‘Vale moves to have major consequences for freight rates’-Zodiac

“Biggest impact in 30 years”

The ambitious plans of Vale, the behemoth Brazilian mining and logistics multinational, involve using its own fleet of iron ore carriers to carry ore between its mines in Brazil to China. These mammoth 400,000 tonne ships will start rolling out next year, says Zodiac, and will drive freight rates southwards across the world.

The first of Vale’s 36 Chinamax ore carriers will be delivered in June 2011. Ian Shirreff, the CEO of Zodiac, says that this move will have “the biggest effect on the market that we've seen in 30 years." Zodiac is involved in importing iron ore to almost two dozen of the biggest steel mills that the State of China owns. Shirreff, based in Shanghai, was speaking in Amsterdam at the annual Coaltrans conference.

Vale is the second largest mining company in the world, besides the largest producer of iron ore and pallets and the second largest producer of nickel. It also mines manganese, ferroalloys, copper, bauxite, potash, alumina, aluminum, potash, bauxite and kaolin. Vale operates nine hydroelectric plants and, after a 5 billion dollar consolidation process that ended in 2007, now controls 85% of Brazil's 300 million tonnes annual iron ore production. It participates in mining operations, through acquisitions and joint ventures, in India, China, Australia, Canada, Finland, South Africa, Chile, Peru, Angola and Mongolia.

The Chinamax vessels include VLCCs that will be converted to carry ore. Shirreff feels that the sheer size and numbers of the ships will severely affect rates, which would fall to the $10,000 to $12,000 a day time charter rate seen in 1977; he expects this to happen within the next decade. Present rates for Capesize vessels, less than half the size of Vale’s future Chinamaxes, are at around $45,000 a day. Sheriff said that the “Vale effect” would be the biggest factor affecting freight rates in the next few years.

Gurinder Singh, Director of shipping at Vale, told the conference that Vale created the cape market by building Capesize vessels and egging the Japanese to build deep-water ports to take them. Today, "It's all about iron ore, it's all about China," he said. "Since 2009, Vale has tried to be part of the shipping market moving from selling free on board at ports to CFR (delivered), and freight and iron ore has decoupled so freight is now a much lower proportion of the delivered cost," he added. "Freight is now 20 per cent of the delivered cost or even lower”.


Zodiac expects China's growing demand for coal and iron ore imports to continue, given drivers like urbanisation, modernisation and general economic growth. It revealed that the Chinese are building ten ports to take the Chinamax vessels, out of which three will be ready next year. "Our customers and Vale need low and stable freight because when the Australia-Brazil differential is $40-60 nobody will buy ore from us but when the freight is low the differential is automatically very little," Singh said.

Elaborating on Vale’s expansion plans, Shirreff told the conference, "They're planning 80-100 vessels to drive the market down so low that the differential between Brazil-China freight and Australia-China is minimal”.

“Make no mistake, this will happen," he added.
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PCV Samudra Prahari: Indian Coast Guard goes state-of-the-art

Maharashtra Chief Minister Ashok Chavan commissioned the state of the art Pollution Control Vessel (PCV) “Samudra Prahari” at the naval dockyard in the city yesterday. The sophisticated vessel will join the growing fleet of Coast Guard vessels that will protect Indian waters against both environmental and security risks.


The CG says the Prahari, built at a cost of Rs 20 crores, is extremely technologically advanced and is said to be the first of its kind in South Asia. ABG Shipyard at Surat has built the 4,300 ton 95 m long vessel. It boats 3000 KW twin diesel engines and twin shaft generators, reaches a peak speed of 21 Knots and can go 6500 nautical miles at economical speed without refuelling. Equipped with the latest pollution monitoring and response equipment, the Prahari also has a helipad, Dynamic Positioning, advanced navigational and communication sensors, an Integrated Platform Management System, Power Management System, an infra-red surveillance system that can detect even small boats in rough seas, a gun mount and a High Power External Fire Fighting System. The Prahari will carry five high-speed boats and four water scooters for security, marine pollution response, SAR and law enforcement purposes. It will have a crew of ten officers and a hundred men, will be based in Mumbai and be deployed in the country’s Exclusive Economic Zone (EEZ).

The Chief Minister said at the commissioning that the PCV would help to tackle environmental issues such as the ones seen after the recent MSC Chaitra collision with the Khalijia. He also revealed that two more such PCVs are in the pipeline, as are another 26 interceptor boats that will be used for maritime security and surveillance. The CG is being augmented in other ways, he added, revealing that a new station had been opened at Murud Janjira and Ratnagiri along the Maharashtrian coast. “I am aware that the CG is facing an acute shortage of land for developing its infrastructure. The government is committed towards strengthening coastal security measures and would facilitate land acquisitions for infrastructure development,” Mr. Chavan said, pointing out that land had already been allotted to the CG in some areas in and around the city.

Across India, the Coast Guard expects to induct, in all, two Offshore Patrol Vessels (OPVs), 13 Inshore Patrol Vessels (IPVs) and 61 Interceptor Boats (IBs), besides the three PCVs. These should be all in place by 2014, sources say.

Vice Admiral Chopra, Director General of the Indian Coast Guard, said at the Prahari commissioning that CG stations in the country would double by 2012. “On an average, more than 20 CG ships are out on the sea. With the threat of terrorism, the role of coastal security has gone up. It is essential that pollution control operations are launched immediately. The CG's response to the oil spill was swift and professional. They launched operations in rough weather. The task would have been more effective with a PCV,” he said.

Pirates threaten to ‘slaughter crew and sell their kidneys and hearts’

Just days after reports that the Sri Lankan Captain aboard the Ocean Trite was killed in a pirate raid, and a few months after the Pakistani Captain was killed as Somali forces overran the hijacked QSM Dubai, comes another shocker. Pirates holding 24 crew hostage, including six Indians, aboard the cargo vessel ‘Iceberg 1’ have threatened to kill the crew and sell their body parts that they say are “more expensive than the ransom.”


The Iceberg I was taken just ten miles from the port of Aden on March 29 this year on a passage to Jebel Ali carrying expensive machinery and other equipment; the UAE owned and Panama-flagged vessel has 24 crew (6 Indians , 9 Yemenis, 4 Ghanaians, 2 Sudanese, 2 Pakistani and 1 Filipino). She was later apparently renamed the ‘Sea Express’ by the pirates and presumably used as a mother ship. Believed to have about 50 pirates aboard, reports say that the crew have long run out of food, medicines and water; some are sick and the ship has no diesel for the generators, according to communication received from the crew. The owners Azal Shipping in Dubai have reportedly refused to pay any ransom, and the Iceberg 1 apparently has no insurance. The owners are believed to have abandoned negotiations with pirates, which are now being handled by British cargo interests. The sailors have no more food, water or medicines left; some food has been supplied by local villagers and humanitarian groups at Garacad, Somalia, where the ship is presently anchored.

One of the Ghanaians spoke to a journalist towards the end of last month saying that the pirates had said, “If we don’t come up with anything reasonable they will kill some of us and sink the vessel”. Recently, however, the captives sent a more alarming text message to Citi FM, saying that the hijackers had threatened to kill them all and sell their organs. A Ghanaian crewmember later said at an interview that the hijackers had “come [to an] unkind, inhuman and terrible decision last night. Immediately after one of their commanders arrived on board, he said officially that if they don’t get their ransom ASAP they will slaughter us and remove our kidneys and hearts which are even higher than the cost of ransom they are requesting. Kindly forward this urgent news to all other embassies in Nairobi and human right watch worldwide ASAP.”

The crewmember begged for help. “The health situation is very bad because people are suffering from cough, diarrhoea, some dangerous skin diseases and others are also suffering from spinal cord problem…we are suffering- please, it is becoming unbearable. Please help us.”

The ongoing ordeal of the crew of the Iceberg 1 is almost six and a half months old. Ransom amounts for ships and instability within the Somali government, which is closer to being overrun by the rebel Al Shabaab, have both escalated during this period. The pirates seem to be getting more violent, perhaps seeing that there is no effective response to their criminal actions. The question begs to be asked: How long will we continue to hang out our seafarers to dry like this?
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Shipping needs 55,000 crores to stay afloat.

The shipping industry and the Ministry of Surface Transport have asked Finance Minister Pranab Mukherjee to consider subsidies to the 35,000 crore maritime sector, media reports say. Although the country’s tonnage has grown today to more than 10 million gross tonnage (GT), with a record 63 new ships totalling nearly a million GT being added to the Indian fleet since January, Indian shipping share in its own domestic maritime trade has plummeted to 8 percent, and India’s share of global tonnage is just 1 percent. These, and the cost of operations, are the main issues that the industry wants to address.


The 8 percent figure is half the 2009 share and has prompted the industry to lobby the Finance Ministry for subsidies once again. "Subsidies will definitely help us and Indian shipping. Out of the 9.45 gigatonnes of shipping capacity, about four million tonnes will need to be scrapped and replaced by 2012," says Mr Sabyasachi Hajara, CMD of SCI. His company, which has approval for a stake sale recently, is looking for interest subvention similar to the Technology Upgradation Fund that has been raised for the textiles industry; a portion of the loan interest for upgradation is borne by the State as per the scheme.

Indian companies say that they would buy more ships if the climate for investment was better and a level playing field ensured. At present, only 10 per cent of the India's exim cargo is carried on Indian ships. “Our operating cost is nearly 30 per cent higher than that of foreign flag vessels,” says Mr Anil Devli, CEO of the Indian National Shipowners' Association (INSA). Indian flag vessels pay a service tax of 13.2 per cent which foreign ship’s do not. Moreover, crew working on foreign vessels do not pay income tax: all this results in the market being tilted in favour of foreign ships.

Amongst these grievances, the industry is now seeking an acquisition fund of 400 crore that would be interest-subsidised. INSA estimates that the total cost of replacing Indian tonnage is a staggering Rs. 55,000 crore, given that the average age of the Indian ageing fleet is down to 18 years today; half the vessels are older.

"The fall in share of Indian shipping companies is alarming. Indian ships are considered more expensive than foreign ones, but our companies are heavily taxed," said Atul Aggarwal of INSA to the newsmagazine Tehelka; the organisation also wants Cabotage rules to be strictly enforced by Indian authorities, thus protecting Indian bottoms.

Government officials admit that finance for shipping remains a problem in India. With banks not keen on offering loans for new acquisitions and with little government support, shipowners are in a difficult situation. Indian companies are obviously keen to exploit the low acquisition prices presently prevailing in the global market but are hamstrung by lack of funds. Even so, many, including SCI and Great Eastern, are going ahead with ambitious expansion plans.


Shipping tonnage has grown steadily in the last seven years after the advent of the Tonnage Tax: From 6.94 million GT in April 2004, it stands at 10 million GT- 1029 ships- today, a smart rise by any standards. As of September 1, 2010, 1,029 ships totalling 10.10 million GT were registered under the Indian flag. About two thirds of these- 693 ships- are coasters. “Moving from single-digit gross tonnage to double digits is a significant achievement. However, this tonnage is peanuts when compared with that of the other maritime nations such as Singapore, China, and Japan,” said Devli, quoted in the Hindu. “It is a paradox that Indian ships do not carry the bulk of Indian cargo,” he added. “The government must adopt a policy of ‘Indian cargo for Indian ships.’”
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Greenpeace continues protest against Dhamra port

accuses Environmental Ministry of double standards

                                pic: Greenpeace

Environmental group Greenpeace has alleged that the Ministry of Environment and Forests is displaying double standards in Orissa: although it has stymied Vedanta’s mining activities in Niyamgiri in eastern Orissa, the Ministry is doing nothing to safeguard sensitive ecological areas against the joint Tata Steel/Larsen and Toubro Dhamra port project in the same state.

Greenpeace has been campaigning against the Dhamra project for more than five years now. The port is scheduled to begin operations at the end of the year, according to the Tatas. Greenpeace activist Ashish Fernandes now says, “The Government is selectively applying forest and environmental laws to corporations.”

Greenpeace is fighting the project because it says that the port is too close to the breeding ground of the endangered Olive Ridley sea turtles, and another similar project is home to the saltwater crocodiles. In any case, says Greenpeace, the entire project is situated in ecologically sensitive wildlife areas and should be stopped. It says that government released documents clearly show that the port is in violation of the Forest Conservation act; it says it has documents from the Orissa authorities to prove this, quoting a report by Mr JK Tewari of the Environmental Ministry’s eastern office as saying, "It is clear that Dhamra Port project site was never developed as a Port and is a part of the protected forest under the Kanika Protected Forest [Orissa]."

A 2009 Supreme Court ruling had referred the entire matter to a committee, which agreed with the Government’s stand that no laws had been violated. The government had submitted to the Supreme Court an affidavit saying that the project is not built on forest land, something that Greenpeace aggressively disputes.

The website of the Dhamra Port claims that the port area is “30 kms away from nesting area by sea and 15 kms as the crow flies”, and that findings show that it is sufficiently away from the limits of both the Gahirmatha Sanctuary and National Marine Sanctuary. Critics say that Greenpeace wants to compare the Vedanta mining episode with the Dhamra project in order to give fresh impetus to their protests. It also hopes to get Environmental Minister Jairam Ramesh to react to the allegations.

Meanwhile, the first phase of the port is nearly complete. Nevertheless, Greenpeace hopes that the Environmental Ministry will stall the port development now. "For years, we have had this 'fait accompli' situation in which big companies would simply create huge constructions in violation of environmental laws and later pay a small penalty to regularise it. Vedanta was the first case where the minister broke with this tradition. But we are not sure why the same yardstick is not being used against the Dhamra project. If you can shut down Vedanta project for building without getting forest clearance, you should be able to punish Dhamra as well," says Fernandes.

"It is a matter of fairness, if you are applying one law for Vedanta, you must apply the same to other groups also."
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