTAs the trade gap with key partners in Asia such as South Korea and Taiwan has grown this year. However, trade with Canada and Mexico has also worsened. This might be manage-able but America is still increasing imports (all those iPhones made in China, for instance) and this leads to worse deficit numbers. Greater domestic oil production (and shale gas coming on stream) can only mar-ginally offset the deficit growth. ●

America goes to workUnemployment is at its lowest for six years

A Year of Job GrowthUnemployment Rate %December 2013 7.0

January 2014 6.6

April 2014 6.3

July 2014 6.1

October 2014 5.8

Source: Federal Reserve

“ Low oil prices meant more consumption despite sluggish wages ”

maritimeceo6

reGULar

The European Union is pessi-mistic. It’s newly published economic autumn forecasts,

covering each individual member state as well as the Eurozone and the EU as a whole, make bleak reading. The larger EU economies, especially Germany, have started showing signs of faltering. The expected momentum many predicted earlier in the year has not materialised – France’s economy remains stagnant, Germany’s has dipped and the UK, though perhaps the best of the bunch at the moment, is still far from stellar.

It had been hoped that struc-tural reforms in the wake of the Eurozone crisis would have started to take hold by now and that the banks would be back on track, but it hasn’t happened as expected. For the banks the conundrum is that while banks are being told to lend more money, regulation is making it more difficult for them to lend. Quantitative easing may have to return.

This may be why the UK is per-forming so well comparatively. Both

the UK and US resorted to renewed quantitative easing. However, even this could fail if banking regulations become even tougher.

The UK economy is expected to grow by 3.1% this year while the growth rate in Germany is just 1.3% and the average for the Eurozone is a paltry 0.8%. Even so the UK has weak export numbers right now, worsened by rising oil imports into the country. Germany has also seen export orders fall and many blame the impact on EU sanctions against Russia, sanc-tions from which Germany by far stands to lose the most among the member states along with Hungary, Slovakia and Cyprus. German

exports to Russia were 26% lower in August than a year earlier, and down 17% year-over-year in the January to August period, according to the German Federal Statistical Office.

Where there are signs of strengthening in Europe, aside from the UK, it’s in the smaller and newer states. For instance, among the newer entrants to the union, Slovenia’s exports surged 14% in September, the fastest growth in three years. A further sign Slovenia is rebounding after narrowly avoid-ing an international bailout last year. As far as smaller nations go, Ireland is a good example with the economy expected to grow by 4.6% this year fuelled by strong exports and its historically close trading rela-tionship with the UK. The message from Dublin seems to be that those countries with strong ties to coun-tries with rebounding economies are better placed than those without such relationships (see chart). Additionally Greece is expected to see growth of 2.9% in 2015 – but this is off the back of its recent economic near-collapse. Overall though the Commission has cut its forecasts for Eurozone growth, predicting that the Eurozone economies would grow by 1.2% next year, down from 1.7% forecast six months ago. ●

EuropessimismQuantitative easing may have to return to an ailing continent

Ireland’s Major Trading PartnersExport destination

% of total exports

US 18.9

UK 18.4

Belgium 14.6

Germany 6.9

France 5.8Source: Eurostat

eConoMY eU

“In a tough market a little bit of

imagination goes a long way”— Susanne Munch Thore,

managing partner, Wikborg Rein

Issue FOuR 2014 7

China’s third quarter mac-roeconomic data appears to indicate that the PRC

economy is gradually decelerating. However, this should, most analysts believe, lead to a healthier, less hectic and more sustainable growth rate.

Long-term China watchers had long known this deceleration was coming. The PRC’s workforce has been shrinking for some time due to demographic factors while much of the job of the last decades of frantic urbanisation has now been com-pleted – major infrastructure and large-scale housing projects have already been built (overbuilt some would say pointing to the infamous ‘ghost cities’ and rural bridges-to-no-where of the stimulus years).

Sensibly China’s leaders have resisted the urge to artificially boost growth and moved away from the growth at all costs thinking of recent years. GDP growth is now expected to be just above 7% this year, and will probably be slightly slower next year.

Other indicators also reflect a new calm in the economy – despite fears of a major collapse the much media hyped Chinese property market looks likely to stabilise in the coming quarters, and some of those ghost cities may even start to fill up. Additionally, steady growth in incomes and retail sales mean China remains the world’s best consumption story with higher wages being poured into domestic spending rather than savings and so circulating.

For those in shipping and logistics though the picture is a little more mixed. Net exports – i.e. the

value of exports minus the value of imports – accounted for approxi-mately 10% of GDP growth, up from small negative contributions during the past two years. But this was probably due in large part to lower import prices rather than a revival of exports. So if you’re shipping into China then it’s good news, but if you’re shipping out then full loads may still be more elusive than in the workshop-of-the-world past.

Though the much talked about property bubble of China hasn’t burst there was a small decline in house prices. However, the government is encouraging current home owners to upgrade to better properties and has actively encouraged this by lowering the cash down payment requirement to 30% from 60% for those who pay off their first mortgage and buy a second house. This seems popular with the month-on-month growth rate of new home sales, rebounding to 41% in September, compared to

an average of 32% for that month during the previous seven years. The long-term plan is that poorer new urbanites will move into the homes vacated by those upgrading thus allowing many more to finally get on the property ladder.

This should then be the future for 2015. The government has sent clear signals that there will be no more stimulus packages or economic boosting measures as in the past – clear and steady as she goes then. ●

Talk of gloom and doom in the People’s Republic is misplaced

Sustainable slowdown

eConoMY China

China’s GDP Growth – Levelling OffYear % growth

2007 14.1

2008 10.0

2009 9.8

2010 10.4

2011 9.9

2012 8.6

2013 8.3

2014 7.3*

2015 7.0*Source: IMF *=estimates

“ Steady growth in incomes and retail sales mean China remains the world’s best consumption story ”

maritimeceo8

Economic analysts appear to like the new Narendra Modi-led BJP government of

India. Predictions of GDP growth for this year are unchanged but, anticipating effects from the new administration’s economic meas-ures, predictions of 6.4% annual growth for 2015 are now being bandied about. The Organisation for Economic Co-operation and Development (OECD) is even pre-dicting identical growth with China (around 7%) for 2016.

The OECD and analysts believe that Modi’s substantial majority at the election polls will enable him to undertake reforms and carry them through without opposition and with less of the regionalism that has bedevilled previous national economic reform programmes. Of course, it should be remembered, India’s ‘catch-up’ with China is also partly predicated, not just on India’s growth, but China’s mid-term economic deceleration and newly stabilised GDP growth rates at below 8% per annum.

Despite these upbeat projec-tions there are still major hurdles for the government to leap – the fight against inflation being a major one. This may mean trouble with com-panies who are looking for interest rate cuts from New Delhi. However, changes put in place immediately by the new administration do seem to be having a positive effect. Logistics firms will be pleased with newly deregulated diesel prices, linking gas prices to global benchmarks, while employers and entrepreneurs have warmly welcomed labour policies, steps to end the ‘inspector raj’ and cutting red tape for businesses. The stock markets have also seemed pleased with Indian stocks in the

ascendant. Exports, however, are a more

mixed picture. Engineering exports have grown strongly, particualry to India’s immediate neighbours – Pakistan, Sri Lanka and Bangladesh. Despite this, car exports have stalled. Some analysts argue that this is due to increased local consumption, which is good news for manufac-turers like Maruti and Tata, but others have cited the rising cost of Indian-made cars abroad as the country’s low cost of manufacturing is slowly eroded making vehicles

manufactured here less compet-itive in the international market. India’s low cost labour model had attracted investment from the likes of Nissan, Renault and Hyundai but some are arguing that relocating to Eastern Europe and closer to key European and Middle East markets will make more sense in the future. Still rising domestic car sales show the fast emergence of a middle class – Hyundai expects an 8% jump in local sales in 2014 but, conversely, a 25% drop in exports to under 200,000 vehicles this year.

Shippers and manufacturers will hope that the Modi government will now prioritise the tweaking of India’s tax structure to make the country more exporter-friendly. At the moment this involves high taxes on imported components offset by subsidies but most analysts, and the World Bank economics team in India, would prefer to see lower taxes, an end to subsidies and the money redirected to investment that generates competitiveness, higher productivity and jobs. ●

Good vibrations Analysts are warming to Narendra Modi’s policies

eConoMY india

India's Declining Car Exports Year-on-Year

Sept 2013

Sept 2014

% Change

Maruti 14,565 10,448 -28

Hyundai 20,816 16,430 -21

Honda 692 380 -45

M&M 566 464 -18

Toyota 3,782 1,502 -60

Tata Motor 530 433 -18Source: Society of Indian Automobiles Manufacturers

Issue FOuR 2014 9

In October President Dilma Rousseff won re-election, but a slight contraction of the Brazilian

economy in the last quarter led analysts to slightly revise their GDP predictions for the year to 0.24% from 0.27% immediately afterwards. GDP forecasts for 2015 remain fairly constant at 1%. Clearly Brazil is not a stellar performer among the so-called BRIC nations and two quarters of negative GDP growth in what was supposed to be a strong year, courtesy of the World Cup, have not materialised.

Football aside, Brazil’s structural problems remain deep rooted. Brazil’s economy grew 2.3% in 2013 but has singularly failed to maintain momen-tum in 2014. Brazil ended 2013 with an inflation rate of 5.9%.

A surge in prices at the start of this year appeared to threaten the government’s target, but inflation has finally eased in the wake of interest rate hikes by the Central Bank.

So how will the newly re-elected president Rousseff deal with the systemic weakness in the economy? Brazil now looks a laggard compared to most other Latin American econo-mies as well as the emerging nations

globally. Brazil is still suffering from the economic short-termism of the ‘super-cycle’ years – dependent on mineral exports (particularly iron ore) and agricultural commodities (par-ticularly soy) – as well as on domestic consumption. But the super-cycle has passed and the initial benefits of a booming middle class now subisided. More sustainable, non-cycle depend-ent growth is required. Additionally costly subsidies on fuel and energy may have to be scaled back as well as welfare programmes. What is needed rapidly are ways to boost job creation, wages growth and general entrepreneurism.

Exports are not performing well either – car exports are down as well as domestic sales – Brazilian carmak-ers, led by Fiat and Volkswagen, have sold a combined 2.8m vehicles so far this year, a 9% drop over the same ten-month run a year ago. As Brazilians pay close to $5 a gallon for petrol, many middle class consumers are simply forgoing purchasing a car until gas prices look more favourable.

The country’s overall trade balance so far this year is a negative $1.17bn, the worst trade deficit since 1998. This is compounded by the poor state of the real – now trading at R$2.50 and not helping exports. Export values this past October were a whopping 19.7% below that of October 2013, according to Brazil’s Foreign Trade Ministry.

The manufacturing sector will have to be an early target of the new administration if growth is to be started seriously. Exports of manufac-tured goods made in Brazil dropped 30.3% in October 2014. Exports to China dropped 43.8% and exports to the EU, Brazil’s second largest market after China, fell by 40.4% in value terms. Restarting the export economy will have to be a priority. ●

eConoMY BraziL

Brazil’s Top Export Categories, 2014Sector % of total exports

Industrial machinery 47

Instruments 12

Electrical machinery 11

Cars 6

Plastics 4

All other 20

Total 100Source: Brazil Foreign Trade Ministry

‘Restarting the export economy a priority’

Re-elected as president, Dilma Rousseff’s in-tray is overflowing

Issue FOuR 2014 11

reGULar

In comparison to the free fall in commodity prices seen this year, along with the relative flatness in

most dry bulk freight rates, capesize rates have proved to be very volatile during 2014. Capesize volatility has been particularly noticeable during the last three months; while at the same time iron ore and thermal coal prices have remained under very steady pressure and panamax, supramax, and handysize freight rates have collectively only fluctu-ated by a small amount.

Since the start of September, panamax, supramax, and handysize rates have fluctuated by $3,550, $1,885, and $1,203 respectively. Average daily panamax rates began September at $7,072, fell to a low of $6,396 in late September, and reached a high of $9,946 in early November. Freight rates have stayed even steadier in the supramax and handysize segments of the market. Average daily supramax rates began September at $10,220, rose to a peak of $11,016 in late September, and declined to a low of $9,131 a day in mid-November. Average daily handy-size rates began September at $6,629, rose to a peak of $7,747 a day at the start of October, and decreased to a low of $6,544 in mid-November.

The capesize market, though, has seen a great deal of volatility. Average daily capesize rates began September at $16,605, fell to a low of $7,932 in mid-October, and rose to a peak of $26,802 in mid-No-vember. Significant volatility (and a good deal of strength) has been

particularly evident in the capesize market very recently. Rates stayed above $20,000 a day all the way through to November 25. At the very end of last month, however, rates came under great pressure as a lull in Brazilian iron ore cargoes occurred in the market. Only seven vessels were chartered to haul Brazilian iron ore cargoes during the last two weeks of November, which caused average daily capesize rates to decrease to $14,564 by the end of last month.

During the last three months, capesize rates have fluctuated by $18,870. Capesize rates are normally the most volatile in the dry bulk market, and what has been of even more significance this year is that 2014 has been a year that has largely seen iron ore and thermal coal prices come under only downward pres-sure. Capesize rates have been the one segment of the global industrial commodity complex where rates have actually seen a great deal of movement in both directions.

Thermal coal prices have decreased by approximately 15% through the first eleven months of this year, and iron ore prices have

decreased by approximately 40%. Both have been coming under all but steady pressure, along with most global commodity prices recently. Capesize rates, however, have not been coming under steady pres-sure. Instead, they have seen seven different peaks through the first eleven months of this year, and just as many troughs. Overall, volatility has been especially unique to the capesize market during the last three months. During this time, there have been six weeks where capesize rates have increased on a week-on-week basis. During the same period, iron ore prices have only increased once and thermal coal prices have only increased three times. When capesize rates have increased, they have increased week-on-week by an average of 28%. When iron ore or thermal coal prices have increased, they have increased by an average of only 3%. Such volatility (the ability to see prices move by a large amount in both directions) has been unique to the capesize market, and is a charac-teristic that the iron ore and thermal coal markets would have been eager to see this year. ●

Markets drY BULk

Volatility unique to the cape marketCapesize rates have fluctuated by $18,870 in the past three months, writes Commodore Research’s Jeffrey Landsberg

0

3

6

9

12

15

Nov 28Nov 21Nov 14Nov 7Oct 31Oct 24Oct 17Oct 10Oct 3Sep 26Sep 19Sep 12Sep 5

Vessels Chartered to Haul Brazilian Iron Ore Cargoes(Week Ending Sep 5 - Week Ending Nov 28)

QualityManagementSystemQuality. Service. Reliability. Every step of the way.A landmark initiative for the fi rst time in the history of the Russian Bunker Industry

Rosneft Marine (UK) Ltd.One Kingdom Street / Paddington CentralLondon, W2 6BDTel. +44 (0) 203 402 3633 / Fax. +44 (0) 203 402 350www.rosneftmarine.com

Issue FOuR 2014 13

reGULarMarkets tankers

As we approach the end of the year, let us reflect on some of the changes that have been

taking place in the crude tanker mar-ket, driven by ever changing crude oil trade flows.

In the VLCC market, we have seen the relative decline in the movements of Middle Eastern crudes to the US Gulf as a result of the boom in crude oil production in North America. At the same time, oil imports in countries in Asia, such as China and India, have continued to grow. Both China and India have a deliberate strategy of diversifying their sources of supply and they are now importing from producers all over the world. Venezuela, for exam-ple, has become a significant trading partner for Asian clients, while reducing its focus on the US. Long-haul crude and fuel oil movements from the Caribbean to Asia have become a significant VLCC trade and because the Arabian Gulf to the US trade has declined, a regional shortage of vessels has started to develop. Increasingly, VLCCs need to ballast from other discharge regions to the Caribbean. This scenario would have been unheard of five years ago. Tradeflows around North America are likely to change even more over the next five years as Canadian pipe-line companies are planning to build significant oil export infrastructure on both Canada’s Pacific and Atlantic coasts. The new export facility in Kitimat (on Canada’s West Coast) as well as the East Coast port of St John are both capable of receiving VLCCs. The new pipelines feeding these facil-ities are expected to be operational in 2018.

No crude tanker segment has been more impacted by the growth in light sweet crude oil production in the US than the suezmax segment. The US used to import more than 1.5m barrels per day of crude oil from West Africa, most of which moved on suezmaxes due to port restrictions on the US East Coast. Since the US sources most of its light sweet crude from domestic shale production, the West African import volumes have now been reduced to a trickle. As a result, suezmax tankers have had to look for alternative employment and they found it in both the Atlantic and the Pacific Basins. Within the Atlantic, suezmaxes have seized on opportunities in the West Africa to UK/Continent crude oil trades. Based on reported spot fixtures, suezmax voyages on this route almost tripled since 2010. Another growth area for suezmaxes has been the Middle East. Movements from the Arabian Gulf to both eastern and western destinations have increased dramat-ically, partly because traders like the flexibility of the one million barrel suezmax cargoes as they are easier to sell and hedge.

In the crude aframax sector

we have seen interesting develop-ments as well, even though the main trades in the Atlantic Basin have not changed much. Several new aframax routes have been created in the last five years. On the East Coast of Russia, a new trade has emerged from the port of Kozmino, the end-point of the Eastern Siberia – Pacific Ocean (ESPO) pipeline. Kozmino exports started in 2009 and have reached some 20 aframax cargoes per month, mostly destined for China, South Korea and Japan. Russia’s state pipeline company, Transneft, is planning a doubling of the capacity of the ESPO pipeline by 2020. This could vastly expand the volume of aframax cargoes from Kozmino Bay. Another interesting new aframax trade that has developed is the exports of Eagle Ford shale oil from the US Gulf to the East Coast of Canada. This trade, which did not exist three years ago, is the result of abundant supplies of domestic US shale oil looking for a home. Canada is an attractive destination since it is exempt from the US crude oil export ban and the East Coast of Canada does not (yet) have sufficient access to domestic Canadian supplies. ●

Changing trade flows boost earningsPoten & Partners' Erik Broekhuizen on dramatically altered tanker routes

QualityManagementSystemQuality. Service. Reliability. Every step of the way.A landmark initiative for the fi rst time in the history of the Russian Bunker Industry

Rosneft Marine (UK) Ltd.One Kingdom Street / Paddington CentralLondon, W2 6BDTel. +44 (0) 203 402 3633 / Fax. +44 (0) 203 402 350www.rosneftmarine.com

-400 -300 -200 -100 0 100 200 300

W Africa to Europe (Suez) W Africa to Asia (VLCC)

AG to Asia (Suez) AG to Europe (Suez) Caribs to Asia (VLCC)

UKC to N America (Afra/Suez) Med to N America (Suez/Afra)

Med to Europe (Afra) W Africa to N America (Suez)

Number of Reported Spot Fixtures

Changes in Reported Spot Fixtures on Selected Routes 2010 YTD to 2014 YTD

EC S America to N America (Suez)

service and quality are within your reach

THE MARSHALL ISLANDS REGISTRY

International Registries, Inc.in affiliation with the Marshall Islands Maritime & Corporate Administrators

tel: +30 210 4293 223 | [email protected] | www.register-iri.com

The shipowner’s preferred choice

exclusive insights

Global network

World-respected writers

Gadgets

Acerbic comment

Heavyweight financial commentary

Why bother with an executive when you can

hear from the CEO?

www.maritime-ceo.com

www.maritime-ceo.com

Issue FOuR 2014 15

reGULar

The formation of a new alliance landscape with 2M, Ocean3, G6 and CKYHE has resulted

in much attention being levied on the mega vessels these alliances will be deploying and, crucially, the fuel savings brought about by these ships.

Whilst it is undeniably true that the large vessels, deployed properly, will convey fuel savings, another important aspect has received almost no attention. This is the aspect of savings resulting from a broader network, irrespective of vessel size.

A single carrier can only cover a limited number of port pairs directly, and is forced to use feeder vessels to get cargo to other ports. Two carriers joining forces can re-arrange their joint network in such a way to have more direct port coverage, and hence less feedering. Intuitively it is clear that even if these two carriers main-tain exactly the same fleet as before they joined forces, and do not change the speed of the vessels, they will obtain cost savings due to the new network – they will save on feeder costs as well as on transhipment costs.

From this perspective, it is clear that, as an example, the 2M alliance will result in network sav-ings for Maersk Line and MSC. It is, however, difficult to accurately measure the value of the network effect for the four main east-west alliances, as they do not disclose sufficient data as to their actual volume on a port-port level.

Instead, SeaIntel Maritime Analysis has published the results from a model simulating the

effect of such alliances. In the model, all vessel sizes remain the same, hence purely measuring the network effect. It simulates the head haul Asia-Europe trade, using 10 major and 10 minor ports in both Asia and Europe. Minor ports are never called directly. Furthermore, the network is designed for each service to have direct calls at four ports in both Asia and Europe.

If two carriers, each having only one service, join in an alliance, the network effect in itself can result in a cost saving of 6%, and as seen in the graph, the more carriers who join the alliance, the larger the pure network savings. In the extreme, eight carri-ers can join in an alliance, achieving a network cost saving of 29% com-pared to each carrier operating on their own.

For the current alliance changes this means that particularly MSC stands to gain from network savings, as its direct port coverage will increase significantly. In the case of Ocean3, we are looking at an alliance, which not only will get a

broader network, but is poised to take delivery of a range of very large vessels. The unit costs for the Ocean3 carriers thus stand to decline drasti-cally in the coming couple of years as they reap the benefits of both these effects.

In the case of G6 and CKYHE, it is mainly Evergreen, which stands to gain from access to a wider network, whilst the effect on the other CKYH partners is quite small, and G6 pres-ently does not seem poised to gain additional network benefits. ●

Network valueSeaIntel’s Lars Jensen shows the savings carriers can make from teaming up

Markets Containers

“ If two carriers, each having only one service, join in an alliance, the network effect can result in a cost saving of 6%”

number of services total saving12 6%3 11%4 17%5 21%6 24%7 26%8 29%

0%

5%

10%

15%

20%

25%

30%

35%

1 2 3 4 5 6 7 8

Number of carriers in an alliance -‐ vessel size unchanged

Cost saving compared to operaDng alone

VESSEL OWNING & CHARTERING MODERN SOPHISTICATED FLEET

MDPL www.marinedelivery.com.sg

Issue FOuR 2014 17

reGULar

It’s the price of oil, stupid.” So wrote Matt Symonds in the early '90s when we saw the price of oil

drop to the low teens and the impact it had on the oilfield service busi-ness, which includes rigs and boats.

I listened to a quite eminent Norwegian banker at a conference in Oslo in September this year advising us that up until the end of 2017 the price of oil would float at a price per barrel of between $102 and $107…who would have seen the crash in price we now see.

With OPEC (driven by Saudi Arabia) playing a very clever game with the US shale oil producers and deciding not to cut production we could see a likely floor level of $60-70 per barrel for Brent crude and $80 in the long term. The short-term weak oil prices should flush out high-cost oil production – the aforementioned US shale oil – and thus hopefully return the oil market to an even demand-supply keel.

With OPEC maintaining its pro-duction ceiling of 30m barrels of oil per day, Ali Al-Naimi, Saudi Arabia’s oil minister, stated after the recent OPEC meeting in Vienna, “Oil prices have fallen more than 35% from its peak of $115 per barrel in June 2014.”

Of immediate impact to the offshore marine sector is the high-end ultra deepwater drillship market where the capital spend will be at significant risk. The cost of oil production has increased consid-erably since the last oil boom in 2003-09 driven by increased opex (people) and asset pricing (bigger, better, deeper and also driven by extravagance).

Infield Systems report

breakeven costs – using Brent as a benchmark – for offshore oilfield developments range from $20 a barrel to $80. At the bottom of the cost spectrum, the breakeven costs for shallow-medium water depth projects are $20-30 in the Caspian Sea and $30-40 in Southeast Asia. In comparison, deepwater develop-ments are considerably higher with ultra deepwater breakeven costs of $40-50 for Brazil Pre-Salt, $50-60 for US Gulf and $60-70 for West Africa. The most expensive developments are those in the Arctic region, which have a breakeven cost of $70-80 per barrel. These costs are in line with the cost of onshore US shale oil (fracking), which is now under considerable threat.

The drilling sector is already softening amid overcapacity. Before the most recent fall in oil prices, rig utilisation and day rates for deepwa-ter rigs were already on a downtrend due to impending overcapacity from a large orderbook.

At the start of 2014, jack-up, semi and drillship orderbooks were 26%, 25% and 77% of their respective fleets. IHS Cera Petrodata forecasts the global drilling jack-up rig fleet to increase from 543 units by the end of 2014 to 602 units by the end of 2015 with projected utilisation to fall from 83% to 77%. As for the semi-sub market, the total fleet is expected to increase from 222 units by the end of 2014 to 231 units by the end of 2015 with utilisation falling from 78% to 73%. The drillship fleet is forecast to expand from 120 units

by the end of 2014 to 139 by the end of 2015, with utilisation falling mar-ginally from 82% to 81%.

Traditionally, there is a cor-relation between oil prices and rig demand (“It’s the price of oil, stupid”), as witnessed by the last oil cycle (2003-09), the oil price collapse in 2009 and the subsequent rebound in 2010.

Lower oil prices will continue to hold down rig utilisation even fur-ther, and this will hopefully dampen further orders to shipyards, some-thing that is already apparent. After stellar rig orders in 2011-13, less rig orders were placed in 2014. So far, this year, we have seen total orders for 27 drilling rigs compared to 104 units in 2013.

I believe we will also see some surprising consolidation in the O&G marine space. In the service sector we have already seen Halliburton take out Baker Hughes, Technip romancing CGG and the world’s major shipbrokerage houses melting into each other. There will be more to come, wholesale I believe. ●

Markets offshore

Shock oil price decline leaves many in the lurchUtilisation rates are plummeting as are newbuild orders, reports Mike Meade from M3 Marine

“

Bringing maritime media out of the dark ages

Does your Chinese marketing for 2015 make the cut? www.sinoshipnews.com

Sinoship 2014.indd 1 27/1/14 11:59 pm

Issue FOuR 2014 19

Bringing maritime media out of the dark ages

Does your Chinese marketing for 2015 make the cut? www.sinoshipnews.com

Sinoship 2014.indd 1 27/1/14 11:59 pm

Markets finanCe

So here we are at the end of another tumultuous year for shipping, one finishing with

much talk of consolidation across every segment of shipping from brok-ing to owning.

Yet I have my doubts about this rush to coin an era of consolidation. If you look at the uptick in rates on the tanker markets, for instance, nothing has changed from a consol-idation point of view. Sure, there is commercial consolidation such as what Navig8 has pursued but not much ownership consolidation.

While tanker rates have rallied, I remain worried about prospects for dry bulk although I am not as bearish as some – talk of no decent markets for dry bulk through to the end of the decade is far too pessimistic. Dry bulk will have spikes especially for bigger ships but there is enormous oversupply across the board. Take handymaxes or supramaxes as an example. If rates for these work-horses of the bulker trades were to go up by $1,000 to $1,500 a day, then all of a sudden you are going to see at least 20% overcapacity if these ships decide to ditch slow steaming to maximise earnings during an uptick.

I am constantly asked what is the best way to raise cash in today’s market, here are my thoughts. So long as you have a good balance

sheet and a decent track record, commercial banking is coming back in a big way that perhaps has not been fully understood by shipowners around the world yet.

In my mind there is also still an interesting market for bonds espe-cially for those tapping markets in Oslo and New York.

Likewise, private equity firms are still working with shipowners who are established and have good credentials.

I was particularly interested to see the results of the latest online survey carried by Maritime CEO, results of which can be found on the back page. What piqued my interest most was the one asking readers what sector they’d invest in if they had $100m to spend. I’m told more than 700 people voted which shows just how many would-be shipowners there are out there!

So how would I spend my imag-inary $100m? Like the readers, my first pick would be in LNG, but spe-cifically if I could drill down a bit, it would be in regasification, something that offers a fantastic return on your money, just ask the likes of Höegh and Golar.

Given the underlying strength in LNG and gas, my second pick would be LPG, which is also clearly a high growth area. I’d also think about

MR tankers and lastly with my spare change I’d bet on some smaller mod-ern containerships for local trades, something I have seen give very solid returns in recent years.

Finally, at the behest of the editor, I’ve been asked to comment on what impact lower oil prices will have in shipping. This is simple, an old maxim I have always heard in this industry – there are two good things for shipping; one is war and the other is falling oil prices, in that order.

2015 will not be like 2014. ●

“ There are two good things for shipping; one is war and the other is falling oil prices, in that order”

Overcapacity concernsDagfinn Lunde’s take on the markets, including the odd glimmer of hope

maritimeceo20

eXeCUtiVe deBate

Shipping is years behind its automotive and airline cous-ins in harnessing information

technology and urgent investment is required, especially as the pool of well qualified seafarers gets ever tighter, according to one of the industry’s most famous analysts.

Speaking at a breakfast in Hong Kong organised by our sister title, SinoShip, and sponsored by Rightship and DVB Bank, Dr Martin Stopford, president of Clarkson Research Services, went so far as to suggest shipping needs to mirror the self-driving Google Car (pictured).

“We are so old fashioned we don't even realise just how far behind we are with the latest technology,” Stopford said.

The lack of qualified crew is one of the most pressing issues facing the industry, he noted.

“You’ve got 58,000 deepsea ships, that’s 58,000 qualified chief engi-neers, it’s tough to get them today and there’s a feeling that in 10 years time you are on a real loser there,” he said.

What he proposed is to look at how owners can “deskill” onboard jobs.

“If you can lay your hands on some expertise it is much better to have it in the office and be doing the difficult, technical stuff from the office, not on the ship,” he said, noting that this is exactly what the car industry has done.

“Take your BMW into the

garage,” he said, “and they don't get out a spanner, they plug it into the computer, download all the infor-mation and the computer tells them what circuit board to plug in.”

Stopford hit out at owners for failing to invest properly in technical expertise.

“I think there is a lot to be done on the technical side in rebuilding the expertise which in 50 years of cutting costs most companies have taken out,” he said, pointing out just how few shipping firms have technical directors these days.

As far as the navigation of the ship goes, Stopford said shipping should look at the advent of the Google Car, which has only had two accidents and they were both when people were driving them. The 64 lasers on top of the car don't make mistakes, he stressed.

In a rallying call to owners, Stopford urged: “It’s time for a reap-praisal about what our strategy is in shipping and time to think whether that $180bn of investments last year in new ships needs to be matched by perhaps a much smaller but signif-icant investment in increasing the industry’s technical capability to use this great new revolution we have, information technology.”

Commenting on Stopford’s thoughts, Simon Doughty, ceo of Wallem Group, says any serious push for automation will come down to supply and demand and perhaps a unified shipping industry to tackle

the innovation.For unmanned flight, much of

the development has been due to innovations from the world’s defence forces investing in drone technology, Doughty notes. “There is a huge step from unmanned military aircraft, or perhaps commercial cargo planes, to passenger flights – how would you feel boarding a flight and knowing that nobody was upfront should it be required in the case of an emergency,” he says.

The airplane and car industries have proven anything is possible, Doughty reckons, with a bit of pull from demand and creative thinkers leading the way. “Shipping can do the same in its own way,” he asserts. “Technology is an enabler. We should use it to enable a whole new way of moving goods by sea.”

Richard Sadler, ceo of British classification society, Lloyd's Register, bemoans shipping’s conservative nature, which has, he agrees with Stopford, left it way behind other modes of transport.

“If we can use autonomy with all the risks and uncertainties of taking a car around a town, then surely we can use the technology to drive ships,” Sadler says, adding, “Not nec-essarily to berth them, but certainly from outer buoy to outer buoy across the ocean.”

Quite so, concurs Martin Kits van Heyningen, ceo and chairman of communications firm KVH Industries. “Compared to piloting an airliner or navigating an autono-mous vehicle on crowded city streets, navigating a vessel across oceans or through busy channels is trivial,” he says, claiming the technology to

Will shipping ever catch up with its automotive and airline counterparts in terms of harnessing information technology? Top names deliberate

Would a Google Ship be beta?

“ We are so old fashioned we don't even realise just how far behind we are with the latest technology”

Issue FOuR 2014 21

In profIle

do this exists today. “Autonomous ships would dramatically reduce the number of accidents and save fuel,” he says.

One man well placed to com-ment on the issues raised by Stopford is Mika Vehviläinen, who prior to taking up his current role as presi-dent of Finnish equipment supplier, Cargotec, was the head of Finnair. He admits shipping is well behind airlines. He does, however, see less and less need for seafarers onboard ships going forward. “The role of the crew in ships will be more focused on maintenance and monitoring of the operations,” he says.

The problem, according to Nicholas Fisher, ceo of Masterbulk, is that it is still possible to trade profita-bly with the minimum technological advances, if any. Nevertheless, he is adamant unmanned ships are not a matter of if, but when.

It won’t be for a while, argues Sergey Popravko, managing director of Unicom Management Services, at least two to three decades.

“There would be so many issues that would need to be legislated before such a huge change such as legal, union issues, safety and secu-rity – an unmanned ship may well become an easy target for terrorists and pirates,” Popravko warns.

Rahul Choudhuri from Veritas Petroleum Services is not convinced unmanned ships will happen in our lifetime or ever.

“Shipping economics tend to distort the deep value of seaman-ship knowledge,” he says, adding: “Technology has numbed seafarers to believe that the ship can run on its

own. This is a fallacy and significant non-compliance is a result.”

Caroline Huot, managing direc-tor of lube supplier Unimarine, is of a similar opinion pointing out that leg-islators have mandated Google Cars have a wheel and a brake, acknowl-edging the possible need for human intervention and initiative.

Moreover, if there’s a problem with a Google Car, it simply parks on the side of the road and waits for assistance, something, she says, that will definitely not be the case in the middle of the ocean.

The automation debate contin-ues on our back page where more than two thirds of our readers polled appear sceptical about unmanned ships. ●

“ Autonomous ships would dramatically reduce the number of accidents and save fuel”

eXeCUtiVe deBate

maritimeceo22

In profIle

In profile this issueMaritime CEO’s 17 correspondents around the world have been in touch with many of the world’s top shipowners. Highlights are carried over the next 17 pages

Gregorio Gavarone

p.34

Emanuele Grimaldi

p.31

George Gourdomichalis

p.36

Spyros Capralos

p.37

Paolo Cagnoni

p.39

Issue FOuR 2014 23

In profIle

Alex Yeo

p.32

Tim Blackburn

p.37

Amandeep Singh

p.32

Fred Cheng

p.38

Helmut Sohmen

p.27

Tim Huxley

p.35

Bharat Sheth

p.30

Arun Gupta

p.29

Rolf Habben Jansen

p.24

Datuk Adrian Henry D’Silva

p.38

Stig Remøy

p.33

maritimeceo24

In profIle

As is common between neighbours, the Dutch and the Germans have quite

some rivalry. Similarly, those in freight forwarding tend to be wary of their shipping counterparts and vice versa. So it came as a surprise when Rolf Habben Jansen, a Rotterdam native and high flyer in the freight forwarding world, was nominated to take over from Michael Behrendt this year as the ceo of Hamburg’s premier shipping firm, Hapag-Lloyd. The boxline, steeped in tradition, but mired in red ink, opened its grand doors at the venerable Ballin House on Hamburg’s Inner Alster Lake to its first ever non-German ceo this July.

Habben Jansen, 48, has mam-moth tasks ahead of him, integrating a South American line, changing Hapag-Lloyd’s corporate structure, getting it back into the black and then possibly pushing ahead with an IPO.

On December 3, the final approval for the merger between Hapag-Lloyd and Chile’s Compañía Sud Americana de Vapores (CSAV) came through from Beijing, paving the way for integration to start in

earnest, something Habben Jansen is upbeat about despite the notoriously difficult history of merging shipping companies and the very different trades the two lines have focused on to date.

“Integration won’t take too long,” he says, telling Maritime CEO that Hapag-Lloyd systems will be rolled out across all CSAV operations soon. Hamburg will be the headquarters of the enlarged company while CSAV’s headquarters in Valparaiso will become the head of South American operations, the German line decid-ing to split the Americas into two distinct regions for the first time.

Hapag-Lloyd, of course, knows all about mergers. Hapag-Lloyd was formed in 1970 following the merger of Hamburg-Amerikanische Packetfahrt-Actien-Gesellschaft and North German Lloyd. Hapag’s own history dates back to 1847.

Habben Jansen points out in his characteristically animated way that Hapag-Lloyd’s takeover of CP Ships nine years ago was “one of shipping’s best integrations”.

Habben Jansen's own career has been one potted with names of the past that have since merged. He started out with Dutch shipping company Royal Nedlloyd, which became P&O Nedlloyd and then part of Maersk Line. He worked at the Swiss logistics firm Danzas, before the latter merged with DHL. In 2009, he moved to become ceo of Damco, a logistics giant controlled

by AP Moller-Maersk. In a neat twist, Damco’s origins can be traced back to Royal Nedlloyd.

Admitting some redundancies will be inevitable with the South American merger, Habben Jansen then cautions that both Hapag-Lloyd and CSAV had a very restrictive hiring policy for a number of years during the downturn. “There will be plenty of openings,” he maintains. The merger should bring savings of $300m, he reckons.

The word ‘consolidation’ has become one of the most used in ship-ping as 2014 comes to a close with a host of high profile mergers – from brokers to owners. Habben Jansen is not averse to bolstering the Hapag-Lloyd brand, but not for any price. “We would like to play an active role in any further consolidation,” he says, “but only if the right opportu-nity comes by. We can be successful without it.”

The line’s on/off courting of Hamburg Süd in the past couple of years appears to be over, with Habben Jansen’s predecessor, Behrendt, now chairman, recently dismissing any further plays for the fellow Hamburg line.

The merged company of Hapag-Lloyd and CSAV will have around 200 vessels with a total capacity of approximately 1m teu, transporting some 7.5m teu every year, making it the fourth largest boxline in the world.

While many of his peers remain

“ If I were a betting man, I’d expect rates next year to be somewhat higher”

Hapag-Lloyd is awash in red ink, faces a tricky merger with CSAV, and still might push for an IPO next year. Hamburg’s top line has employed its first non-German ceo to push through massive changes

Dutch courage

Hapag-Lloyd

Formed in 1970 following the merger of Hamburg-Amerikanische Packetfahrt-Actien-Gesellschaft and North German Lloyd, Hapag-Lloyd has just completed a merger with Chile’s CSAV. The company

now has around 200 vessels with a total capacity of 1m teu, making it the

fourth largest boxline in the world.

Spot on

Issue FOuR 2014 25

In profIle

wary of rates prospects for 2015, Habben Jansen is hopeful.

“It is important to look not just at the number of ships, but to look at ports, congestion, inland issues, the costs of low sulphur, and so on,” he says, adding: “If I were a betting man, I’d expect rates next year to be somewhat higher.” Volatility will remain however.

Any rate increase will be gladly welcomed at Ballin House. Hapag-Lloyd’s third quarter net loss stood at $63m, hard hit by increasing interest costs. Its full year loss last year was $134.3m, following on from significant

losses for the two years prior to that. Habben Jansen is determined

to reverse this, and is going about a serious reshuffle of how the venerable line goes about its business, the ceo talking of making a flatter organi-sational structure, trimming costs wherever possible and optimising sales. He will not be drawn on when a possible IPO might take place post-CSAV integration, but the smart money is now on early 2016. One way or another this Dutch logistics expert has his work cut out getting one of Germany’s blue ribbon names back on track. ●

CoVer storY

“The whole procurement

process around bunkering roughly matches the same procedure most people use to buy a new pair of trousers”— Colin de Vries, founder,

Oiloffer.com

Issue FOuR 2014 27

On November 20 one of the best-known names in shipping called it a day. Fast

approaching his 75th birthday, Dr Helmut Sohmen announced his retirement as chairman of BW Group and BW Offshore, having served the group for 44 years with 28 years as chairman.

Sohmen’s son, Andreas, has taken over as chairman.

On the day of his departure, Sohmen commented: “It has been a privilege to oversee BW’s growth from a tanker and dry bulk business to a significant maritime oil and gas player involved in LNG, LPG, crude, products, chemicals and FPSOs. Andreas has been with BW for the past 15 years and I am confident that under his leadership, the company will continue to grow.”

Sohmen ran the shipowning giant after his father-in-law, Sir Y K Pao, had relinquished his role as founder of World-Wide Shipping. Pao had made World-Wide into one of the top names in shipping, but by the 1980s it was facing hard times. Under Sohmen, World-Wide bounced back, buying out Norway’s Bergesen,

rebranding as BW, and having a fleet larger than even in the heyday of the World-Wide founder.

Now, with more time on his hands, Sohmen is able to reflect on how shipping has shifted in his ten-ure in a rare and exclusive interview with Maritime CEO.

The main changes, he says, in shipping during the past four decades have been the shift from a very private – “at times considered even secretive” – business to one that has become very public. This, Sohmen puts down to being a natu-ral consequence of the development of financial markets and the heavier engagement in shipping by short-term players.

A second development, he notes, has been the increasing government involvement in all aspects of the operations of shipowners, prompted by greater scrutiny of business in general, the emergence of new safety, environmental, and liability issues, as well as the closer attention paid to questions of taxation, anti-trust, manpower protection, or the ade-quacy of insurance cover.

“More sectors of shipping have become commoditised,” he says.

Arguably one of the biggest

changes in his tenure at the top has not been with shipowners, but the people who supply the ships.

“What has changed significantly is world shipbuilding capacity and the resultant threat of permanent overtonnage,” Sohmen warns.

Looking ahead, Sohmen can see plenty of potential changes such as resource production techniques and locations, the cost of fuel, environ-mental considerations, direction of trade flows, larger canals. However, all of these issues have not yet settled down and might throw up surprises, he warns.

“Owners should not make too many assumptions or believe in linear projections based on historic precedent,” is the Austrian national’s sage advice.

As he points out, few people would have guessed only a few years ago the success of fracking, the polit-ical decisions to terminate nuclear power generation in major industri-alised countries, or the incredible Chinese economic success story.

Wise words from one of the most cerebral shipowners around. ●

BW Group

Operates a fleet of nearly 100 owned, part-owned or controlled vessels including

tankers, LNG and LPG carriers, and FPSOs. World-Wide, founded in 1955 in Hong Kong by Sir Y.K. Pao, became the world’s largest

shipowner by 1979. Helmut Sohmen became chairman in 1986 and took over Norway’s

Bergesen in 2003 and rebranded firm as BW. Son Andreas Sohmen-

Pao now chairman.

Spot on

How shipping has changedDr Helmut Sohmen has just stepped down after 44 years at BW. Here, he muses how the industry has changed over the decades

in profiLe

“Not everyone in their mid-50s gets

a chance to start a new career”— Richard Hext, non-exec

chairman of Univan Ship Management and now group chief executive at the University of Central Lancashire

PTR Holland is the world’s largest producer of APPROVED Pilot & Embarkation ladders - always according to the latest regulations.

Production plants in Rotterdam (NL), Singapore (Singapore), Newcastle (UK) and Qingdao (Peoples republic of China).

If you are elsewhere, airfreight goods can be delivered within 48 hours worldwide.

Complies: MED-ISO799:2004 & MED-ISO5489:2008

PTR Holland also stock a wide variety of marine & offshore products which can be found at our website, or simply give us a call or send us a fax.

Suction pad and magnets• For easy and safe pilot transfer

Pilot and embarkation ladders• M.E.D. and CE approved

PTR Holland is an ISO 9001 certifi ed company

Helicopter nets• Comply with CAP 437

PTR HOLLAND SINGAPORE PTE LTD. 16 Fan Yoong road 629793 Singapore

[email protected]: +65 62 65 65 95 Fax: +65 62 65 65 92

Fast delivery worldwide!PTR Holland is the main

European distribution centre for BPC.

www.ptrholland.com

Issue FOuR 2014 29

In early 2014, India’s Shipping Ministry surprised many by appointing a marine engineer as

chairman and managing director of the country’s largest shipowner, Shipping Corporation of India (SCI), which had been operating with an acting head for over a year.

Perhaps it was Arun Kumar Gupta’s 37-year long service with the national carrier that tilted the scales in his favour for a post normally reserved for those with a background in administrative and financial management. Or perhaps it was the SCI careerist’s performance over the previous three years as director – technical and offshore services that convinced the ministry about his credentials.

“When I joined SCI, I never expected to reach the chairman’s level,” says Gupta, 58, frankly. “I guess it was just a question of being in the right place at the right time.”

Gupta has completed a two-year shipmanagement course that teaches all commercial aspects of shipping.

“In any case,” he muses, “what does a good top manager require? Logic and common sense; it is not rocket science.”

Nevertheless, Gupta has been

placed in the hot seat at a time when SCI is going through the most turbulent period in its history. Only twice in its 52-year history has the corporation made losses – in the mid-1980s when there was a world-wide shipping recession, and over the past three consecutive years.

Gupta has exactly two years in which to extricate the national carrier from the tough situation in which it now finds itself. There is no question of an extension beyond the age of 60 in a government job.

“I have a lot to prove in a very short time,” he admits, soberly. “In the main, we have to conserve our cash.”

Looking back he notes that SCI bought ships at high prices, but he cautions no one could have pre-dicted the severity and length of the current shipping downturn.

SCI is saddled with an immense burden of debt that has to be serviced. Although loans were taken between 2010 and 2012 at an attractive rate, there is currently a major cash crunch and a substantial requirement of working capital.

“We are trying to curtail our losses, and exiting from loss-mak-ing joint ventures, like Irano Hind and SCI Forbes,” says Gupta. “We are looking to restructure the liner division, and we will focus on LNG. In addition to the LNG ships we are running for (state-run) Petronet, we are looking to operate three home-built LNG carriers for (another state-owned) GAIL India Ltd.”

Gupta predicts that even the medium-term future for shipping does not appear rosy. He feels that the current level could be main-tained next year, but foresees another major storm coming in 2016

and 2017 with far too many vessels ordered recently.

The SCI chief is adamant that the corporation will not be ordering any vessels in the foreseeable future. Its focus in the recent past has been on energy transportation, but the recent finds of shale gas in the US has turned that country into a net exporter.

“Based on the feeling that India would become a refining hub with export-oriented refineries, we had invested in tankers, and are now stuck with too many of them,” says Gupta. “Earlier, we thought we had a diversified fleet; and yet, we have taken a hit.

“We need to go into shipping-re-lated activities – logistics, terminal management, inland container depots, container freight stations. I am not advocating going into some totally unknown field. We will look at ventures which will give us returns in the smallest gestation period. I have no appetite for taking risk at present.” ●

Shipping

Corporation of IndiaIndia’s largest shipping line, state-run SCI was founded in 1961. Can claim

to be the only line in the nation operating in all the main shipping

sectors.

Spot on

Mammoth taskArun Gupta admits he was surprised when getting the nod to become chairman of India’s top shipping line. The challenges ahead are daunting, but do not faze this engineer

in profiLe

maritimeceo30

In profIle

During the course of the last six years that has seen the shipping industry pass

through one of the worst recessions in living memory, India’s largest private sector shipowner, Great Eastern Shipping, has regularly churned out annual reports awash in black ink. There has been a dimi-nution of profit, year-on-year, yes; a loss in any year, no.

“One major factor in our con-tinued financial health was that we were never excessively leveraged. We never were in a position where we expanded beyond our means,” says Bharat Sheth, Great Eastern’s soft-spoken vice-chairman and man-aging director.

“A second reason was that we very swiftly divested a considerable chunk of our asset base. We had got rid of assets worth roughly $550-600m across the board by 2008. We sold crude oil tankers, dry bulk ves-sels and some offshore vessels, and reduced our capital commitment significantly.”

Sheth claims the company also had in the bag some good charters that had been fixed in better times – in 2007-08, just before the global financial meltdown.

“In addition, we approached some of the shipyards where we had placed newbuilding orders; and, at a price, cancelled those orders,” he says, adding that these quick “small haircuts” helped keep the company afloat.

Over the last couple of years, Great Eastern has gone back to the shipyards, and placed orders worth $400m, which will add 450,000 dwt to the company’s 28-strong fleet.

Considering the size of its balance sheet, Sheth terms the com-pany’s ordering as moderate. Around $200m will be used for six vessels, comprising five 81,000 dwt kamsar-max bulk carriers and one 50,000 dwt medium-range (MR) tanker. The remaining $200m will be spent on a newbuilding jack-up rig, ordered in 2012, and scheduled for delivery in February 2015.

A unique feature of this con-servative outfit is the fact that it has always been conscious of the valua-tion of its assets. If one looks at the five dry bulk vessels it has ordered, it can be seen that its entry point was attractive.

“At those rates, our downside risk was pretty limited,” says Sheth. “Nobody can really anticipate the

direction in which the market will move, so we concentrate on entering any sector where we will get trading returns, and also where we think the newbuilding cost of a similar asset can only go up in the future.”

Great Eastern’s offshore sub-sidiary Greatship – formed in 2006, shortly after Great Offshore, run by cousin Vijay Sheth, was spun off from the parent – today has 21 vessels in the water.

It is the performance of the subsidiary that has contributed heavily to the health of the parent’s balance sheet – to the extent of 70% of the consolidated profit. 2012-13 may have been the best year in Greatship’s short history, with over 100% improvement in profit over the previous year, but even 2013-14 wit-nessed a compound growth of 70% in net profit, compared to 2012-13.

“Great Eastern pulled Rs15-17bn ($250-280m) out of shipping in 2006, and invested it in oil and gas; and it is only fair that we have reaped the returns, to the extent of 25-28% per annum,” Sheth reveals.

For the foreseeable future, Sheth expects average earnings from shipping over a 12-month period to move in a narrow band with a 10-15% variance. Earnings from oil and gas, after peaking in 2007, are expected to remain either where they are now, or soften slightly.

“Eventually, this game is about how sensibly you allocate your capital,” he says. “This year, we have seen dry bulk values drop about 25%, product tankers sink 15-20%. From where we are positioned today, we would welcome a softening of the market, because we could then invest at the lower end of the cycle.”●

‘This game is about how sensibly you allocate capital’Great Eastern, India’s largest private owner, has timed its market forays well

Great Eastern

India’s largest private shipowner has a 28-strong fleet made up of bulkers and tankers and latterly offshore assets via subsidiary

Greatship.

Spot on

Issue FOuR 2014 31

In profIle

The 0.1% sulphur emissions control area rules that will apply in the North Sea, Baltic

and English Channel from next January are set to split the shortsea shipping industry into two classes: operators that can still compete, and those that will struggle. That’s the opinion of Emanuele Grimaldi, ceo together with his brother, Gianluca, of the Naples-based Grimaldi Group. He is absolutely sure that winners will emerge from these volatile and uncertain times thanks also to the new emission rules.

“Finnlines and Minoan Lines, our group companies operating respectively in the Baltic and East Mediterranean region, are laying down the benchmark for their mar-kets,” the Italian shipowner says.

The deepsea routes in the Atlantic Ocean are covered by Atlantic Container Line’s vessels while the Euro Med Network linking Northern Europe, West Africa and South America are operated by Grimaldi Lines conro ships.

The group has grown dramati-cally in recent years from 85 ships to 103 with another set for delivery. The average age of the fleet is a youthful 11 years old.

On September 1, the group took delivery of the Grande Lagos, the first in a series of six multipurpose vessels ordered at Hyundai Mipo. With a deadweight of 31,600 tonnes and a length of 236 m, the Grande Lagos has a capacity of 5,700 linear metres and 1,800 teu. Grimaldi Group next year will also receive all of the five roro ships under construc-tion for Atlantic Container Line at Shanghai’s Hudong-Zhonghua ship-yard. These newbuildings will have a capacity of 3,800 teu, plus 764 roro units and 1,307 cars.

“Beyond the new investment

plans, this year we are investing EUR100m in green technologies such as hydrodynamic coatings, re-blading and scrubbers for the Finnlines fleet deployed in the Baltic Sea,” says Grimaldi, who is also the president of the Italian Shipowners Confederation (Confitarma). “When combined with slow steaming and propulsion systems retrofits, we have been able to reduce fuel consumption every year since 2008 by at least 10%.” This process – Grimaldi explains – is far from over since Finnlines is now investing another EUR50m in emissions scrubbers for 14 of its 20 operated ships.

Given solid financial results – a EUR179m net profit last year – the Neapolitan shipping company is eventually considering new acquisitions.

“Nowadays,” he concludes, “my priority is the acquisition of Polish ferry company Polferries and the sale or acquisition of Hellenic Seaways, the Greek based company where our main shareholder is based. For the time being I prefer not to talk about

the Italian company Tirrenia and the Spanish Trasmediterranea to avoid raising their share prices.”

In Greece the crisis is in many ways far from over where overton-nage and a slump in both cargo and passengers volumes have plunged operations into the red, Grimaldi reports. While Minoan Lines reduced the number of ships deployed on the market, other companies such as Attica, Anek and Nel Lines have refused to consolidate and are still stubbornly clinging on operating ships that are up to 40 years old, he moans. ●

ECA winners and losersThe Grimaldi Group, one of the most famous names in Italian shipping, is well prepared for impending new environmental legislation

Grimaldi

Founded in 1947, Naples-based Grimaldi Group operates roros, car carriers and ferries. Controls

a number of well known firms including Atlantic Container Line, Finnlines and Minoan

Lines.

Spot on

maritimeceo32

In profIle

It has been a very busy year for Singapore offshore operator Swissco Holdings with the

acquisition of rig operator Scott and English Energy for $218m. The deal means Swissco now has nine jack-up rigs to go with its 34 OSVs. There

are another three more OSVs set to deliver soon too.

Alex Yeo, the company’s ceo, explains the rationale for the rig company buy.

“There are synergies that could be achieved with the acquisition,” he says. The group has since captured various opportunities in the offshore oil and gas industry as it penetrates the upstream market across different geographical regions.

Going forward the group will look to continue to increase its fleet size and extend its reach globally. Potential areas of deployment include the Middle East, Yeo says, and should opportunities arise else-where, they will definitely be taken into consideration, he adds.

On the markets, Yeo concedes, “Analysts and industry watchers have cautioned that the sector could face challenges with overcapacity and the falling oil price.”

Typically, major oil producers would look to cut back on spending, which may exert pressure on the deepwater segment, as it is more costly, he points out. Fortunately for Swissco, its drilling and service assets are for shallow waters and the majority of them have firm long-term contracts with a national oil com-pany as its end client. ●

Rig synergies

OSV VETERAN AMANDEEP Singh is convinced the downturn has been beneficial for quality owners, as it has by default initiated the process of forcing lots of old tonnage out of the market.

The managing director and ceo of Marine Delivery (MDPL), a seven-year-old Singapore offshore firm, notes that many oil companies across the world have now started to demand for quality specifications and newer vessels as they have the upper hand.

“This is helping in phasing out the older tonnage,” Singh says, “and we can already see a lot of owners who have been holding on to them for long are now gradually moving to scrap them.”

He reckons this will have a gradual positive impact on the OSV markets.

Given this changed paradigm

Singh warns: “All owners will have to be cautious on the specification and age of their fleet for survival.”

Singh, a master mariner with some 24 years experience in ship-ping, worked for a number of offshore support firms when he came ashore before founding Marine Delivery in 2007. He also serves on the board of CS Offshore.

Marine Delivery owns and charters a very diverse set of offshore

support vessels.On plans to grow, Singh says

that the disadvantage of being head-quartered in Singapore is that the country is not an oil-bearing country and as an offshore company Marine Delivery does not enjoy any cabotage rights compared to a number of other competitors.

“We need to step out and estab-lish various new establishments in such countries with local partners,” he says. ●

Benefits of a downturn

Swissco’s purchase of a rig operator is opening up new avenues

Swissco

Predominantly an OSV opera-tor, Swissco also has a ship repair

yard and is now in the rig business following acquisition of Scott and

English Energy this year.

Marine Delivery

Diverse seven-year-old OSV operator based in Singapore.

Significant expansion underway with eight newbuilds set to

deliver.

Spot on

Spot on

Issue FOuR 2014 33

In profIle

Stig Remøy grew up on Remøy, an island in Herøy, a municipal-ity with a long history of fishing.

His father and grandfather were fish-ing masters, and it was natural for him to choose the same profession.

A Master Mariner, Remøy is now keen to share his knowledge with the next generation of seafarers. As well as fishing, Remøy is a significant name in the offshore support vessel sector via his 1996-founded Olympic Shipping. Today, Olympic has close to 1,000 employees, operating 24 vessels

worldwide. Within the maritime cluster in

Møre in the northwest of Norway, a handful of shipowners have joined hands in building a simulation centre. The owners, led by Remøy, are aiming to make this outpost a maritime knowledge hub.

“We are both competitors and collaborators working together, aiming at sharing technology. We all see the marketing effect of promot-ing us as a leading maritime centre,” says Remøy, explaining the rationale for the combined NOK450m ($65m) outlay.

The simulation centre is located in Fosnavåg where local owners con-trol a fleet serving the oil industry valued at NOK40bn. The area is also well served by a number of yards. Leading French offshore player Bourbon has also chosen to set up its Norwegian headquarters here.

“It’s all about the people now if one wants to be among the best, one needs to be innovative, smarter

and greener,” says Remøy who has a traditional maritime background but is well aware that the future lies with ever-increasing automation of operations. He sees training from computer-based technology as the future.

Remøy has seen by his own experiences the need to continually update the skills of his crew. Four vessels from Herøy were working in the Gulf of Mexico when BP’s Macondo accident occurred result-ing in widespread environmental damage and media attention. He remembered he could sit on his com-puter in Fosnavåg and watch oil flow out from the pipeline with a camera on his remote operated vehicle, just days after the accident. Incidents of this scale prove the need for simula-tors, he stresses. ●

Shared knowhow Owners in the northwest of Norway are clubbing together to develop training techniques

Olympic Group

Norwegian outfit founded in 1996 involved in fishing and

offshore support vessels.

Spot on

What mass flow meters will bringSINGAPOREAN LIM TECK Cheng is the ceo of the world’s largest bunker vessel operator, Hong Lam Marine.

Singapore is the world’s top bunkering hub and is taking the lead with the introduction of mass flow meters to try to ease owners’ qualms about the right amounts of fuel being delivered. Lim argues that one con-sequence of this quest by Singapore Inc for innovation is a natural further culling of the number of companies within his sector.

“When mass flow meters come in a lot of smaller players will find it diffi-cult,” says Lim, who anticipates the playing field being cut by another 10%

making the sector more sustainable in the long run.

There are too many bunker tankers in Singapore now, admits Lim. Mass flow meters can supply 15 to 20% more than before, he points out, which in turn means there will be no need for 15 to 20% of today’s bunker tankers. However, there are a still a number of single hull tankers plying Singapore waters so eventually everything should balance out, Lim maintains.

Hong Lam Marine has 25 harbour tankers plus 12 ocean going ships, a mix of chemical and prod-uct tankers. For the latter sector,

Lim admits trading conditions have turned sour of late.

“There are too many tankers for not enough cargo so things are a bit tight now,” he says, noting how rates are coming down for product tankers.

Hong Lam MarineWorld’s largest bunker vessel

operator with 35 vessels as well as 12 product and chemical tankers.

Spot on

maritimeceo34

In profIle

After two decades of existence, the business adventure of the London-

based, Italian owned Euroceanica UK is coming to an end. Market sources report the sale of the chem-ical tanker Crystal Atlantic, the last vessel remaining in the fleet of the company controlled over the years by various stakeholders including Rimorchiatori Riuniti, Banchero Costa, T.Mariotti, ERG, Messina Group, Yarpa Investment Fund and PKB Privatbank.

“We are trying to finalise the sale of the last ship in the fleet and the transaction should be completed by the end of this year,” confirms , manging director of Rimorchiatori Riuniti, main shareholder of Euroceanica. While there is no com-ment on the identity of the Crystal Atlantic buyer market rumours cite the Chinese company Sinochem.

“In 1994, Euroceanica was set up with the intention of participating in the privatisation of Italian state controlled shipowning companies,” explains Gavarone, adding that, “The intended participation in privatisa-tion did not materialise but it was decided nevertheless to continue with the new venture. Subsequently, many additional investments have been made under the Euroceanica name”.

Actually Euroceanica and its

shareholders have had a long history of investment and operations in the tramp shipping markets. The first investments were made in the dry bulk market and subsequent dry cargo investments have included both standard bulk carriers and OBOs. The first newbuildings were ordered in the early 1970s, when a panamax bulk carrier was con-tracted in Poland, followed shortly by other bulk carriers from Japanese yards. In the first phase of the group’s development the investments were exclusively dry cargo, however in the early 1980s the first investments in tankers were made. By the 1990s the group had built up expertise in both wet and dry markets and had oper-ated ships both on time charters and the spot market. During the 1990s a series of investments were made in OBO vessels and tankers followed by a series of suezmax and product

tanker newbuildings ordered from Korean yards. In 2005, Euroceanica entered the chemical tanker market securing first the fleet of Finaval in Italy, and in 2006 Crystal Pool, which included both its fleet and operating company.

“In 2004, we successfully sold three suezmax tankers to a Greek shipowner and with the money we decided to penetrate the chemical shipping market buying Crystal Pool considering that, although low profit margins, it might be a less volatile and profitable investment for the future. Unfortunately from

2008 onwards also the shipping of chemical products has been severely impacted by the crisis and in the last four years a deep restructuring of the company led to the gradual sale of all the ships,” says the Italian executive.

Even with the Genoa-based group still owning two container-ships (RR Europa and RR America) and a panamax bulk carrier (Hampton Bridge) through Bulk Malta Ltd, the new investment strat-egy is focused on port tugs and the offshore market.

“The dry and liquid bulk markets seem to be segments unstable and unsuitable to our development strat-egies, due to the presence of large financial investors ordering dozens of newbuildings with the result that the freight rates remain depressed. They just make a fortune for some technical and commercial managers. That’s not the traditional shipowning and shipping approach as we intend it,” emphasises Gavarone.

2014 is an important year for the group, he explains, as it has invested some EUR100m taking a 50% stake in Ravenna-based Gesmar Group, as well as ordering two harbour tugs in Vietnam and Turkey, and taking delivery of a new AHTS vessel built by Rosetti Marino shipyard. ●

Rimorchiatori Riuniti is focusing on tugs as well as the offshore market

Back to its roots

Rimorchiatori Riuniti

Founded in 1922 initially as a tug-boat operator in the port of Genoa,

has since entered many different ship-ping sectors. Today Rimorchiatori Riuniti acts as a holding company

for shareholdings in several shipping companies.

Spot on

“ The dry and liquid bulk markets seem to be segments unstable and unsuitable to our development strategies”

Issue FOuR 2014 35

In profIle

Maritime CEO has scored another exclusive ship-owner interview with the

first on-the-record interview this decade with one of Hong Kong’s most talked about and intriguing shipping companies.

Amidst the raft of high profile fund raisings in New York, Oslo and elsewhere in the past couple of years, one Hong Kong-based company has quietly set about growing a fleet with the aim to become a leading regional tonnage provider in the container feeder markets.

Mandarin Shipping was origi-nally founded in 2006, but sat out the boom years of skyrocketing prices before identifying the container mar-ket as an area ripe for investment.

Having attracted backing from a number of well known shipping related investors, including industry heavyweights China Navigation and Wah Kwong, Mandarin has recently added to the two older containerships it acquired in early 2013 with an ini-tial order for six 1,700 teu ships to be built at Ouhua Shipyard in China. The orders are sister vessels to the series on order at the yard by Mandarin shareholder China Navigation, who are also undertaking the supervision and have had considerable technical input.

Mandarin chairman Tim Huxley, who also doubles as ceo of Wah

Kwong, comments: “This sector has had limited investment over the past few years, particularly since the German KG market hit problems. Liner companies are particularly sen-sitive to fuel efficiency and hence we see an opportunity to build an Asian based company providing a first class service with modern, fuel efficient ships to the major liner companies.”

Mandarin’s remit is not just focused on the container market and Huxley says they have “looked long and hard” at various bulk carrier pro-jects, but couldn’t really make sense of them. Huxley won’t be drawn on how big he sees the company growing, but says that with the initial corner-stone investors allowing the company to prove itself with this first order, further expansion, both in terms of number of ships and the investor base will now be sought.

“It’s not just about owning effi-cient ships,” he says. “We want to be a lean company which gives investors maximum returns, so we have been very careful in ensuring our costs and fee structures are the most compet-itive in the business, but without compromising quality.’’

Huxley is one of the best-known names in Hong Kong’s shipping frater-nity. After decades with shipbroker Clarkson he struck out on his own with Mandarin Shipping nearly ten years ago, before a tempting position with Wah Kwong came along. Also in the Mandarin mix is William Fairclough, another ex-Clarkson bro-ker, widely praised for his razor sharp analytical market nouse. Together, Huxley and Fairclough have wooed

some major names to come and invest and Mandarin is now poised for con-siderable growth after a long time in the shadows. ●

A Hong Kong owner has reemerged with significant box orders

Mandarin breaks cover

Mandarin Shipping

Founded by former Clarkson broker Tim Huxley in 2006,

Mandarin seeks investors for indi-vidual ship projects. Initial focus on

small boxships.

Spot on“Competitive advantage often sits

with the first movers”— Mark Bell, general

manager, Society for Gas as a Marine Fuel

“ We want to be a lean company which gives investors maximum returns”

maritimeceo36

In profIle

Blue Wall Shipping has spent $220m over the past 18 months building up a modern

dry bulk fleet. The firm’s ceo, George Gourdomichalis, says he can see light at the end of dry bulk’s long and dark tunnel.

“Whereas freight markets remain challenging and our outlook for the short term is very cautious, we remain long term optimistic for our subsector and we have built a fleet with a capital structure able to withstand the short term volatility within the industry’s longer term upwardly sloping curve,” he says.

Blue Wall is an investment holding company funded by an expe-rienced management team together with institutional investors.

“With direct investments in shipping assets, our commitment to

the industry is long term and built on experience and flexibility,” the Greek insists. He says that the company recognised the increasingly capital intensive nature of the shipping industry with a changing pattern of debt and equity funding which led Blue Wall to opt to establish a corpo-rate structure funded by institutional investors being a mix of multi-strat-egy hedge funds, private equity firms and large family offices to create a platform with a solid capital struc-ture and, he says, superior corporate governance.

“The company is able to tap the capital markets and be in a position

to execute our strategy of quality asset acquisitions providing accretive value to the shareholders and taking advantage of the opportunities arising in these challenging times,” Gourdomichalis says.

The traditional shipowner/finan-cial investor partnership is working well in the case of Blue Wall, the Greek national claims.

“Partnering with institutional investors has provided the com-pany with not only a strong balance sheet but also allowed us to develop sophisticated newbuilding projects and create synergies in both the commercial side of the business. It also opened up the doors to debt

providers who would otherwise not be in a position to provide fund-ing for our projects,” emphasises Gourdomichalis.

The Blue Wall ceo is also man-aging director of Phoenix Shipping & Trading, a shipmanagement firm based in Piraeus, managing a fleet of nine dry bulk vessels ranging from handysize up to panamax and with four handymax bulk carriers under construction in China. ●

Greece’s Blue Wall has built up its fleet fast in recent months and insists institutional investors are not all bad

Traditional owners can work with private equity

“ Partnering with institutional investors has opened up the doors to debt providers who would otherwise not be in a position to provide funding for our projects”

“A clear visual representation of

your company can set you miles apart from the competition” — André Eichman,

photographer

Blue Wall Shipping

Founded last year with a dry bulk focus, this Greek outfit has spent $220m in 18 months with plenty of funding from private equity.

Spot on

Issue FOuR 2014 37

In profIle

Such is the scale of fleet expansion ongoing at China Navigation that for the first time

in its 131-year history it is looking at farming out some vessels to third party managers. The controlled fleet is set to hit around 80 ships follow-ing a dramatic series of orders over the past four years, which has also spawned a whole new bulker division.

In 2010 China Navigation embarked on a big fleet renewal programme with an order for

eight 31,000 dwt multipurpose (MMP) vessels at China’s Ouhua Shipbuilding. These ships are replac-ing eight 25,000 dwt ships. It then ordered four 22,000 dwt vessels at the same yard for delivery next year. These ships will go on the company’s Australia – Pacific Islands trades. China Navigation also bought three ships from Rickmers last year.

Its liner trades, operating as Swire Shipping, now runs on 12 tradelanes. Bolstering its position on the Pacific, China Navigation bought out long time partner Polynesia Line last year, and followed this up this January with the acquisition of Pacifica Shipping, a New Zealand-based container feeder operator.

Further acquisitions are pos-sible. Tim Blackburn, managing director of China Navigation since 2011, tells Maritime CEO. “There is scope for more acquisitions as we look to build our liner network in the Pacific,” he says. The company will target regional operators who

have long-term relationships with customers or markets, but have felt the pressure from the increasingly consolidated liner trades.

The other big focus under Blackburn has been developing a new bulker entity. Swire Bulk was formed in 2011. “It was the oppor-tunity to diversify into bulk at the right time in the cycle,” Blackburn explains. The company quickly identified the handysize sector as the one to focus on. It has since ordered twenty-four 39,000 dwt ships in China in the past 24 months, plus four 38,000 dwt ships at Imabari.

Finally, there is Swire Bulk Logistics, another new creation under Blackburn’s watch. The divi-sion operates a variety of converted panamaxes and floating cranes in Southeast Asia and has a tie up with Peter Livanos’s CTM. ●

Managing growthThe Swire shipping arm isn't ruling out more acquisitions

China Navigation

The wholly owned shipping arm of John Swire & Sons. Headquartered in

Singapore, the company operates a global network of multipurpose liner services, dry

bulk and bulk logistics services through its three business divisions: Swire

Shipping, Swire Bulk and Swire Bulk Logistics.

Spot on

IN THE BULK trades in 2014 Spyros Capralos has clearly been the ship-owner newsmaker of the year. The chairman of Star Bulk Carriers now presides over the largest US-listed dry bulk shipowner with a fleet of 103 ships – including newbuildings – following mergers and acquisitions with Oceanbulk and Excel Maritime, aided by its largest shareholder, Oaktree Capital. With consolidation the name of the game at the moment for private equity’s binge in shipping, Star Bulk is leading the way. Its mar-ket cap is now around $1bn.

“Mergers are difficult, but

possible,” says Capralos, a burly character who represented Greece in water polo at the 1980 and 1984 Olympics. Star Bulk was already managing Oceanbulk’s ships prior to merging, while the Excel deal Capralos describes as “more natural” since Star Bulk bought the fleet and not the business. “The deal was in shares not cash which was good as there was not too much financial strain,” he relates.

“Right now bulk is still at a low part of the cycle,” Capralos admits. Nevertheless, with iron ore prices down, Capralos thinks in China there

will be a significant substitution of local iron ore for imports in the offing. ●

Shipping’s top consolidator

Star Bulk

Founded in late 2006, Greece’s Star Bulk Carriers Corp is listed in New York with Oaktree Capital as its major share-holder. Has taken over larger companies

Oceanbulk and Excel Maritime recently to give it a fleet – includ-

ing newbuildings – of 103 ships.

Spot on

maritimeceo38

In profIle

Genial Fred Cheng is in a slightly frustrated mood when meeting with Maritime

CEO. For a long time, Cheng, the famous owner who soared high and crashed spectacularly with Golden Ocean in the 1990s, has been championing prospects for VLCCs. It was a mistimed major investment in VLCCs in the late 1990s that brought about his downfall.

Cheng is absolutely convinced that market dynamics point to a very strong uptick in VLCC earnings come the fourth quarter of 2015. “The markets are coming together, there is a great opportunity in VLCCs,” he claims, while cautioning that the orderbook pushing into late 2016 and 2017 will dampen pros-pects quite quickly. The frustration for Cheng is not being able to find the funds quick enough to get in on the act. “I am talking to people, but I don't think I have the time to get everything in place quick enough,”

he says.Despite the battering ship-

ping has taken since the global financial crisis, Cheng feels ship valuations have not fallen as they should have done. Cheng,

for whom the Asian financial crisis of 1997 saw the beginning

of the end for his time at Golden Ocean, reckons, “There are no more cheap ships.” Current shipping cycles

are totally out of kilter with previous eras and bargain newbuilds are a thing of the past.

If he cannot get in on the VLCC act soon, Cheng says his firm, Shinyo International, which he founded 13 years ago, might look at starting with some small bulkers. “It is kind of how I always started with small bulkers before moving on to bigger ships,” he says.

However, he admits the current market has left him in a spin and his ship might literally have sailed. “It will take two more cycles before really good returns come to ship-ping, and I am not too sure I will be around by then,” says the shipping veteran. ●

VLCC return?Fred Cheng is looking at shipowning again

A Southeast Asian automotive specialist has eyes on international trades

Shinyo International

The latest investment vehicle from Fred Cheng. Cheng founded Golden

Ocean in 1978, a company that was even-tually sold under Chapter 11 protection to Frontline. Post Golden Ocean he worked with Univan Ship Management founder Capt Charles Vandeperre in a joint ven-

ture calles Vanship Holdings as well as running Shinyo, which means

New Sun in Japan.

Spot on

Malaysian automotive ship-ping and logistics provider Giga Maritime Group

(GMG) has announced big invest-ment plans.

These investments are in line with the National Automotive Policy (NAP) announcement earlier this year. Malaysia aims to increase its total production to 1.25m vehicles and boost annual exports to 250,000 units by the year 2020.

Datuk Adrian Henry D'Silva is the managing director of Straits Auto Logistics and Giga Car Terminals,

both subsidiaries of GMG. He tells Maritime CEO the company has plans to increase the fleet but it will be “in tandem” with the growth of the car distribution market within ASEAN. The company took on the 5,040 unit PCTC Grand Vision in mid-Septem-ber, taking its fleet to three roros, all of roughly 5,000 units each.

While Giga has remained focused on primarily Malaysian trades, D'Silva says international expansion is something the company might look at in the future.

On the markets, D’Silva admits

roro rates have increased just mar-ginally over the past five years while direct costs such as bunkers have leapt.

“Though the profit margins are thin at the moment, owners have been able to enjoy decent profits arising from the increased volume over the past five years,” D’Silva maintains. ●

Driven by demand Giga Maritime

GroupMalaysian conglomerate with extensive car carrying expertise. Brands within the Selangor-headquartered group include Straits Auto Logistics, Giga Shipping,

Nexus Mega Carrier and Giga Car Terminal.

Spot on

Issue FOuR 2014 39

In profIle

There’s degeneration in the market in no small measure thanks to investment funds.

That’s the view of , ceo and chairman of Mediterranea di Navigazione. “Not all business segments of the maritime transport are feeling the same way about the economic downturn. For instance, the chemical tanker market is moving towards stability thanks to a reduced number of newbuilding deliveries planned for the future,” explains Cagnoni underlining that the excess of liquidity brought into the dry and liquid bulk by the investment funds is changing the traditional dynamics of the shipping market.

Mediterranea di Navigazione was founded in 1908 and is based in Ravenna in Italy. The company, which is the owner of 10 modern vessels, has focused on highly specialized niche markets with its diversified fleet of chemical carriers, gas carriers (such as ethylene carriers) and oil tankers of different sizes with total capacity ranging from 5,000 to 45,000 dwt. Last year the company moved approximately 3.3m tonnes of 70 different types of cargo such as chem-icals, petroleum products, lubricants, vegetable oils and gas.

The company has suspended new investment initiatives after buying the asphalt bitumen tanker Black Shark from the SMTV-G Messina bankruptcy procedures a year ago. "With that investment, we completed a process of diversification already started with the delivery of the two ethylene carriers – King Arthur and Excalibur – built in Vietnam in 2011 and 2012,” says Cagnoni, summaris-ing the composition of the fleet. “We have a total of 10 units that allow us to be present not only in the bitumen and gas market, but also in the small chemical tankers segment as well as in the 15,000 to 45,000 dwt tanker market,” he says.

Although 2014 will close in the red with a turnover of around EUR55m, Cagnoni says the group’s diversification plans, entering the likes of chemical, gas and bitumen transport where there are high tech-nological and financial hurdles which tend to bar the entry of speculative investors, places the company in a decent position going forward.

For the future Cagnoni strongly

believes in two parallel shipping industries: “On one hand there will be the traditional markets more easily to be attacked by private equity funds, while on the other hand the niche segments, with companies like Mediterranea providing tailor made services to charterers through high quality ships and crews.”

Looking at the short term future, the Italian shipowner says: “At present the Mediterranean and the Black Sea regions are suffering due to low char-ter rates but my main worries is in West Africa with the Ebola virus and the piracy impact on the business.” ●

Double track industry coming very soonThe boss of Mediterranea di Navigazione is adamant private equity is splitting shipping

Mediterranea di Navigazione

Founded in 1908 in Ravenna, Italy, the company has always sought niches in which to operate. Current 10-strong

fleet made of chemical carriers, gas carriers and oil tankers.

Spot on “Solving the overcapacity

problem in the traditional shipbuilding market is our priority”— Guo Dacheng, president,

China Association of National Shipbuilding Industry

maritimeceo40

wine

Christmas: depending on your age, a word that either fills your heart with joy or dread.

But there is a bonus to Christmas, even if your adventures in shipping this year have turned less of a profit than expected.

Christmas and good wine go together so well that the latter forms an indispensable accompaniment to the food of the season, with no excuse needed to raid the cellar or stock up on high quality bottles.

Those who make them up say there are rules to follow on the day: champagne, white burgundy, claret, sweet Bordeaux, port (followed by unconsciousness) but I think these only apply if you have the budget but no imagination. There is a world of good wine to enjoy, so why not ring the changes?

You might be in the business of giving bottles or enjoying them your-self but my advice would be to pitch either presents and your own stocks somewhere between rarity and value, something that can be drunk straightaway or held for a bit.

For clients who like the unusual, England’s South Coast and West Country sparkling wine produc-ers are making some great wine. The best is these days served at

Buckingham Palace, often to French visitors.

Even in accepting that fine white Burgundy is hard to beat, there are Chardonnays that will serve just as well, such as from Tuscany or Western Australia’s Margaret River, that combine simi-lar freshness and persistence.

For reds, there might be nothing to beat Bordeaux in terms of snob factor but I’d suggest there are more interesting wines out there that deliver better bang for your buck. The stars of the Northern Rhone can be pricey but there are gems to be found with a bit of digging. The Langhe region is home to some of Italy’s greatest reds but they don’t have to be Barolo. For similar

refinement and a smoky, engaging style look south of Rioja to Ribera del Duero.

For sweeties, don’t assume that the world ends at Bordeaux. Instead consider a Rutherglen Muscat from Victoria or an unctuous Pedro Jimenez sherry from Spain. Put a bottle of Trockenbeerenauslese on the table and you’ll have plenty to talk about while you enjoy the hon-eyed charms of fine Riesling.

As for afters there’s much more on offer than the kind of mass-produced port that shifts by the tonne this time of year. For a different direction entirely, uncork a fine bourbon, oak aged, mellow and expressive, sipped from a small glass. ●

Neville Smith picks out some yuletide bottles

Nyetimber of SuSSex has established an inter-national reputation as a serious alterna-tive to Champagne. its current release, Classic Cuvee 2009, is as fine-bubbled and well-balanced as they come. older vintages

and NV are also easy to find online.

The Nebbiolo grape shares some of the perfume and elegance

of fine red burgundy and Nebbiolo Langhe, GD Vajra 2012 is a great way to get yourself barolo-level quality at a much more rea-

sonable price. ●

Two to try

Festive spirit

Issue FOuR 2014 41

GadGets

Brew master

Brewing your own beer is like making your own bread: it sounds like a great idea until the grim reality sets in, squeezing out all romantic notions and

squashing them underfoot. The reality is it’s messy, complicated, time consuming and with often very different results, as there are so many variables to go wrong. The PicoBrew Zymatic is pitched as the antidote — it takes as much of the hassle out of brewing as is possible thus far, and yields fast, easily replicated results automatically — much like a bread machine, you just load it with measured ingredients, set it going, and in four hours you have a beer that simply needs to ferment for a week or so. Then you can rinse and repeat, or change the recipe.

$1,800www.picobrew.com

Eye-catching

The new iMac with Retina 5K display is Apple’s top of the line iMac, and whilst the 5K Retina Display is the standout feature, it’s not just a pretty screen. Under the hood it sports

either a 3.5GHz Quad-core Intel Core i5 or a 4.0GHz Quad-core Intel Core i7, 8-32GB of RAM, an AMD Radeon R9 M295X graphics card with either 2 or 4GB of dedicated GDDR5 and up to a 1TB SSD drive for storage. This means that not only do you get a crystal-clear display, but also a machine that’s capable of coping with the most demanding use, even gaming at 5K. All in all, it’s a pedigree Mac machine — expensive, gorgeous and beautifully designed, with some serious power backing it up.

$2,500-$4,400www.apple.com

Faster than a Bugatti Veyron… in the water

If you’ve ever wanted to be James Bond, this is the car for you. It’s also the car for you if you live in a flood plain, or if you have trouble staying on the

road near rivers. Based on a Lotus Elise chassis, the Rinspeed sQuba is an electric watersports car that floats on water, and then submerges to keep on driving underwater: perfect for the final getaway if your life is a succession of unlikely car chases! It has an open-top to allow easy emergency escape, and occupants breathe underwater using scuba regulators. While the sQuba has a not-so-sporty top speed of 120 km/h on land, even at a pedestrian 6 km/h (3.2 kn) on the surface and 3 km/h (1.6 kn) submerged, it easily outpaces the Pagani Zonda Cinque and the Bugatti Veyron in the water. The batteries will give you a range of about 130 km on land and about three hours underwater after a four-hour charge. The car also has laser sensors for autonomous cruise control. This car has been a concept/prototype since 2008, but is now actually available to buy, albeit for an eye-watering price.

$2,000,000www.rinspeed.eu

maritimeceo42

reGULarBooks

Doing any business wherever it might be carries a certain risk. That has always been

true but understanding the nature of risk can be a mind-boggling task. Risk is defined as ‘uncertain events that can affect outcomes’ and this includes everything from weather to pirates; government policy to ever changing regulations. The key to minimising risk is preparation, preparedness and information, so books that give you a head start are probably well worth the investment.

One of the best places to start assessing the risks you may face is perhaps Mike Clayton’s all-encom-passing book, Risk Happens! Whether you’re a small voluntary organisation, a large corporation or a government department, managers at all levels need to take on and deliver projects that range from the multi-million dol-lar projects lasting years to short-term deals. However, as Clayton states, “All of these projects have one thing in common: risk.” Clayton’s book is aimed fairly and squarely at project

managers who need a practical guide to what they should be watching out for and what they need to do and some advance prep to avoid.

Books about risk are at their best when they are tools rather than tomes and Clayton’s book provides over 60 checklists you can apply to your own specific project, joint venture or deal. Clayton introduces the concept of the ‘risk breakdown structure’ in his book allowing the reader (or perhaps user is a better term for this book) to apply risk analysis to all project activ-ities and deliverables item-by-item. If there’s one mantra from Clayton’s book worth repeating it is to remem-ber that managing project risk is more than just a one-off brainstorming session and logging everything on a spreadsheet. Rather, as Clayton writes, “You have to actively manage the risk, otherwise it won’t go away.”

Right now probably many con-glomerates’ biggest investments and therefore most risk prone under-takings are in China, a country with its own very specific set of political

and economic risks to add to those that apply to any business anywhere. Jeremy Gordon, a business consult-ant in China to foreign companies of 20 years standing, has condensed his experiences of anticipating and avoid-ing risk for his clients into one handy book, Risky Business in China. Again, like Clayton’s book, Gordon’s is more of a tool to be consulted and referred back to again and again as different issues arise rather than a book to be read from start to finish and then shelved. At the start Gordon declares, “Risk is a major reason that compa-nies fail in, or fail to enter, China.” The recent problems of GSK and other pharmaceutical companies in China illustrate this dramatically, though Gordon has many useful case study snapshots of firms that both got their risk analysis right and those that got it very, very wrong too.

Perhaps Gordon’s most useful chapter is his so-called ‘Survival Toolkit’. This starts with the basics of due diligence and risk avoidance – online searches, site visits to prospec-tive partners and how to check com-pany records in China. But there’s a lot more work to do. Document checking, patent and IP protection, credit and reputation checking – all far from sim-ple in the People’s Republic. At every stage Gordon handily lists a set of questions you should be both asking yourself and your business partners. Negative answers equate to massive waving red flags that need to be dealt with sooner rather than later.

Everyone gets excited when a new business is getting underway – the fun of the deal, the excitement of doing something new, the glitter of future profits. What Clayton and Gordon show is that enjoying the process and eventually getting those rewards is far more likely if you put in the hard slog of risk analysis and due diligence at a preliminary stage. ●

“Managing project risk is more than just a one-off brainstorming session and logging everything on a spreadsheet”

Paul French reviews a couple of works that could help your business

The importance of risk analysis

Issue FOuR 2014 43

Seattle is quite possibly one of the coolest cities in the US. Known for its rain, sleepless-

ness, coffee, and Boeing (amongst other things). With minimal travel there is an amazing variety of things to see and do. So, plan your day, but be prepared to adapt to the sights and sounds, and weather.

Start your day with a bit of crumpet and a cup of whole leaf tea. For 36 years The Crumpet Shop on 1st Avenue has been in the organic crumpet making business. Choose from a variety of sweet and savoury options and see the crumpets being made in the attached bakery, surpris-ingly quite an interesting process.

Founded in 1907, the Pike Place Market is the iconic US farmer’s market. Beat the crowds and spend the early morning wondering around the stalls and surrounding shops. Prepare to eat. From fish to east-ern European foods, from wine to hot-sauce, clam chowder to fish throwing, this market and the sur-rounding shops have it all.

This is Seattle, the home of

American coffee and the global coffee craze. No trip to Seattle is complete without a coffee tour, and there are no shortage of options. The first-ever Starbucks is located opposite the market and it is worth popping in to see where it all began. Humble beginnings for a slice of American corporate history.

The Storyville Coffee Company is one of the coolest coffee shops around. Anywhere. They know their stuff and make a top-notch double espresso (for the aficionados). Great service and an ambiance so good you may just want to kick back and hang out for the rest of the morning. A great break from the crowds below.

If boats are your thing… and let’s face it… we’re all reading Maritime CEO… take a 30 minute, 1.3 mile walk to The Center for Wooden Boats. A museum focusing on the wooden boat heritage of the North West. See small pleasure craft through to the workhorses of the fishing fleet. Take some time to admire the workmanship and a unique slice of local maritime history. The exhibits

are ‘interactive’ (you’re allowed on them) and for those with time on their hands, you can take a free ride or hire a classic sail or row boat. Entry is free, and the center is run by volunteers.

As a side trip consider taking a 10-minute drive to the scenic Lake View Cemetery on Capitol Hill. Here lie many of the city’s illustrious founding settlers. And, the Master himself, Bruce Lee.

One of the things, museum-wise, the Americans do well is aerospace. Seattle is one of the most impor-tant centres of US flight, and is the home of Boeing. The Museum of Flight collection includes air-craft names such as Wildcat, Corsair, Tomcat, Starfighter, B-17, Concorde, Blackbird, P38, Phantom, Thunderbolt, and Air Force One to name just a few. It’ll take a few hours, possibly the rest of the day.

The museum is located out by the airport, a 15-minute drive from the market.

Come back into town and finish off your day with the best views of the city. The Skyview Observatory offers 360-degree views of the city and its surrounds. On a clear day you can see spectacular views of Mt. Rainier and the Cascade Mountains. At nearly 1,000 feet high, the Skyview Observatory is the highest public viewing point on the West Coast of the US. The views are superior to those from the city’s iconic Seattle Space Needle. ●

Twelve hours in SeattleGraeme Somerville-Ryan shows what’s brewing in one of America’s coolest cities

Activity CostCrumpets It depends how hungry you are. Prices are reasonable

Pike Place Market Free…though you’ll end up buying things

Coffee It’s a coffee…relax

Boat ride Free…but make a donation!

Lakeview Cemetery Trail guide: $5

Museum of Flight $19Skyview observatory $12.50

traVeL

maritimeceo44

reGULar

My favourite hole is the 4th hole at Prestwick. There is nothing better than

getting back from wherever one has been in the world that week and heading down to Prestwick for the nine o'clock draw on a Saturday morning. There is no commitment and so no pressure to show up if delayed by travel. However, the wel-come and good company is a hugely restorative tonic after a busy week away.

The first three holes are pretty awesome at Prestwick, so it’s only around the fourth when I am getting into the swing of it. It’s a classic hole as well as historic. It is the first dog's leg hole in Open golf.

The hole was added in 1882 when the course was

extended from 12 to 18 holes. The designer was James Braid. There was quite a

discussion at the time as to if a golf hole could be any-thing other than

straight. It’s a classic

cross between risk and reward.

It dog legs right around a bend in the Pow burn, a stream which gets fat and ugly in winter and very full on a high tide, whilst appearing benign in summer. The ground runs down to the burn, the tighter you drive and in summer when the ground is harder, how many times have I seen a good shot end in tears! There is plenty of fairway to the left so complete safety, other than a couple of artful bunkers which I have managed to find on occasions.

It’s the second shot where you are challenged. If you have gone tight and stayed out of the water with your drive, you have a fairly straight-forward shot into the green and the reward is all yours. Played for safety and gone left – and you have a very tricky second onto the green, with an apparently magnetic bunker on the left of the green, or again go right and you can end in the burn again if long, and as the green slopes to the water.

So before you line up your drive, consider how wayward you and your opponent are hitting that day, are you up or down, brave or cautious. The wind, which is a regular factor of this course, tends to blow you towards the burn and needs to be allowed for. So drift and leeway calculations are required, which as a

mariner I like.The most dramatic incident on

this hole occurred in the 1914 Open when JH Taylor led by one shot over Harry Vardon with one round to play. He was paired with Vardon in the final round and started well. However, he took a seven at the fourth compared to Vardon’s four and so lost the initiative to Vardon, who held on to win by one shot.

If Taylor had won the Open in that year, he would have achieved a record of six wins. As it was, Vardon did so and he remains the only player to have won six. Taylor, James Braid, Peter Thomson and Tom Watson have all won five times.

No doubt, there have been other incidents on the hole but Taylor’s misfortune is the best known. The story I like best was an occasion when an erratic visiting American golfer turned to one of the more famous caddies at Prestwick and asked him, " If I were to fall into the Pow burn, would I likely drown?" The caddie looked at him for a while and said, "You, sir? No, not you, sir."

"Why not me in particular?" the American asked.

"Because you could not keep your head down long enough," replied the caddie. ●

GoLf

Every issue we ask readers about their favourite hole in golf. This time, Bob Bishop, executive director at V.Group, discusses a dastardly dog’s leg on the west coast of Scotland

‘A classic cross between risk and reward’

Issue FOuR 2014 45

reGULar

As the president of Fraser Yachts I guess it was only a matter of time before the

Maritime CEO team got in touch to get me to pen my thoughts on an amazing destination to visit. Here at Fraser Yachts we have a team of experts ready to support, advise and assist you in every aspect of luxury yacht ownership and operation. We handle sales, charters, construction, management and crewing, tak-ing the headache out of owning a superyacht.

The funny thing is despite a life connected to the sea with V.Ships and now Fraser Yachts, while I do enjoy a voyage, it is not my favourite pastime – that would be skiing.

I am reliably informed that the editor has been trying to get a favourite ski run regular page into the magazine but his beach loving Australian business partner keeps turning the idea down.

Nevertheless, when asked to write this destinations column, a holiday from about three years back

immediately sprang to mind. In 2011, I was lucky enough to

go on a voyage around dramatic, remote and rugged shorelines just off northwest Australia.

We went on a 10-day journey in the Kimberley region of Western Australia, heading from Broome to Darwin, visiting many stunning places that are only accessible by helicopter or sea.

I can genuinely say that this was one of those trips that will stay with me forever. We’d anchor off amazing bays and take Zodiacs into mangroves, through canyons and up to towering, glistening waterfalls. When feeling energetic we’d climb dramatic escarpments

Highlights for me included swimming in freshwater waterholes above waterfalls in the Berkley

River, discovering Aboriginal art sites and simply revelling in the beauty of the pristine environment – from protected rivers and bays to uninhabited islands. The marine wildlife was also something quite extraordinary, getting close up to turtles, sharks, manta rays and dolphins.

Our lives in the shipping indus-try can be high stress – I cannot recommend a trip to Kimberley highly enough, just to get away from it all for a little while.

As for me, I’m off to mull where my favourite ski run is, there’s so many to choose from. My shortlist includes Jackson Hole in Wyoming and Zermatt in Switzerland. Might be time to dust off the skis and nar-row that selection down a bit this Christmas. ●

“ We’d anchor off amazing bays and take Zodiacs into mangroves, through canyons and up to towering, glistening waterfalls ”

YaChtinG

Ten days in KimberleyRoberto Giorgi, president of Fraser Yachts, recounts a trip to the far northwest of Australia

maritimeceo46

reGULar

Go with the flow? No way!A man tasked with buying bunkers for a large fleet reveals his gripes about the bunkering industry

the seCret proCUreMent

offiCer

“ How do you pour yourself the correct quantity of a glass of wine? Want to use a complicated piece of vibrating technology to measure it?”

We have come a long way from the gun slinging days of bunkering. Or

have we? Gangsterism. Steal for pleasure. Entrap the engineer. Fool the naive shipowner.

The new global structure of sup-ply and demand, quality and quantity focus, regulatory compliance, envi-ronmental pressure have all resulted in an industry that is increasing complex yet offers a control mecha-nism if you are willing to pay for it. It gives operators the choice we need. We understand Caveat Emptor.

But the recent chatter on mass flow metering seems to have taken a demonic life of its own. Like as if we have suddenly been visited by God Himself to solve this issue with His own God flow meter which measures everything perfectly. Hail God flow meter.

When once we all believed in good ol’ fashioned measurements, suddenly the whole world is denounc-ing this as an epidemic. How do you pour yourself the correct quantity of a glass of wine? Want to use a compli-cated piece of vibrating technology to measure it? Keep it simple I say.

Our good oil companies, who have used this simple and tested method of human touch for decades, are now out in force denouncing it. I wonder if this is purely to seek the economic advantage of selling us

more for the same old bunker fuel? Make hay while the sun shines. Go with the flow.

Don’t get me wrong. Support technology, I will. Fit mass flow meters on my ships I may. But to tell me my ship tank measurements do not matter is forgetting that it is I who is doing the buying. It is I who have the foresight of experience. It is I who have the dollars. I will most surely insist that my ships check their bunker fuel quantities received every time. Now and in the distant future. When I am paying one million bucks for refuelling my ship every time, please don’t tell me how I should measure this or that or not. You do your check, I do mine. It is my dollars. It is my decision. I am the buyer.

Trying to tell me, over and over again, that filling my ship is like filling my car – then I say bunkum. You expect me to sit back and receive my million dollar purchase doing no checks of my own. Have you just lost it? Perhaps, you want me to be cheated some other more compli-cated way? Read my lips – no way. Legal recourse is about evidence. I will keep my evidence the way I deem fit. I will keep more of it in these complex times. I am the buyer.

One caveat. We don't condone cheating. We

want bunkers we pay for. We want fair quality and fair quantity. We don’t care if you use a God flow meter or whatever. We trust our staff to do a good job. You build trust in yours. We understand that some quantity differ-ence is inevitable. But like I said, we expect a fair trade. Where the buyer is respected. Where I have a choice in the market. ●

Issue FOuR 2014 47

reGULar

I dare say most of us know that the concept of ‘CRM’ – cockpit, or crew, resource management – is

applied in three fields – aviation, where it developed, ship operations – and medicine. Please excuse a brief foray into medicine.

In this year’s Reith Lectures in the UK, on the future direction of medicine, Professor Atul Gawande, of Harvard, discusses the concept of human fallibility developed by Samuel Gorovitz and Alastair Macintyre in 1976. They identified two main causes of failure – igno-rance – what we actually don’t know – and ineptitude – failure to apply what we, as a species, actually do know. To these, they added ‘neces-sary fallibility’ – we cannot hope to know everything. An example of necessary fallibility is a tropical revolving storm – we can predict its behaviour roughly, through the Laws of Storms, but we cannot hope to know precisely what it will do. It is simply too complicated.

Now, you will, I am sure, agree with me that ignorance – having only a limited understanding of all of the relevant physical laws and conditions that apply to any given problem or circumstance, as Dr Gawande defines it, very seldom applies in ves-sel operations these days. Compared to the Victorians, who were guessing wildly for half the time, we know just

about everything that people need to know about ships and their mechani-cal and electrical systems.

Centuries of practice, good charts, and modern meteorology have pretty much allowed us to work our way safely around necessary fallibility in the forms of weather and uncharted reefs.

Our problem is ineptitude. We know enough to ensure that accidents can be eliminated. Yet they continue to happen, because that knowledge is not available at the time and place where the accident is about to be caused – I did not write “about to happen” because ‘Act of God’ is necessary fallibility and we know our way round that. We know that accidents always have causes. And we know that the cause is human error.

Now, the biggest single ineptitude is found onshore, in ship-managers’ and shipowners’ offices, because it is the people ashore who are responsible for not getting the available knowledge to the place where it is wanted, onboard.

There are wonderful resources available for getting that knowledge

to where it is needed, but if, gentle reader, you are one of those people who don’t find it necessary to provide your ships with broadband – and that is most of you – because “What would they need it for?” – the fault for the ineptitude that will cause your next accident is yours. You are not applying the knowledge available to you to getting the knowledge availa-ble to your people afloat.

You have a smartphone – of course you do – doesn’t everybody? And you use it constantly – doesn’t everybody?

Well, you know who doesn’t. Your own colleagues afloat don’t. You think it is perfectly fine for them to be cut off for weeks at a time. Yet there really isn’t the slightest doubt about what it is that seamen – almost all of them – want most. They want the internet, just like everyone else does.

To take one example of the sort of free resource, which goes a long way to reducing ineptitude, by providing the knowledge to the seaman at the point where he needs it, consider Bob Couttie’s excellent Maritime Accident Casebook. A long series of modern case studies, each of them short, sharp and to the point. It is actually aimed at the seafarer using the internet. One accident prevented pays for your broadband for the year.

Who is being inept, here? ●

On maritime ineptitudeAndrew Craig-Bennett argues the resources to cut out accidents are available, yet penny-pinching owners have their heads stuck in the sand

“One accident prevented pays for your broadband for the year”

the Contrarian

maritimeceo48

reGULar

A remarkable 721 of you voted in our latest online survey. The topics caused much debate with the spiciest comments carried below

Your thoughts

Does the recent Suez boxship collision – and many others like it – bolster or hinder the argument for unmanned ships?

Should all ships have proper connectivity for all seafarers?

Is the current supply/demand imbalance the new normal?

Is there an actual need for the new Nicaragua Canal?

Maritime CEO gives you a metaphorical $100m to invest in shipping. What do you buy into?

Is the supersizing of ships seen in the container and dry bulk trades good for shipping?

“ First, it will break the Panama Canal monopoly. Second, it will rationalise transit costs. Third, the Nicaragua Canal will not be hindered by locks and thus will have a higher scalability”

“ No one goes broke while getting high rates. But many have gone broke chasing market share”

“ Supersized ships are a time bomb for slack seasons and economic downturns”

MarpoLL

Bolster 32%Hinder 68%

Yes 32%No 68%

Bolster 32%Hinder 68%

Yes 32%No 68%

Yes 92%No 8%

Yes 92%No 8%

Yes 54%No 46% Yes 51%

No 49%

Yes 54%No 46% Yes 51%

No 49%

LPG 7%LNG 33%Containers 19%Dry Bulk 7%Oil Tankers 7%Product Tankers 7%Chemical Tankers 3%OSVs 17%

LPG 7%LNG 33%Containers 19%Dry Bulk 7%Oil Tankers 7%Product Tankers 7%Chemical Tankers 3%OSVs 17%

“ Automation is just as risky as the human element”

“ Poor connectivity is the single largest factor disincentivising the best and brightest youth from espousing seafaring as a career”

“ If there's one thing shipping has taught us, it's that there is no normal supply/demand balance”

TOR M. ØSTERVOLDCEO at ECOsubseaYoung Entrepreneur Award winner 2013

NOMINATE FOR THE2015 AWARDS

For more details of each award, full criteria and how to apply, visit

www.nor-shipping.com

Media Partner: Award Partner:Award Partner: Media Partner: Media Partner:Award Partner:

ENERGY EFFICIENCY AWARD

IMO - International Maritime Organization

NEXT GENERATION SHIP AWARD

YOUNG ENTREPRENEUR AWARD

Documents

Maritime CEO Issue 4 2014