Ship owners oppose vessel retirement program

In International Shipping News 30/09/2016

The country will face a crippled shipping industry and dislocated economy should Department of Transportation (DOTr) Secretary Arthur Tugade pursue plans to phase out ships aged 35 years old and above, a group of local shipowners warned.

“The whole industry is at stake here…this will totally dislocate business,” said Philippine Roro Operators Association (PROA) president Lucio E. Lim Jr. during the joint meeting of PROA and the Visayan Association of Ferryboat and Coastwise Service Operations Inc. (VAFCSO) yesterday at the Casino Español in Cebu City.

More than half or 65 percent of all vessels in the Philippines are second-hand importations from Japan, Korea, China, and Europe and are now more than three decades old. Tugade earlier said the government intends to phase them out for safety reasons.

“Let us not rush this. Please study it carefully. The effect of this will be very big to the economy,” Lim added.

In Central Visayas alone, this could affect 365 vessels that transport thousands of passengers and bulk of cargo daily. Economically, this is expected to spell slow trade activities as 80 percent of goods are said to be transported by sea.

Maritime Industry Authority (Marina) Enforcement Services Head lawyer Vera Joy S. Ban-eg, however, said that there is no written policy from DOTr yet about Tugade’s pronoucements.

The transportation agency cited safety as reason for the vessel retirement. Maritime accidents in the country left thousands of passengers dead in the past years.

Earlier, Marina 7 Director Nanette Villamor Dinopol said they are yet to come up with a policy for this and suggested approaching financial institutions to help ship owners and operators acquire newer vessels.

While safety is everybody’s concern, shipowners believe a ship’s age is not a measure of safety. Rather, shipowners said safety is a matter of responsible ownership and having competent crew members.

“Age of individual ship is not an indicator of quality and that the condition of an individual ship is ultimately determined by the standard of its maintenance,” the organizations said, quoting a 2014-2015 study of the International Chamber of Shipping (ICS).

In addition, the group has also opposed Executive Order 909 by former President Gloria Macapagal-Arroyo that provides incentives to new ships. Lim called it “economic sabotage.”

EO 909 provides incentives to new vessels that will invest in an International Association of Classification Societies (IACS)-classed newly-constructed ships.

Those who qualify will be given protection of investment and route protection for a period of six years by imposing a moratorium on the deployment of additional vessels or not allowing other vessels to ply in the applied link or route.

Likewise, domestic shipowners granted “pioneer status” will be given priority in the issuance of certificate of public convenience (CPC) by Marina in the route it proposes to operate, whether the route has an existing ship operator or not.

“We are not against the government giving incentives to brand new vessels. They can actually give them everything, except giving the monopoly of routes,” said Lim, adding that Marina, which had issued a circular last year, did not consult with local shipowners on the matter.

Other incentives to new ships include giving a 50 percent discount on regular fees in all applications and renewals of ship documents, licenses, certificates and permits.

The EO also provides special ramp or berthing facility to IACS-classed brand new or newly constructed ships.

To date, only two companies have modernized their fleets with new vessels namely, the Archipelago Philippine Ferries Corporation and Starlite Ferries.

Source: Sun Star Cebu

Wan Hai Lines Awarded “Container Shipping Line of The Year India-Far East Trade Lane” for the fifth time in six years

In International Shipping News 30/09/2016

Wan Hai Lines again honored the “Container Shipping Line of The Year India-Far East Trade Lane” by 2016 MALA (Maritime And Logistics Awards) which was held on September 28, Mumbai, India. It is the fifth time Wan Hai won the same award in last six years which signified Wan Hai’s service reliability.

The criteria of the award include volume handled in Far East sector, year on year growth, global reach, documentation procedures, commencement of new services, schedule integrity and customer satisfaction.

Supported by strong private consumption, India’s growth forecast for fiscal year 2016 and 2017 will be kept at 7.4% and 7.8% respectively according to Asian Development Bank’s latest economic forecasts. To keep up with this trend, Wan Hai not only continue to rationalize the existing service routes but also has launched China – India Service II (CI2) and Japan – India Service (CHS3) in this year to strengthen the network coverage. There are total 9 services deployed by Wan Hai as of today, covering all major sea ports across Indian coast line. It is indeed a testimony to Wan Hai’s persistent efforts for awarding the honor one more time.

Wan Hai currently operates the most intensive networks in the Asia by offering 40 over regular services in the region and serving as many as 20 countries with 146 front offices worldwide. Driven by the steadily growing economy of the India sub-con and ASEAN, Wan Hai is committed to expand more comprehensive service coverage in order to better satisfy customers’ transportation requirements.

Source: Wan Hai Lines

Domestic shipping companies see coastal shipping miles away

In International Shipping News 30/09/2016

Coastal shipping in India will take a while to make its presence felt. With infrastructure remaining exceedingly inadequate and confidence pertaining to regulatory affairs staying feeble, both shipping companies as well as cargo-owners do not see the segment make much headway any soon.

“At present, there is no adequate infrastructure at the ports at all for coastal shipping to take-off substantially any soon. Due to this, coastal shipping will take a while to have impact on overall shipping business, an official with country’s largest private shipping company told Business Standard. This company has small presence in coastal shipping at present but has no plans to increase focus in this area until substantial change takes place on ground.

Currently, the country’s coastal shipping business garners about $1 billion from a cargo volume of 60 million tonne. In coming years, the government is aiming to churn $3-5 billion business from coastal shipping.

“There is no commitment from cargo-owners at all. They just try out one or two voyages via coastal route and shift back to rail or road. This reluctance is keeping shipping companies from investing in coastal business. There needs to be dedicated cargo for vessels to be deployed,” said Captain Kiran Kamat, managing director at Link Shipping and Management. This company was first in the country to offer Ro-Ro (roll-on roll-off) services in February and carried Hyundai cars from Chennai to Pipavav. However, it discontinued the services after it incurred a 60% loss.

India has a coast line of 7,500 km but carries only about 7% of its total domestic cargo via sea. In comparison, China and Europe carry to the tune of 46% and 43% of their total cargo, respectively.

In coastal shipping, the operating as well as capital expenses are far higher as against vessels deployed towards overseas trade.

“High interest rates and taxation issues pertaining to the crew are some of the biggest road blocks that makes coastal shipping unviable despite immense potential,” said a senior official with a leading unlisted shipping company.

State-owned Shipping Corporation of India, Essar Shipping, Great Eastern Shipping and Shreyas Shipping among others are some of the large shipping companies in the country that contribute to the coastal shipping business in India at present.

Meanwhile, domestic cargo owners expressed apprehensions in shifting to sea mode of transportation saying lack of confidence in government’s regulatory affairs is keeping them away from coastal shipping apart from on-ground hurdles.

“Look what happened to some of the steel and power companies that were given captive coal blocks. Upon de-allocation and amid hostile business climate, companies lost heavily and are still struggling to find a way out. We don’t plan to disturb something that is working smoothly. If the government policies changes gears in future we will have a problem,” said an official with a metal company on condition of anonymity.

In late 90s, the government allotted coal blocks to metal and power companies and encouraged firms to make investments within a certain period. Responding to the friendly business environment, firms responded and invested heavily only to lose their captive source in 2014, when the Supreme Court de-allocated all mines leaving companies starved for fuel.

“There is a proposal to take finished steel via coastal shipping but we plan to allot only about 1-2 lakh tonnes out of total 22 lakh tonne on pilot basis. We do not see shifting to coastal route soon,” said a senior official with state-owned Rashtriya Ispat Nigam.The company carries its finished goods via railways at present.

“Coastal shipping has several handling points (loading-unloading at source and destination), this can damage the material (finished goods) in the process. In addition, the distribution channels from destination are not developed at all. In such a situation, it is difficult to shift to coastal any soon,” said an official with state-owned steel company.

The government on the other hand is doing its bit to boost business in this segment. The Shipping ministry has suggested giving large incentives for coastal shipment of select cargo classes. The aim is to incentivise a shift to coastal mode of cargo transport by compensating for first and last mile transportation. The incentive is large for automobiles and select bulk commodities such as food-grains and fertilizers but does not apply to coal and petroleum products, which account for the majority of present coastal cargo.

The ministry has also extended the central sector scheme to include the capex for setting up exclusive coastal berths at major and non-major ports. The other key issue of evacuation of cargo from destination point is also being addressed by creation of Indian Port Rail Corporation Limited (IPRCL), which is focusing on last-mile rail connectivity projects close to ports. This will incentivise the movement of bulk commodities, especially that of coal.

Source: Business Standard

Suez Canal Authority discounts target ships passing through US east coast, east Asia ports

In International Shipping News 30/09/2016

The Suez Canal Authority is studying potentially providing new discounts to dry bulk vessels, long-haul car carriers, and specifically ships that move between ports on the US east coast, east Asia, and south Asia.

Sources explained, on condition of anonymity, that these discounts target a limited number of ships―about 20-30 vessels―that do not frequently cross the canal. The move comes in light of the competition of the Suez Canal route with that of the Panama Canal, targeting ships from the US east coast and east Asia ports, and ships taking alternative routes after unloading their cargo.

The sources pointed out that bulk vessels carrying grain and coal rank third in terms of frequency of passing through the Suez Canal, wh 2,878 ships with a total of 102,156 tonnes of cargo during 2015. The number of car carriers stands at 939 ships with a total freight of 3,293 tonnes.

They also added that the Suez Canal is seeking to implement a marketing policy based on attracting new ships and providing discounts for ships that chose other routes after the drop in oil prices.

Since its inauguration, the Suez Canal has issued six publications with four discounts, and an extension period for two discounts, in light of the Cape of Good Hope’s acquisition of an additional competitive advantage after the drop in oil prices.

Eight percent of the world’s trade crosses the Suez Canal every year, and 20% of the world’s container ships pass through the canal.

Source: Daily News Egypt

‘Green’ shipping trend a boon for AkzoNobel marine coatings

In International Shipping News 30/09/2016

AkzoNobel’s marine coatings business stands to benefit from the shipping industry’s expected compliance to more environmentally-friendly or “green” regulations to improve operational efficiency, a senior executive of the specialty chemicals firm said.

“The shipping industry is under increasing pressure to increase its sustainability, improve operational efficiencies, and reduce its impact on the environment,” Oscar Wezenbeek, managing director of AkzoNobel Marine Coatings, told ICIS.

In September, the company launched Intersleek 1000, a new biocide-free fouling control coating that let users save on fuel and carbon dioxide (CO2).

“We have seen an increase in the uptake of premium hull coatings, such as our Intersleek range of products that improve operational and environmental efficiencies, reducing fuel consumption and associated costs and emissions,” Wezenbeek said.

The company has also developed a carbon credits methodology, in conjunction with the Gold Standard Foundation, which financially rewards ship owners and operators for investing in sustainable hull coatings.

Shipping, along with other industries, is under significant pressure to minimise its greenhouse gas emissions (GHG) after global warning targets of below 2 degrees were set at the United Nations Climate Change Conference in Paris in December last year.

The International Maritime Organization (IMO) is expected to make a decision in October this year on whether to implement a key part of the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI regulation, which will require vessels to burn fuel oil with a sulphur limit of 0.5% from either 2020 or 2025, “although the earlier date is more likely”, Wezenbeek said.

Based on IMO’s recent greenhouse gas emissions study, the shipping industry’s CO2 emissions could increase by up to 250% by 2050 if the new “green” regulations were not implemented.

“Ship owners are also under pressure from charterers, and shippers to improve levels of sustainability within the supply chain – reducing fuel costs and emissions, as well as optimising operational performance. This means that ship owners with more efficient vessels are therefore more competitive in the eyes of their customers,” Wezenbeek said.

The AkzoNobel executive said that demand for marine coatings improved in 2015 last year as delivery of new ships had risen for the “first time in several years”.

“However, we are now seeing signs of a slowdown in new build activity in Asia, due to declining contracting of new vessels as the shipping industry undergoes a correction of the oversupply of vessel capacity,” he said.

“At the same time we see a slowdown in maintenance and repair as ship owners and charterers feel the pressure of low freight rates, which continue to depress their earnings,” Wezenbeek added.

Although marine/bunker fuel prices have dropped tracking crude oil, new environmental legislation has forced an increase in the use of more expensive distillate fuels in Emissions Control Areas (ECAs), according to Wezenbeek.

“For many years, sustained high fuel prices gave ship owners and operators cause to investigate and introduce measures to mitigate hull roughness in order to unlock heightened levels of operational efficiency,” he said.

“This will require the majority of ship owners to use more expensive distillate products, which will only increase in price as the cost of crude rises,” Wezenbeek said.

AkzoNobel completed in May the expansion of phase one of its performance coatings plant in Cikarang, Indonesia. It invested €2.5m to expand the facility’s capacity by 40%, to serve growing demand for its International brand marine and protective coatings products in the southeast Asian country.

Source: ICIS

Firm US demand buoys spot trans-Pacific freight rates

In International Shipping News 30/09/2016

Spot containership rates from Asia to the U.S. remain at roughly 17-month highs on growing trans-Pacific freight volume amid solid consumer spending and housing investment in America.

The benchmark fare from Asia to the U.S. West Coast has been near $1,730 per 40-foot container throughout September, spiking some 50% from an August low.

Freight demand remains strong. Goods equivalent to 10.23 million 20-foot containers were shipped during the first eight months of 2016, up 3% year on year and an all-time high, according to data compiled by the Japan Maritime Center. Demand has not weakened in September, according to a source at a leading foreign line.

Carriers have been busy shipping Chinese-made goods to the U.S. ahead of the holiday sales season. “U.S. consumer spending is supported by cheaper oil and a solid job market, while housing investment remains firm,” said Junichi Makino, chief economist at SMBC Nikko Securities. Many project the mild growth to continue.

Among U.S.-bound freight, furniture and housing-related goods such as construction tools and floor materials posted a 5% increase in the January-August period, while TVs and other audiovisual products also rose 5%. Automotive parts and tires exceeded year-earlier levels as well.

The August collapse of South Korea’s Hanjin Shipping also spurred concerns about a possible capacity shortage. Hanjin represents an estimated 7% of trans-Pacific shipping to the U.S. market, according to the Japan Maritime Center, more than Japanese peers Kawasaki Kisen and Nippon Yusen. Former customers of Hanjin are shifting their freight to other lines.

Meanwhile, spot rates from Asia to Europe are now at around $760 per 20-foot container, down about 20% from a peak in mid-September. The decline is apparently attributed in part to Hanjin’s smaller role on these routes compared with trans-Pacific ones.

Source: Nikkei

Ship shake: Hanjin woes may help float tech, data start-ups

In International Shipping News 30/09/2016

The global shipping industry, ravaged by collapsing revenues, defensive mergers and the failure of major player South Korea’s Hanjin Shipping Co Ltd (117930.KS), is slowly waking up to the redeeming potential of technology.

While sensor-laden containers, smart ships and 3D printing have grabbed the headlines, the start-ups making the biggest inroads are those working on something more basic – streamlining the interaction between shippers, freight forwarders, and those actually transporting the goods.

“This is way up there on the list of insanely complex systems with enormous impact on the global economy,” says Trae Stephens of Founders Fund, which this week led a $65 million investment round in Flexport, a start-up focusing on providing logistics services and data.

“We believe doing this in a more efficient way can really move the needle on every part of the economy,” said Stephens, who will join Flexport’s board as part of the investment round.

Container ocean trade is likely to grow no more than 3 percent over the next few years – at a compound annual growth rate – compared to 10 percent in 2000-05, and 5 percent in 2005-10, according to Seabury, a transportation consultancy, and McKinsey predicts shipping oversupply will stay above 20 percent this year and next.

Zvi Schreiber, CEO of Freightos, a Hong Kong start-up that offers Expedia-like quotes for end-to-end freight shipping, says the shipping industry is “manual, inefficient and opaque.”

KPMG found that a quotation for shipping freight typically involved 20 associated fees and, according to the Journal of Commerce, shippers each lose up to $150,000 a year when price volatility and staffing cuts force invoicing errors.

“This industry is broken, there’s no question we have a serious issue,” Jesper Kjaedegaard, partner at shipping and logistics firm Mercator International, told a recent shipping conference in Singapore. “Without technology, this industry is not going to move much further.”

TRANSPARENCY

Kjaedegaard pointed to start-ups like Xeneta, set up by two industry veterans after they failed to convince their employer, shipping giant Kuehne und Nagel (KNIN.S), to introduce greater transparency into rates charged.

“Transparency is viewed by a lot of people in the industry as destructive in that it would negatively affect margins,” said co-founder Thomas Sorbo.

Xeneta’s solution was drawn from the world of consumer start-ups: encourage all those in the industry to contribute rates, creating a crowdsourced database of some 17 million contracted sea-freight rates around the world.

By providing real-time data, shippers can see what they should be paying.

“Suddenly (they) can compare their contracts with others and find out if they’re being ripped off,” Sorbo said.

Venture capital interest in the broad supply chain and logistics industry has been growing, at least until last year. In 2015, consultancy CB Insights counted more than $1.7 billion of investment in start-ups, triple that in 2014. Another $500 million or so was invested in the first half of this year.

Start-ups range from those trying to Uber-ise the industry to those like Natilus, which plans a Boeing 777-size cargo drone which lands and takes off in water. CEO Aleksey Matyushev envisages a world where the cost of transporting goods by air could do away with a lot of the ocean-bound shipping, which accounts for around 98 percent of container freight, according to Seabury.

But, for now, it’s start-ups like Xenetas, nibbling away at the industry’s inefficiencies, that are making waves.

Freightos, for example, provides software that allows logistics firms to manage contracts and automate the quotation and sales process. Last month, it bought WebCargoNet, a Spanish network of air cargo rates.

GT Nexus, which allows shippers to manage their supply chain online, was bought last year by Infor, one of the world’s largest software companies.

Not everyone in the industry is happy with the attention, and question whether such start-ups will be able to carve out much more than a niche.

“They think they’ve reinvented the wheel, and they haven’t,” said Nick Coverdale, a Hong Kong-based industry veteran. The industry “is not as backward as people claim.”

But he acknowledged that technology could play a role, and pointed to a service he will launch next month which would enable freight buyers to choose a sailing online and agree a deal in seconds.

Others have noticed the benefits of embracing such services.

Eddie Soh of Singapore-based Global Air Cargo International, says using Freightos allows him to give a customer a quote quickly, even if he’s on the road, just by pulling out his iPad.

Previously, he said, that involved going back to the office, and trawling through emails and Excel spreadsheets.

Source: Reuters (Reporting by Jeremy Wagstaff, with additional reporting by Keith Wallis; Editing by Ian Geoghegan)