Tanker Recycling on Record-Breaking Year

In Hellenic Shipping News 14/06/2018

The decommissioning of a significant part of the tanker fleet is about to alleviate the current oversupply issues, as evidenced by the record-breaking pace of demolition activity this year. In its latest weekly report, Clarkson Platou Hellas commented that “with the end of an eventful week in Athens for the bi-annual Posidonia, Owners, Cash Buyers and other industry players were able to come together and discuss what has been an active first half of the year in the recycling market. With the main topic of discussion still being tanker units, it currently looks to be a record year for tanker recycling and many questions and discussions were being raised for this sector which should ensure the supply for these types of units to continue and interestingly, the topic of ‘green recycling’ was evident.

The market has remained stable again this week and some positive prices have even been witnessed with some potential rising sentiment returning. These prices can be further attributed to the increase in bunker prices and may entice more owners to consider leaving further bunkers on board for Buyers, knowing it could become more beneficial in the price received. Although there remains some uncertainty with another week of Ramadan (and Eid thereafter) still to commence, end of June will provide a better understanding of where the market actually lies and how the recyclers view the domestic markets. At present, the market appears to be simmering but the question is which way will we turn?”, wondered the shipbroker.

Meanwhile, in a separate note, Allied Shipbroking said that “the balance on the ship recycling side continues to show a relatively bullish face, with activity keeping fairly firm while quoted prices from cash buyers are still holding at relatively strong levels. We are still seeing a fair amount of volume being fed from the tanker side, while again this week we noted yet another VLCC being picked up. The Indian Sub-Continent has managed to upkeep its levels, while we have even managed to see some high spec units achieve relatively aggressive prices. It looks as though appetite is still there, despite being at the start of the monsoon season. At the same time, downward pressure has been felt from the negative track being seen on the foreign exchange front, with the US$ having gained considerable strength these past weeks. At the same time, there has been a fair amount of speculative buying that has taken place, largely in part due to the budget announcements that were taking place this past week. There is a fair amount of indication now that buying appetite will gradually start to subside over the coming days, though given the current market momentum being seen, it is likely that prices will continue to hold a fair amount of support for now”.

Similarly, the world’s leading cash buyer, GMS added that “with much of the shipping fraternity engaged in Posidonia festivities in Athens last week, in addition to the ongoing month of Ramadan and upcoming Eid celebrations in Turkey and the Indian sub-continent, activity and levels were expectedly more subdued this week. Despite that, at least two FSU sales did manage to register at firmer numbers, perhaps the result of some over exuberant celebrations during Posidonia. Meanwhile, after filling up their plots with over 10 VLCCs from various Cash Buyer hands, Pakistan has slumped alarmingly of late. A worrying currency depreciation to the tune of about 6% coupled with the imminent imposition of the 5% sales taxes announced during the recent budget, hint at a certain panic that seems destined to set into a previously bullish Gadani ship recycling sector and any further sales (especially those at numbers similar to the recently bullish levels) seem highly unlikely, at least in the near future.

Nevertheless, the Bangladeshi and Indian markets continue to impress with Chittagong buyers having awoken from their mid-summer lull and increasingly keen to acquire units once again, as the Indian market continues to dominate the market rankings with the firmest levels on offer. The overall rise in local steel plate prices in India has also seen Alang regain its position as the top placed sub-continent market – particularly for mid-sized specialist units such as reefers, LPGs and offshore untis, of which, there have been a number of fixtures of late. With the number of available candidates starting to dwindle, we anticipate it will likely be a quieter summer / monsoon period ahead for sub-continent yards, as the plethora of units sold so far this year starts to gradually be absorbed by the markets, ahead of an anticipated busier fourth quarter of the year”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Dry Bulk: Summer Time Has Arrived for Capesize Market but is it Sustainable?

In Hellenic Shipping News 15/06/2018

A new booming trend has started shaping up in the dry bulk market of late, as the past few days (since the beginning of Posidonia) have marked a rebound in freight rates, which is also evident in the FFA markets as well. In its latest weekly report, shiproker Allied Shipbroking said that “it has been a relatively interesting week for the dry bulk sector, with a fair reversal having been seen in the freight market as some of its most vital commodities start to show a more bullish face. The main interest shifted on the coal trade, a commodity that in the past had shown a relatively troubled picture and had felt a fair amount of negative pressure due to the fact that it was the main target of emission and pollution controls”.

Allied’s Research Analyst, Thomas Chasapis said that “what was the main focus this past week is the sharp surge in prices that has been noted since mid-April, with the price of Newcastle coal peaking on Thursday at US$ 112.05 per metric tonne, the highest level noted since 2012. This success story however has been writing itself since the end of 2017, despite the imposed measures that have been taking place in China, which is the largest importer worldwide and accounting for almost one fifth of total global imports. Imports from China have already risen by around 8% from January to May, while the local coal market shows real strength with ample appetite for the time being”.

Chasapis added that “it is worth mentioning however that the most recent price shift and peaking demand has had as its driver the exceptionally hot weather noted of late, while at the same time the very cold temperatures noted back in January had as a result an excessive draining of local inventories at ports, mines and power plants. So the real question is, to what extent this trend seen in the first half of the year could follow through till year’s close or beyond. The truth of the matter is there are few who are willing to back coal at the moment, as has already been stated many times before, this commodity’s long-term prospects are rather bearish, given the general aversion away from high polluting energy commodities and the general shift towards cleaner alternatives”.

Allied’s analyst also noted that “the focus however is on the here and now and given this most recent trend the dry bulk shipping market has found some much needed support. The Baltic Dry Index (BDI), finished at the end of the previous week at a level close to 1,400 basis points, which was actually similar to the level it started the year at. During these first 5 months the market has shown a considerable amount of volatility, having been shaken back and forth by the extensive geopolitical tensions that have taken place. On the on hand, it is true that the market has shown real strength and strong fundamentals over the past 12 months, managing to sustain relatively well the much higher average levels brought about during the final quarter of 2017. But on the other hand, after every short-term small rally we have witnessed in the year so far, a sharp correction of the same magnitude has taken place, denoting that the market lacks any real underlining support to reach even higher peaks for the time being”.

According to Chasapis, “all-in-all, despite this boost in sentiment as of late, it seems as though the track noted between the different major dry bulk commodities seems to be out of sync and as such has in part been feeding this extensive back and forth shake up in earnings. On the coal front, it looks as though things will eventually subside as China’s inventories start to replenish and while keeping all other variables equal, this could lead to negative pressure being felt once again on freight rates. The hope is that other commodities will move in and fill the gap, with the most prominent contender considered to be grain cargoes at this point, given the slack that was noted during the past two months in the US Gulf”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Container giants MSC, Maersk eye slow steaming to cut costs amid rising fuel prices

In International Shipping News 15/06/2018

Slow steaming is to become a more prominent feature on some routes for container shippers as industry leaders Mediterranean Shipping Company (MSC) and Maersk look to cut costs and improve reliability, the companies confirmed Wednesday.

“The cost of fuel and the advantages of reducing related air emissions into the environment are among the factors behind this,” a spokesman for MSC said.

“The initiative is driven by a need to become more reliable and punctual, which is an issue facing the whole industry,” the spokesman added.

Bunker costs for June are higher than they were at the start of the year and have been rising strongly since March, the S&P Global Platts’ North Asia to North continent IFO380 average cost assessment, which includes bunker fuel costs at Colombo, Gibraltar, Rotterdam and Singapore, showed.

NORTH ASIA TO NORTH CONTINENT IFO380 AVERAGE COST ($/MT)

Jan 394.00

Feb 380.50

Mar 378.00

Apr 399.50

May 442.00

Jun* 450.50

* month to date

Source: Platts

By going slower vessels can better adhere to more realistic schedules and avoid congestion at ports when they stop to bunker. “The schedule is often impacted by port congestion and once they are out of sync they have to move ships much faster, using more fuel to catch up,” he said.

The same thoughts have occurred to Maersk, which is part of the 2M Alliance with MSC.

“The reliability in the industry and for Maersk Line is lower than we would want it to be and there are many levers a shipping company can pull to increase punctuality and efficiency,” the company said in a statement.

“These include the removal of port calls, the reduction of speed as well as adding ships to a service. We are constantly looking for ways to improve our network, making it more efficient and customer-oriented,” Maersk said.

By slow steaming, bunker buyers have said they can push vessels further to reach even cheaper and more strategic bunkering locations, rather than having to stop at the most convenient location in terms of logistics. Barge fees, calling costs and port charges can contribute to hikes in prices and make owners selective about the economics of bunkering.

Slow steaming is likely to be adopted by those who do not upgrade their fleet or invest in scrubber technology, industry participants have said. This will add time to voyages and alter the timeliness of delivery schedules.

However, owners who have upgraded their fleet to incorporate new and more efficient vessels are likely to lead the competition in terms of fuel economics and savings.

Cargo volume allocations are increasing to the mid 90%s and beyond from around levels of about 85% for some, for June and July, according to sources. However, a few carriers are not as full as hoped and this has dampened box rates in the second half June. The new alliance structures, such as the 2M Alliance, are proving to be unpredictable in their cargo loadings with some being delayed at source or at the arrival port.

This is causing some difficulties for shippers and freight forwarders as they seek to manage the overall supply chain.

Increasing capacity is leading to difficulties in ships reaching their full loading capacities. Some carriers are introducing their newbuilds into their schedules which could lead to lower than anticipated cargo allocation percentages.

Slow steaming may help reduce the impact of this capacity increase as well as alleviate the port issues but could further frustrate shippers, when added to the Emergency Bunker Surcharges that some carriers are implementing, sources said.

Source: Platts

Managing Change – Oil Condition Monitoring & the 2020 Global Sulphur Cap

In International Shipping News 15/06/2018

Driven by the International Maritime Organization (IMO), the marine industry is currently going through important and significant environmental changes through a reduction in sulphur content of marine fuel from 3.5% to 0.5%. To fulfil this new requirement, stakeholders in the industry are debating and considering the merits of alternative fuels, different engine equipment and configurations as well as advances in scrubber cleaning technology. Fuels and lubricants both come into contact with engine systems so any changes that occur will have an even wider impact on marine vessel equipment. To minimize the impact of any negative consequences it is important to manage this change effectively.

Managing change effectively is an attitude supported in wider industry sense. Henry Mintzberg and John Kotter are change management experts and both say we must manage change and continuity simultaneously. Kotter says “What we do not do well is identify the most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.”

One method to manage the effects of the Sulphur Cap is through monitoring of the in-service lubricant. Oil Condition Monitoring (OCM) utilises the science of tribology, and enables the condition of a vessel’s engines and other on-board equipment to be monitored. OCM provides an early warning system which when used in combination with fuel analytical information, helps to avoid costly engine failure and downtime and has an important role in preventive maintenance programs.

The best analogy is that of a blood test taken by your doctor to identify, predict and help combat on any potential health issues.

During the combustion cycle, Sulphur in the fuel is released forming SO2 (Sulphur Dioxide) and some of this forms SO3 (Sulphur Trioxide). Water contained within the scavenging air and from the combustion process reacts to form Sulphuric Acid. It is important, therefore, to monitor and control any negative and potentially damaging effects of acidity and alkalinity.

In built mechanisms in the form of oil additives are designed to improve the lubricant performance of the base oil. The choice of additives is determined by the specific application. For the 2020 change, alkalinity additives (like Calcium Carbonate) will be useful to combat oil acidity.

Why Alkalinity Additives? Most modern two stroke engines have been designed for operation on high Sulphur residual fuel.

Consequently the cylinder oil used will have a high base number (BN). If the acid is not neutralized, corrosion of iron will occur and this is the primary cause of corrosive wear for liners and piston rings. Conversely a vessel using low and ultra-low sulphur fuel will produce less sulphuric acid during the combustion process. If the BN of your cylinder oil is too high this may mean that the oil is too alkaline and then compounds can be formed which may cause damage. Some slow speed engines suffer from alkaline deposits building up on the piston crown which can damage the oil film between the piston ring and liner. This can lead to scuffing and seizures. Deposits may also form between the piston rings and pistons, preventing free movement of piston rings and increased liner wear.

Why is OCM important then? Degradation of the oil occurs over time as these protective additives are consumed and engine breakdown products build up. It is important that these changes are monitored and acted on.

Total Base Number (TBN) in a marine oil generally ranges from approximately 15-80mgKOH/g and is analyzed by Potentiometric Determination (Test method: ASTM D4739). This method, for used oil, uses a less polar solvent and weaker titrant than the fresh oil version. The sample is dissolved in a solvent mixture and then titrated with standardized hydrochloric acid. The end point (inflection point on a titration curve) is detected by a change in potential of an electrode connected to a voltmeter/potentiometer and is reported in milligrams of potassium hydroxide equivalent per gram of sample (mg of KOH/g).

All OCM data from the lab (not just TBN) is compared to what is known about the equipment and the lubricant.
The following table shows a range of OCM laboratory tests and their relevance;

The data is trended graphically over time and displayed in sections on lubricant and additives (oil condition monitoring) and wear and contaminants (equipment condition monitoring). An excerpt from a recent report is given below:

Typically, the higher the BN, the more acid it will be able to neutralize. As the oil becomes contaminated with acids the base number will drop.

Expert independent advice is provided using CIMAC guidelines (from the International Council on Combustion Engines) as well as a simple summary using easy to read icons for Satisfactory, Caution and Action.

In conclusion, we remember Henry Mintzberg’s and John Kotter’s approach that we must manage change and continuity simultaneously. Participating in an established lube oil testing program can help vessel operators to manage operational risk, comply with 2020 legislation and optimize costs during these changing times. For this to happen it is important that you partner with an experienced and informed supplier that can help monitor this change and provide impartial fuel and lubricant advice. Veritas Petroleum Services has an important role in OCM and Fuel Testing preventive maintenance programs. Our Rotterdam Laboratory has the very latest analytical technology, automation and robotics for the testing of lubricants and fuels.

Source: Veritas Petroleum Services Group