Monday, 23 January 2012

BDI- The Baltic Dire Index?

The Bellwether Baltic Dry Index- the index for dry bulk shipping- continued its near-precipitous fall that started two months ago and accelerated in December (see graph). It has fallen below 1000 points for the first time since early 2009, closing at 926 points today after falling almost 5% during the day; the BDI has also fallen almost fifty percent in the last five weeks; it was trading in the 2150 zone in November last year.

Analysts say that increasing pessimism about trade in the first quarter of the year is the cause of this crash, a sentiment that has been accentuated by factors as diverse as overcapacity issues and fresh deliveries, slowdown in Chinese demand, the Eurozone crisis- and the weather, that has interrupted cargo operations in Brazil, Colombia Indonesia and Australia.

Commodity carrying ship-owners have been hard hit in recent weeks, with Capesize charter rates down from around $33,000 not so long ago to around $8,000 today; a figure that is well below breakeven figures, says shipbrokers Fearnleys, adding that tonnage oversupply was the single biggest reason for the BDI collapse. Observers say that the situation will only worsen in the holiday week during the Chinese New Year that starts next week, though that event seems to have been factored in by the markets.

The Panamax market has experienced a dive in rates of 20.74% in a week, says Fearnleys, but points out that the Capesize market-down 41.42% -is much worse. "We see coal cargoes under contracts being postponed and even cancelled and this will of course influence the market with more vessels free in the market. With Chinese New Year approaching we do not expect any immediate recovery", they say.

The BDI has been going downhill everyday for almost three weeks, with charter rates for all four vessel types in the index plunging. Maersk Brokers' Director Kasper Moller says, “If the Chinese market just takes its foot off the accelerator for a second that has an immediate impact, “We’re having a lot of new ships being delivered, too.” The Chinese slowdown, coming at a time when new deliveries are still being scheduled, has proved calamitous for the BDI; Panamax rates are at a 33-month low.

Janet Lewis of Macquarie Equities Research’s says that the situation will remain worrying over at least the next six months. “The dry bulk market has responded to the glut of supply by restraining orders over the past year as well as by scrapping,” she said, “but these efforts have been overshadowed by the ongoing high level of deliveries of new bulkers.”

Commodity dry cargo trade has grown just 4.5% in the last calendar year, but the tonnage that services this business has shot up 14% and stands at a staggering 611 million DWT. Worse, another 139 million DWT is to be delivered in 2012. Clearly, it will be quite sometime before the situation stabilises. It appears that the only people in the business who will be smiling in 2012 will be the community of charterers.

Thursday, 19 January 2012

London's insurance companies responsible for growth in piracy, the British Times says

"Many careers and many fortunes — all perfectly legal — are now founded upon this racket."

A senior columnist in the UK's "The Times" newspaper has flayed the country's insurance industry, implying that it is a profiteering racket that is the 'hidden cause' behind the growth in Somali piracy.

Matthew Paris says, "Piracy is funded by pirates and insurance companies. A whole network of agents and middlemen has sprung up and is used by insurers and shippers as a semi-formalised line of communication with the Somali pirates. Many careers and many fortunes- all perfectly legal- are now founded upon this racket."

"The greater part of maritime insurance is British, but very few British merchant seamen will ever be affected. You may speculate that the risk of the occasional loss of a few Filipino crewmen is preferred to a substantial hike in the cost of every voyage and the danger that maritime insurance would be driven away from the City of London," he says.

Parris is also critical of the recent Commons Select Committee on Foreign Affairs report on Piracy; he says it skirts around important questions because the insurance industry is run from the City of London and implies that vested interests are involved. Lambasting the report, the column points out that no "properly" armed ship had ever been hijacked, and asks why British insurers do not insist on armed guards on their ships instead of simply applying a discounted premium- something that the Committee should have recommended. (Instead, the Committee has made a somewhat cryptic-and telling- comment: that it is "surprised by the continuing lack of information about those funding and profiting from piracy.”)

"The insurance industry is collecting the money from world shipping, facilitating negotiations with the thieves and helping organise the payments to them. It’s all nicely sewn up," he says, adding that the industry seemed to be acting as middlemen, "effectively (however unwillingly) working for the pirates as well as their policyholders; and creaming off their cut from the transaction".

Parris claims that the only way to handle piracy is for the British government to make payment of ransoms illegal. This is too simplistic, and Parris acknowledges this-somewhat incompletely- saying that "public opinion in sensational and heartbreaking cases" would be big negative.

"So I propose that this be the long stop, held out as a threat to the industries should their co-operation in a more limited proposal not be forthcoming. This proposal is to require all British insurance against piracy in the Indian Ocean to be contingent upon the carriage on board of an adequate private security squad," he says, somewhat more realistically.

To be sure, Parris is not saying anything new; for years now, many have cited unsavoury practices widely prevalent in the interlinked ransom-negotiating and insurance businesses. The fact that intelligence and ransom money trails have led to major financial centres in the Middle East and the UK have often been commented upon, as has the secrecy surrounding most negotiations.

However, this is the first time a column in a prominent British newspaper has pointed a finger at the alleged shenanigans of the insurance industry in general located in the City. It will be interesting to see whether the British government responds to a serious charge that companies on its turf are- consciously and unconsciously- promoting the criminal activity of piracy.

Friday, 13 January 2012

The Talisker Whisky Atlantic Challenge- the world's toughest rowing race

pic, the Telegraph

It had been dubbed one of the toughest challenges on the planet - more people have been in space than have rowed the Atlantic - but even so, contestants in the Talisker Whisky Atlantic Challenge that began in early December are facing a particularly gruelling time this year.  Eleven metre high waves, a sunk boat, survival rations for some and broken oars for others; high winds have tested all seventeen teams.  Some have been forced to quit. Race safety officer Simon Chalk says that this year was especially tough because there had been no break in the weather.

The race began early December with teams participating from all over the world. The challenge has been an event since 1997, and involves amateur rowers attempting to race 2,900 miles in tiny boats from La Gomera, Tenerife, to Port St Charles, Barbados.  "Rowers have to cope with blisters, salt rashes, sleep deprivation and rowing in two-hour shifts around the clock for weeks on end," the organisers say. Boats are just seven metres long and two metres wide with only a small cabin for protection. To make things worse, no boat can take any assistance during the crossing- not even food or water. 

December, as sailors well know, is a particularly bad time for storms in the Atlantic. Rowing 3,000 miles from the Canaries to the Barbados threatened by near gale force winds and high seas is bad enough. This year has seen higher than usual drama, though; with the race still incomplete, a boat has already capsized, a cruise ship has rescued survivors and a bunch of war veterans including amputees are awaiting help after running out of water. Paradoxically, because of fierce following winds, the winners may break the race record- the leader of the race now is a solo rower Andrew Brown, a 26 year old, who is about 500 miles from the finish line. If he makes it on present estimates a week from today, he will break the 2004 solo record set by Frenchman Emmanuel Coindre by almost three days.
Amazingly, all the crew are amateurs, although they had to pass a fitness test and have their boat okayed by the organisers. Six of the teams that started have dropped out, three are awaiting assistance of some kind (that will disqualify them), leaving just eight still in the running. Amongst the unlucky ones are two 23-year-old men whose boat capsized in a huge wave and sank on December 13 and who were later rescued by the cruise vessel 'Crystal Serenity.' 

Two other contestants had all six of their carbon fibre oars snap off in eleven metre waves on December 30;  they could do nothing except shut themselves up in their cabin, even surviving a 360 degree capsize there before a race-assisting vessel, the Aurora, arrived towing another boat that had to drop out of the race with equipment failure. Aurora will then go to the assistance- 800 miles away- of a boat of war veteran rowers who are running out of water, their desalination equipment having broken down.  

Amongst all this mayhem, Simon Chalk remains upbeat. “In the past (races) there have been storms, but they blew through. This time we have had continuous high wind, but everyone will get across safely. And it’s meant to be the world’s toughest rowing race.”

There seems to be little doubt about that.

Explosions on Indian tanker at Fujairah kill at least three

"There were three blasts - boom, boom, boom" 

A string of explosions on an Indian Aframax tanker at a facility at Fujairah in the UAE has resulted in at least three casualties. Two more people are missing and one seriously injured worker has been admitted to hospital after the incident occurred two days ago. Authorities have begun an investigation into the cause of the explosions, a report in the Abu Dhabi based 'The National' newspaper says. The Coast Guard and civil defence authorities are searching for the missing men; it is not clear whether they jumped into the water like many others when the explosions took place.

The 'Prem Divya' - a 109,227 DWT Mercator Limited owned and Anglo Eastern managed tanker-had arrived for scheduled maintenance at the facility two days after Christmas. It is believed that the tanker- that was certified gas-free at some time after arrival- had about a hundred local repair workers on board to check the pipes, carry out maintenance and do some hot work in the engine room. Eyewitness accounts indicate that the blasts were triggered off during welding. Many of the men aboard the Prem Divya jumped into the water when the explosions occurred, from where they were rescued by nearby ships and the local Coast Guard later. Port authorities activated teams that are said to have put out a fire on the tanker after the explosions.

Capt Mousa Morad, the General Manager of Fujairah port, has confirmed to reporters that the vessel was certified gas free, adding that it was not yet clear what caused the incident. "We already got that", he said, referring to the gas free certificate, "so what went wrong, we don't know. Any tanker that has gas in it should be made free of gas before any welding or hot work takes place."
Mr Ishtiaq Ahmed Malik of the Blue Sea Shipping Agency- that was handling the 1998 built Lloyd's classed Prem Divya at Fujairah- confirmed that there were three explosions. "There were three blasts - boom, boom, boom - so the people were in panic," he said.

Representatives from the owners and insurance companies have arrived at Fujairah to investigate the incident. Reports say that around half the 24-man crew of the Prem Divya have been moved to a local hotel after the explosions. One of the seriously injured has been admitted to Fujairah Hospital with burns and facial bone fractures. "His case is still not stable," said Mohammed Abdullah Said, head of the Fujairah health district.

The investigations will undoubtedly take some time before a clearer picture emerges to indicate what caused the explosions in the first place. As Capt. Morad says, "There's money, there's insurance, there's some people missing - so many things."

Increased trade with Pakistan to transform Gujarat Ports?

A report quotes industry experts saying that the likely Pakistani granting of the Most Favoured Nation status to India next year may turn out to be a "game changer" for ports in Gujarat as trade increases exponentially between the two countries from the present $3 billion per annum- according to UN trade data- to cross $5 billion in the next few years.  

The Pakistani government's announcement to the effect last month is thus being seen as resulting in a major peace dividend for the State. Much of the trade between the two countries is presently routed through Dubai and even Singapore; direct movement of goods will bring down costs and time significantly, analysts say.  

Within Gujarat, minor ports could benefit more. "Gujarat, which handles more than 26% of the country’s port traffic, could be the biggest beneficiary when there is a significant boost in trade," the Times report claims. “There are many issues that need to be sorted out before the trade pattern achieves its full potential. Customs hassles and procedural issues may act as a hindrance to cross-border trade, but in all likelihood, the minor ports in Gujarat, with their better infrastructure, will benefit if a direct sea route between India and Pakistan starts”, says economist Bibek Debroy. Other analysts warn, in addition, that the process may be slow and circumspect, especially since there is a long list of 'banned for trade' goods between both the countries.

Regardless, the Gujarat Maritime Board (GMB) seems to be well aware of the possibilities for the future. The State has the largest number of minor ports- besides two major private sector ports at Pipavav and Mundra. Both the government and the private players have been expanding capacities. “We are currently studying the prospects of trade. The government is keeping in mind the importance of the port sector and the potential trade that could emerge between both the countries,” CEO of GMB Pankaj Kumar told the Economic Times. 

Unfortunately, domestic shipping companies may not benefit as much as one would have thought. Analysts say that the many foreign ships that call both the countries will mean that freight rates will remain low. “Freight rates need not necessarily see a surge as connectivity matters the most,” says Abhishek Tandon from Drewry Maritime Services in the report.

Monday, 9 January 2012

Filipino seafarer numbers jump despite problems

The number of Filipino seafarers sailing on foreign ships has jumped to 400,000 in 2011 despite the global economic slowdown and the Eurozone crisis, a report in that country says. This figure represents a 15% jump from numbers earlier projected by the POEA- the Philippine Overseas Employment Administration- that had said that 347,000 Filipinos would be working abroad at sea this year.  Similar growth figures for last year were around 5%.

The POEA credits its seamen, the private sector and the government for the improved numbers. POEA Administrator Carlos Cao, Jr. said that Filipino seamen had an excellent reputation and that the government had done its best to rectify deficiencies detected by the EMSA- European Commission on Maritime Safety Agency- in the country’s maritime training and education. "The government and other maritime industry stakeholders have shown their unity in correcting the problems and that the Philippines submission of the measures to correct the deficiency to the EMSA, well before June deadline, gave the country much credibility in the international seafaring community", he said.

It may be recalled that, after the EMSA audit findings, the Philippines had shut down the country's oldest and biggest maritime college amidst a crackdown on institutes in the country. The move had resulted in protests from the college and students alike.  Department of Labor and Employment (DOLE) Secretary Rosalinda Dimapilis-Baldoz has said recently that the government was committed to making sure that all maritime educational institutions in the country fully met STCW Manila requirements.  

The country produces 280,000 graduates every year and 229,000 Filipinos are said to be serving on ships at any given time; it is unclear whether this figure includes the many who work on cruise ships in the hospitality sector.
Eduardo U. Manese, Joint Manning Group (JMG) Chairman said that the new numbers indicated that Filipino seamen would send home about US$ 4 billion next year. JMG represents overseas crew management in the Philippines and works with DOLE to promote the country's seafarers abroad.