Early 2011 is not the first time that world geopolitics have dramatically altered shipping’s course. Wars, sanctions and the closure of Suez have, in the past, led to changes in fortune for many of those involved in the ocean transportation business. And, as always in shipping, there have been winners and losers on each occasion. It is certainly too soon to foresee the likely repercussions of current Middle East turmoil, but it is not too soon to draw some conclusions about “energy vulnerability”, long-term oil price trends and the implications for shipping and its service providers. They are far-reaching and could,depending on how events unfold, wreak another round of fundamental changes to the industry. The fact that oil prices have risen from around $80 to $115 or more in amatter of a few weeks comes as an unwelcome reminder that prices are more susceptible to supply uncertainty than any other commodity. Saudi Arabia maybe able to step into the breach and pump more oil to compensate lost production elsewhere – for the moment, primarily in Libya – but the Saudisare not ring-fenced from the contagious people’s revolt that is sweeping theMiddle East. And the pace at which contagious discontent is spreading from North Africa to Bahrain, Oman and, it is believed, Iran has left political analysts open-mouthed. In the short run, rapidly rising prices will provide a valuable catalyst for the lacklustre tanker market, as buoyant Asian economies seek to shoreup energy reserves and raise stock levels. So far, only the Philippines has introduced measures requiring companies to maintain a minimum oil stocklevel – 15 days for individual companies and 30 days for oil refineries. But other Asian nations are expected to follow suit. China is the world’s second largest oil importer after the US and buysmore than half its oil from overseas. Consumption rates are rising exponentially. India currently ranks number five in the global consumptiontable. Yet neither country currently has an adequate strategic petroleum reserve. China is currently in the second phase of building up stocks and by the end of this year, it plans to have 270m barrels of reserves. By 2020, it expects to have three months of imports in reserve – about 500m barrels...
Read MoreBIMCO, the International Chamber of Shipping, INTERCARGO, INTERTANKO and the International Transport Workers’ Federation are outraged that Somali pirates have executed, apparently in cold blood, a seafarer on the merchant ship Beluga Nomination which had been attacked and hijacked by armed pirates on January 22nd in the Indian Ocean, 390 nautical miles north of the Seychelles. Three seafarers were reportedly taken aside for ‘punishment’ after an attempt by the Seychelles coastguard to free the hostage crew resulted in the death of a pirate. We express our deepest sympathy to the seafarers involved and to their anxious families. A spokesman said “The international shipping industry is truly disturbed at reports that pirates have been torturing seafarers physically and mentally, often in the most barbaric ways, including hanging them over the ship’s side by ropes around their ankles with their heads under water and even subjecting them to the horrendous practice of keelhauling. “We wholeheartedly condemn these violent acts and once again strongly urge governments to empower their naval forces to take fast and robust action against pirates, and the vessels under their control, before passing ships are boarded and hijacked. “This latest particularly atrocious action appears to represent a fundamental shift in the behaviour of Somali pirates. The cold-blooded murder of an innocent seafarer means that ship owners and their crews will be re-evaluating their current determination to ensure that this vital trade route remains open – over 40% of the world’s seaborne oil passes through the Gulf of Aden and the Arabian Sea. The shipping industry will be looking at all possible options, including alternative routes, which could have a dramatic effect on transport costs and delivery times – piracy is already estimated to cost the global economy between US$7-12bn/year.” At the end of 2010, around 500 seafarers from more than 18 countries are being held hostage by pirates. Piracy clearly affects the world’s largest trade transport industry, but how much is it costing the world? Oceans Beyond Piracy has completed a study on the economic cost of maritime piracy. The project set out to analyse the cost of piracy to three regions: · The Horn of Africa; · Nigeria and the Gulf of Guinea; · The Malacca Straits....
Read MoreThe early weeks of 2011 have witnessed a number of natural disasters causing misery and financial hardship for many. Floods in Australia, Brazil and Sri Lanka have forced large communities to flee, with whole townships under water and personal fortunes radically altered in a matter of hours. But natural disasters are not the only ones heralding the early weeks of 2011. For shipping, it is man’s folly in the form of over-ordering that looks likely to make 2011 a very difficult year in a number of key sectors. A flood of bulk carrier deliveries, for example, is undermining the dry market where demand is still relatively buoyant but is being swamped but the sheer volume of new ships joining the fleet. In the container sector, a wave of deliveries has forced lines to postpone rate restoration plans on some of the world’s most important liner trades. For the moment, though, it is the dry bulk market that is hardest hit. An average of more than 30 bulk carriers will be commissioned each week of this year, according to industry statistics, and of these, around seven will be Capesize units. Brokers warn that however healthy the world’s underlying commodity markets may be, absorbing deliveries on this scale and finding suitable employment for unfixed tonnage working spot will present owners and operators with some of the worst headaches anyone can remember. There are likely to be casualties along the way: some owners may well be able to draw down on healthy reserves built up during the dry bulk boom, but others are thought likely to have used much of their spare cash to invest more equity in newbuildings, as banks have imposed tougher lending criteria. Corporate casualties are likely to result in distressed tonnage becoming available at deep discounts to current values and a fraction of the record prices paid when these ships were ordered at the peak. This may offer an interesting opportunity for owners who have accumulated war chests in preparation for circumstances such as these, but it will do nothing to improve the environment for solid owners whose operating economics are based on more expensive vessels requiring higher rates for debt service. Once again, it is likely to...
Read MoreAs 2010 draws to a close and many owners and operators brace themselves for what will inevitably be a very tough year ahead, reasons for ship repairers to be optimistic may not be immediately apparent. Deep economic uncertainty still prevails throughout large areas of the developed world. Global finance markets may no longer be teetering on the brink of collapse, but they are by no means rock solid. Shipping’s largest-ever fleet looks likely to be in oversupply for some time. And the pace of economic development in the so-called BRIC nations – Brazil, Russia, India and China – is so dramatic that long-established trade flows are being radically altered, with huge implications for global shipping. Against this backdrop, the shipping industry’s principals – primarily its owners – must base investment decisions on the acquisition of expensive assets which are likely to last at least two decades, and possibly three. In times past, owners often received assistance in these decisions from charterers and cargo interests keen to secure the long-term supply of fairly priced shipping capacity. Such transactions are still evident on occasions, but tend to be the exception rather than the rule. Faced with an extremely complex decision-making process, it is no surprise that shipowners – sometimes with the help of their bankers – get things wrong. Sentiment is very important and they often follow each other in the ordering of too many ships of one type, and not enough of another. They give in to bossy shipbuilders who wish to carry on building the same relatively inefficient ships as they have done for decades. Change costs money, they are told, but equally, no change costs money too … as the shipping industry is now discovering. This forms the basis, as 2011 dawns, for three good reasons to be cheerful. One, shipping is in the environmental spotlight as never before. Climate change sceptics, particularly in the US, may continue to bury their heads in the sand, but shipping’s environmental pioneers are already recognising that change means opportunity – particularly in long-established ship design and operational parameters. In fact, it is spawning the design of a wide range of equipment and systems for retrofit – from exhaust gas scrubbers to...
Read MoreLiquid natural gas (lng) could well become shipping’s dominant fuel within the next ten years, according to the head of DNV, Henrik Madsen, who revealed the results of the class society’s latest innovation project to journalists in London this week. DNV’s concept, Triality VLCC – powered by lng – is one of the first examples of an ocean-going merchant vessel fuelled by gas. Madsen believes the first such vessels could be ordered as soon as 2012 and delivered to owners some time in 2014. Whilst most major class societies are vigorously pursuing new technologies to improve shipping’s overall fuel consumption and emissions profile, DNV is spearheading the dash for gas propulsion which has already produced a series of gas-powered coastal craft, notably ferries working on the Norwegian coast, as well as offshore support vessels operating in the North Sea. Until now, convenience and availability of the fuel have been held up as obstacles by those resisting the developing technology. But already this is changing, with bunkering facilities available at various locations in Norway, as well as the development of other gas-bunkering facilities in the Baltic. Madsen points out that although the availability of natural gas has been limited to some extent until now, gas is increasingly widely available in various locations, notably those which dominate global VLCC trades, including the Middle East, the Far East, Europe and the US. And in any case, he says, the new DNV concept design – already discussed in outline with three major shipbuilding groups – envisages that the new VLCC will have sufficient fuel capacity on board, with lng stored in two 6,750 cubic metre tanks on deck, forward of the bridge, to enable the vessel to circumnavigate the globe, if required to do so. Marine gas oil will be used as a pilot fuel. He also highlights two other significiant developments which could prove to be important catalysts in the development of gas propulsion. Firstly, he refers to the new 200 nautical mile Emissions Control Area around the north American coast, requiring the owners of ships trading there to burn increasingly costly low-sulphur fuels. And secondly, he says, lng is already significantly cheaper than heavy fuel oil and, as more reserves come...
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