Tuesday, 30 June 2009

Industry Snapshots

Royal Princess catches fire and Twitter revolution hits the seas: Last Thursday, a fire broke out in the Engine Room on the cruise ship owned by Princess Cruises as she was departing Port Said, Egypt. The crew later extinguished the fire and nobody was hurt, although one passenger was treated for chest pains. The ship was towed back to port even as passengers remained at Muster Stations. Investigations are in progress; there were 733 passengers and 393 crew on board. Interestingly, the unlikely hero of the incident, as far as the media is concerned, seems to be Greg Surratt, a pastor from Charleston, South Carolina. Right through the incident, Surratt was posting updates on the social media site Twitter, much in the news in connection with the post election protests in Iran. Surratt’s ‘tweets’ overshadowed the updates posted elsewhere, including the scanty information put up on Princess’ own website. Concerned family and cruise fans logged on to Twitter over the weekend to get updated information on the incident and see Surratt’s photographs. The cause of the fire is officially unknown, but a weekend post from the tweeter says, "Heard from very good source cause of fire: fuel pump. Not as good a source: involved explosion. Several sources: we are very lucky."

Dreary Drewry report on the container market: Put out a week ago, a report by maritime consultants Drewry is pessimistic about the prospects for the boxship fleet. “With nearly half of the year gone, the industry is looking at the edge of a deep abyss,” it says. Highlighting recent poor performances by well known companies like Zim and CSAV, Drewry says that freight rates are not set to recover anytime soon; Zim reported operating losses of $119 million recently, and CSAV was bailed out by German interests. Drewry is particularly concerned about Asia where cargo volumes have dropped 14 to 18 percent over last year as exports have dropped on the back of poor demand. The report says that the eastbound Trans Pacific freight rates are showing no signs of recovery. One fallout: the container shipbuilding industry. “Depressing economic conditions do not favour shipbuilders. Asset values are on the wane and many existing contracts are being renegotiated to account for delays or possible cancellations,” Drewry says, quoted in Fairplay.

Training institutes mushroom in Kerala to tackle shortage in logistics industry, reports the Economic Times. The newspaper thinks that the upcoming Vallarpadam container terminal, Vizhinjam container port, Petronet LNG terminal and several proposed container freight stations will add to the requirement for qualified and trained personnel. Organisations such as the Falcon Group are already tied up with Dubai Port World to offer the first such Post Graduate qualification. ``The specialty of our course is that it has three months internship where the students can get hands on training,’’ says N.A. Mohammed Kutty, MD of Falcon Group. The Indian Institute of Logistics is will also open its third centre in Kochi, after Chennai and Vijayawada. `` We don’t guarantee placement for them but we help them to build a career. Though the entry salary may be low as Rs 10,000, there is no limit up to which they can go,’’ says director Capt. V.J. Pushpa Kumar. Also on offer, an MBA in partnership with VEL’S University, Chennai and accredited by the London School of Business Management.

A “Hoot” against criminalistion: “The horns of ships in Vancouver harbour sounded out at one minute passed noon Thursday to protest changes to Canada’s environmental regulations which shipping companies and unionised employees say will unfairly target them for prosecution,” reports the ‘Vancouver Sun’.
Organised by the ITF (representing mariners), the International Ship Owners Alliance of Canada (representing ship owners) and the Council of Marine Carriers, Vancouver (representing tug and towing operators), the protests were against Canadian Bill C16 currently being debated in the Senate. The industry is protesting the bill’s “reverse onus” stance, which presumes that an accused is guilty unless he or she can prove otherwise. ITF’s Peter Lahay says that officers and crew will be at grave risk if this bill is implemented, as they could be liable for jail terms up to three years and hefty fines of up to $12 million a day in the event that they cannot prove their innocence in case of an accidental spill. “It could cost hundreds of thousands of dollars for someone to defend themselves against these charges. That’s why we say the officers who lay the charges should have the burden of proof,” said Lahay. The ICS and ISF have already said that the legislation is inconsistent with MARPOL and UNCLOS provisions. Industry watchers say that, along with recent legislation in the European Union, this bill could have far reaching consequences for ship owners and crews. It seems that the Sword of Damocles of criminalisation hanging over seafarer’s heads is slated to get even sharper.

Friday, 19 June 2009

Green Shoots

Baltic Indices spurt, but is this a recovery?

Mumbai, June 6: The Baltic Dry Index (BDI) had hit a twenty five year low of 663 points in December last year; it hit 4,291 three days ago, six and a half times the December low.. A day earlier, on June 2, the Baltic Capesize Index rose by 18% to 7,724 points. Time charter rates for Capesize, Panamax, Supramax and Handymax vessels have spurted manifold since December. Stories are doing the rounds of container vessel layup’s decreasing. The question everybody is asking is, are these the fabled ‘green shoots’ of a trade recovery?

Not according to some analysts, who advise continued caution. For one, they say, the recent spike in time charter rates for Capesize and other vessels are attributed to abnormally high port congestion in China, which has tied up a massive number of vessels there. There are other reasons, in addition, why the industry is being circumspect.

One of these, Precious Shipping of Thailand, says that new tonnage entering the market will cause the BDI to decline. Saying that recent Chinese buying of iron ore will not be sustained, and pointing to speculators who may be driving present demand, it says in a widely reported statement, “Obviously, when you binge buy and compress imports of a single commodity, carried mainly by capesize ships, into a very short space in time, you tend to create two issues at the same time. Firstly, you tend to push up freight rates due to the time compressed/explosive demand growth for that ship sector. And more significantly, you create queues at loading and discharging ports, which tend to reduce availability of spot ships driving prices even higher. Combine this with delayed delivery schedules of dry bulk ships during Q4 08 and Q1 09 and you have the ingredients of a perfect storm especially when you take the number of capesize ships that have been sent to the scrap yard during the last 6/9 months."

Precious goes on to point out that this development will skew the supply/demand paradigm even further, causing a temporary halt in scrapping as well as a resumption of shipbuilding activity, which from all reports has been at a standstill this year. All these factors may well do long term damage to the industry, although there may be an immediate uptick in the BDI. “Clearly the BDI is more reflective of the Capes and the Panamaxes than of the market as a whole," the Company says. If Precious is right in its assessment, the crash may be as sharp as the spurt was.

Coincidentally, a Reuters report published in Forbes magazine quotes Dale Ploughman of Seanergy Maritime Holdings saying that although trade finance is, “Showing signs of life following traumatic upheavals during the height of the financial crisis in late 2008, smaller traders without an established track record in particular are still finding it hard to obtain credit. This is an issue the whole industry must deal with." It seems that the upheaval in credit lines that started with the collapse of Lehman Brothers in September 2008 is far from over, although there certainly seem to be some green shoots here. "We're no longer in the massive destabilising that we saw when trade credit was not available," Douglas Mavrinac, an analyst at Jefferies & Co, told Reuters. "The banking system is healing itself now. But there is still a long way to go and rates are still well off where they were."

Others are more sceptical, pointing out that fixing the trade credit issue in its entirety is essential now otherwise the problems will just be magnified when the market eventually recovers. The IMF says that the shortfall in trade finance (the gap between how much credit is needed and how much banks are willing to lend) was $500 billion in early 2009. No wonder the BDI fell as trade in some commodities was crippled. Incidentally, the IMF has also predicted a global decline of 6.1 percent in trade in 2009.

As if this were not confusing enough, some within the industry have questioned the accuracy of the Baltic Capesize index, raising concerns about its “seemingly erratic” movement. This same index spurted 18% within a day earlier this month. A number of members of the Baltic Exchange Freight Market Information Users’ Group have expressed concern reports Lloyd’s List.

The system at the Exchange is this: thirteen shipbroker ‘panellists’ give a confidential daily summary of capesize vessels to the Exchange; this information is used to compile the Capesize Index. Although the panellists are supposed to give information on fixtures they have participated in, it is felt that some are factoring in freight derivative contracts too. Mr Albertijn of the same User’s group wants more transparency in the functioning of the exchange, although he is hopeful of a good outcome of the dialogue between the user group and the Baltic.

The green shoots, even if they exist, seem quite tender right now. It may be a good idea not to rush in just yet.



Industry Snapshots

Beyond simulation: get trained in these £150,000 replicas! The Warsash Maritime Academy in Southampton has pulled out all the stops in a bid to give students a more realistic experience in ship handling. Students are being trained on miniature models of ships that sail in a lake at the facility; all the models have engines and steering and closely follow the characteristics of the ships they are meant to mimic. In the idyllic setting at the Academy, officers awaiting their first command, experienced Masters and would be pilots alike learn ship handling on board these prototypes. The training is intensive and equips students to deal with worst case scenarios. Some conditions are simulated by trainers; for example, the engine on the models can be remotely tripped, creating conditions akin to that of an engine breakdown. This unique course, the only one of its kind in Britain, is attracting students from as far away as Brazil and Canada, and is booked up to 2010. Trainees claim that considerable skill is required to handle these models; Canadian Matt Sicard says, 'The boats might look like the sort of things your kids play with in the bath, but they are very hard to control”.

Bangladesh panel recommends direct Dhaka to Kolkata passenger service in an attempt to boost trade and tourism. The move follows direct bus and train service resumption between the two neighbouring countries, and will strengthen trade relations in the region. Local companies in Kolkata are enthusiastic about this opportunity, which will undoubtedly give a fillip to their bottom lines in these testing times. There is considerable tourist traffic between the two countries, and shipping companies are thrilled that they may now get a substantial chunk of it.

Mr. Sarkar, Manager of Blacker & Co Pvt Ltd, says he expects passenger traffic to pick up in time. “This will immensely benefit shipping companies like ours. This is because we are unable to charter our ships on long routes due to high operating costs. However, the Dhaka Kolkata route being comparatively shorter will be cost effective,” he said. Others point to the fact that the sea route may well be the preferred one for many ecological tourists since it would pass the Sunderbans.

Directorate General of Shipping says refiners cannot hire foreign ships longer term, reports Livemint. At present, foreign ships can be hired by domestic firms only when Indian ships are not available. The longstanding demand of the PSU oil companies, amongst others, was to enable them to hire foreign ships longer term, so that they could control costs and counter volatility in rates. PSU’s like Bharat Petroleum, Indian Oil Corporation Ltd and Hindustan Petroleum Corporation Ltd have been pushing this since at least last year, when they approached the DGS for the requested change, claiming that higher costs and the volatility in freight rates were an unnecessary drain on their finances. Domestic shipping companies obviously opposed this move: they claimed that a possible regulatory ruling against them would be impossible to survive given the present state of the business. Divya Shipping’s Mr. Shiryan now says, “The DGS’s move has brought relief to the shipping companies in India who are slowly recovering the losses that they had incurred over the past few months. If oil refining companies are given the right to hire foreign ships for a longer period of time, it would enable them to extend their contracts with foreign vessel companies, effectively leading to loss of crude oil transporting consignments for local ship operators.” Other shipping companies continue to demand more policies from the DGS that protect domestic companies, including in other trades. They have INSA’s support in this endeavour.



Saturday, 13 June 2009

Maritime Security: Are we ready?

Half a year after the Mumbai attacks, worrying signs.

MUMBAI, June 2: Arms and explosives were smuggled in by sea and used in the 1993 Mumbai attacks. In 2008, terrorists came in using a similar route. Now, more than six months after Mumbai was attacked, analysts are dismayed that the country is still beefing up security measures to enhance coastal security, and that foolproof security systems are far from being in place. Police officials across the country, however, continue to say that they have their ducks in a row now, and are well prepared to counter any threat.

Many disagree, pointing out that China’s quiet offensive in the Indian Ocean, Chinese and Pakistani links and the continued threat from foreign terrorism need tougher and speedier actions. India is in a dangerous neighbourhood today, and is facing direct or indirect threats from China, Nepal, Myanmar, Bangladesh, Pakistan and Sri Lanka. In this regard, recent newspaper reports suggesting that as many as 400 lower level LTTE militants may have infiltrated into India as refugees are worrisome.

To be fair to the administration, sophisticated speedboats with advanced communications equipment have (only) recently been tested at the Versova creek in Mumbai, and will be used by the Thane rural police. However, one more speedboat is still awaited; a total of 28 such boats were envisaged for Mumbai and adjacent coastal areas in the aftermath of the Mumbai attacks, when a budget of Rs 150 crore was cleared for this purpose. Until now, the rural police in Thane have been patrolling the coastline using fishing trawlers, but this action has had major operational restrictions. Says ADGP Maharashtra, P P Shrivastava now, "We have gone in for the latest technology, latest weapons with better firepower and increased manpower." Additional rural coastal police stations are being setup; fishermen have been co opted into reporting suspicious activity and the Indian Navy and Coast guard are geared to patrol the seas, say other officials. Additional trawlers will be hired as required and law enforcement personnel trained. The question no one seems to be answering is why we are still putting systems and logistics in place half a year after the country’s maritime security was shown up for what it was: a hollow shell.

Further down the coast, in Goa, more interceptor boats have finally been received by the marine police. Built by the Goa Shipyard, these boats should help in patrolling the coastline and rivers there. Capable of operating at 35 knots with a range of 75 miles, these boats carry more than a dozen people on board.

In the South, coastal Andhra Pradesh, Tamil Nadu, Kerala and Karnataka have been on high alert for some time now, thanks to the Sri Lankan conflict and the thousands of refugees that fled former LTTE controlled areas; it is feared that at least some would have slipped through the porous coastline into India, or have melted in with genuine refugees. Although home ministry officials have said that they are constantly screening anybody found suspicious at refugee camps, others are not so sanguine, pointing out that it is impossible for officials in India to verify the antecedents of boat people who often have no papers on them. Officials know well that this threat exists: Sonia Gandhi and son Rahul were advised against travelling to Tamilnadu during the recent elections by intelligence agencies. The Navy and Coast Guard are supposed to be on high alert.

However, a recent report in DNA India says that the Navy, designated responsible for overall Indian maritime security after the Mumbai attacks, may still be working on a comprehensive maritime security concept for India. Rear Admiral Cheema heads a group of naval ships that will arrive in France at the end of June to, amongst other things, “intensively study French maritime security.” The newspaper quotes a naval official as saying, “We have asked him [Cheema] to study the coastal security concept of France and submit a report."

To many these are clear indications that, more than six months after the carnage in Mumbai, India is still not fully geared to protect its coastline against infiltration.



Industry Snapshots

Dead humpback whale found stuck on bulbous bow of oil tanker that arrived in the Alaskan Port of Valdez. The dead whale has now been towed out to sea. The tanker Kodiak, owned by Exxon Mobil, had entered the port with the dead animal stuck on its bulbous bow. Authorities said that the body was not decomposed, indicating that the whale had not been dead for too long. Investigations are in progress by the U.S. National Marine Fisheries Service to determine if the ship broke any laws, since humpback whales are a federally protected endangered species. Details on the incidents are sketchy; experts say that there is a possibility that the whale was already dead when the tanker struck it. "We don't know the condition of the whale when it was struck, or where. What we do know is it was on the tanker bow in Valdez," said Sheela McLean, a National Oceanic and Atmospheric Administration (NOAA) spokeswoman. Surprisingly, the whale went undetected by both the crewmembers on the Kodiak as well as the tugs escorting the Kodiak into the terminal. A trawler has now been hired by the owners to tow the carcass out for a whale burial at sea.

Muammar Gaddafi defends pirates at Saharan State summit, says that they "defend their territorial waters". Gaddafi, the present Chairman of the African Union, says the West is to blame for the situation in Somalia and the Gulf of Aden, restating the oft quoted rationale for piracy: the West is looting Somali resources and that the attacks on merchant ships are not carried out by "pirates but people who are defending their rights." The Libyan leader has earlier accused many countries of violating international law, saying that, “Greedy Western nations invade and exploit Somalia's water resources illegally … It is not a piracy, it is self defense. It is defending the Somalia children's food.''

Goa casino operators adamant, refuse to move from the Mandovi River despite Captain of the Port Department June 8 deadline. Association of Offshore Casino (AOC) spokesman Narendra Punj said that the ships would not move since the AOC felt that, "The captain of ports has given us a licence to operate in the Mandovi River on the basis of which we purchased our ships. We will face a lot of difficulties if we move from the river." Adds Punj, quoted in the Times of India, "We have maritime studies to back us. The sea near the Aguada bay where the government wants us to go is very choppy. Our customers will get sea sick if we park ourselves elsewhere," Punj added. Punj is the MD of one of the biggest offshore casinos in Goa, Casino Royale. The Goa government wanted the operators to shift to the Aguada bay earlier this year following public criticism of the casinos; instead, the AOC had gone to court against the government’s decision.

Hollywood twists, missing money add spice to Maersk Alabama hijack story: Capt. Phillips, rescued in a dramatic US Navy Seal shootout after the Alabama hijack, continues to hit the headlines: declared a hero in his country, he has now sold the rights to his story to Hollywood in addition to an earlier book deal. Kevin Spacey will produce, and perhaps play Phillips’ character in a movie to be made by Columbia. In another development connected with the hijack, the US Navy is investigating the disappearance of $30000 reportedly taken by the pirates during the hijack. Phillips was forced to hand over the $30,000 in cash from the Maersk Alabama safe during the April attack. Only one hijacker survived, but Abduwali Muse was captured by US forces. Muse, the alleged gang leader, is supposed to have distributed the money amongst the hijackers, but the cash was never listed as recovered by US Navy Seals after the other hijackers were killed and Muse apprehended. The Pentagon says its Naval Criminal Investigative Service (NCIS) is investigating. Muse, of course, is in the US facing charges of piracy, hijacking and kidnapping.



Friday, 5 June 2009

Industry Snapshots

Ukrainian crew on ‘Ariana’ being tortured by Somali pirates, claim relatives in a report in ‘Russia Today’. A mother of one of the crew says that her son was made to call her and ask for help in a possible bid to speed up ransom payments. “Pirates want money as soon as possible so they want the news about torture to be spread. Sailors are being flogged and put on the metal deck while the temperature there is about 50 C. I heard bolts clanking,” she said.

Shipping Minister takes charge, promises growth in 90 days. Mr. G.K. Vasan took over the Ministry of Shipping last week, promising six new berth development projects within the next three months. Speaking to reporters soon after he was briefed by Ministry of Shipping officials including Secretary APVN Sarma, Mr. Vasan said that another twenty such projects would be initiated within that period. “In the next three months, we hope to award six concessions for ports and initiate process for 20 other concessions,” the Minister said, adding that the Government was bound to complete the Sethusamudram project subject to the Pachauri committee report and the Supreme Court verdict. “This is one of the most important projects for Tamil Nadu and for the country. Sethusamudram is a dream project for Tamil Nadu. It will be my endeavour and the Government’s to complete the project for the economic development of the country particularly Tamil Nadu,” Mr Vasan is quoted in the Hindu Business Line as saying. The Minister also promised to strengthen the Indian Maritime University.

Indian tanker fleet looking at tough times for the rest of the year, says a Reuters report, pointing to low oil prices, low freight rates and low demand as contributory causes. The report says that the next few quarters will see profit margins shrink and that rates may not ‘touch the 2008 peaks’ soon. The report comes as tanker freight rates shrink to almost half of last year’s peaks. "We believe the tanker market is going through an unusual period because of inventories and weak seasonal demand”, says Mr. Yuddhishthir Khatau, MD of Varun Shipping, echoing sentiments of other Indian operators. Oil prices, which were around $150 a barrel last summer, are around $ 58 today. The climate has affected the bottom lines of many companies, including Essar, Mercator and Varun. Companies have been forced to rethink their acquisition and expansion plans while they wait for asset prices to drop and the market sentiment to improve. "We are looking at a pretty dark tunnel. 2009 is almost going to be a washout in terms of recovery”, says Mr. Bharat Sheth, managing director of GE Shipping, a company that posted a 16 percent Q4 drop in profit last month.

Mottled dawn for “Pacific Dawn”: After days of anxious uncertainty over a suspected outbreak of swine flu aboard, the Carnival cruise ship “Pacific Dawn’ was allowed by the Queensland government to berth at Brisbane last weekend. Passengers not living in the State had not been allowed to disembark at the time of writing this report: Australia is concerned about possibly infected passengers and crew spreading the virus that has already hit a couple of hundred people in the country. Local health officials in Queensland have confirmed to the ‘Courier Mail’ that passengers who do not live in the State will be quarantined and not allowed to disembark. Reports suggest that the ship, on a cruise to the Great Barrier Reef, has more than fifty confirmed cases of the H1N1 virus on board. She was denied entry to berth at a couple of Queensland’s ports earlier; Carnival has announced plans to reimburse some passengers who have been inconvenienced. The ship has more than a hundred passengers from Queensland; although these will be allowed to disembark, they are being asked to isolate themselves at home for a week. It is believed that the others will be allowed to disembark in Sydney on Monday, June 2. There may be as many as 2500 passengers and crew aboard.