Those owners who built up reserves, did not over-extend themselves with newbuilding orders and were not caught out badly by the downturn will take heart from an upbeat view from London-based shipping accountant and Maritime London member Moore Stephens. This year will be a good year for anyone in the shipping industry with cash and access to finance, it says.

According to the firm, 2010 will be a tough year for shipping, and toughest of all for the shipyards. But it predicts this will be a year of opportunity for anyone with cash and access to finance, as they pick up cheap assets from failing projects.

Julian Wilkinson, head of the Moore Stephens Shipping Industry Group, says: “And it will also be the first year in which we will see a new kind of shipping finance, as cautious but forward-looking bankers begin to enquire about the environmental performance of ships and companies they are being asked to fund. Then we shall see a lot of people going green, and those without access to credit looking green with envy at those who have it.”

He says that while shipowners expect tough markets for the next year a growing global economy, booming scrapping and a fast-diminishing orderbook-overhang may mean that the markets will be less tough than expected.

“Combine that with record low global interest rates, and things don’t look too bad for owners who are not over-extended.” Shipping is already the greenest of all forms of transport Moore Stephens claims and “globally, it is much greener right now than it has ever been, as a large proportion of the fleet is going into lay-up, the scrapping of old tankers is reaching record levels, and those ships still working are doing so at slow and very economical speeds”.

This year shipping, the firm expects, will see more green costs forced on it. IMO will “act slowly”, and it will be some time before we see a shipping carbon tax or trading scheme. Nevertheless there are already pressures from charterers to measure the green performance of ships, because they want to be able to tell the end-consumer how green their supply chain is. The result will be that older and less fuel-efficient ships will find it harder to get charters, and will face lower rates, while forward-looking owners will have to invest in a green agenda.”

In an article in the latest issue of the firm’s shipping newsletter, Bottom Line Mr Wilkinson says: “For the first time in a decade, shipping bankers can get a decent and certain return on their dollar. Credit is restricted, loan pricing is up strongly and no banker now has to look for an excuse to turn away marginal business. Stronger clients and higher margins point towards happier bankers, even more so where the banks foreclose on the weakest borrowers.”

He adds: “In the shipyards, the shortage of credit is being used by shipowners to push back delivery dates and renegotiate contracts. The effect is less profound in China, where Chinese banks and the government are taking up the slack. The big European yards are expecting big cruise orders, as the global economy begins to look up. But in the world’s leading shipbuilding nation, South Korea, we may see mass lay-offs if work dries up.

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Freight derivatives broker Clarkson Securities has announced that it has brokered the first ever trade of the Container Freight Swap Agreement (CFSA), between Morgan Stanley, the global investment bank and Delphis, the regional container shipping specialist.

This new container freight derivative is an over the counter cash-settled swap that will settle against the Shanghai Shipping Exchange’s newly created Shanghai Containerised Freight Index (SCFI). The index is comprised of freight rates from Shanghai to a number of mainline ports around the world giving USD per TEU assessments on a range of tradelanes. Rates are assessed on an ‘all in’ basis for spot shipment by 30 panellists, comprising of container lines, non vessel operating common carriers and freight forwarders.

Commenting, Alex Gray, ceo of Clarkson Securities said: “ We have been working closely with the Shanghai Shipping Exchange to ensure the SCFI will be a suitable mechanism for container freight derivatives such as this and firmly believe this index heralds a new era for marine risk management. As well as providing an interesting product for financial investors, the CFSA will allow industry players to cover their own exposure against an agreed barometer of the market without affecting their competitive advantage. By allowing carriers to protect themselves against market fluctuations better competitive conditions for all will be created.”

While the dry and tanker markets have been trading freight risk for a number of years based on independent assessments by the Baltic Exchange, to date no such option had existed in the container industry.

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Mutual shipping industry delay insurer The Strike Club reports a retention rate of about 95% although premium income will be down despite a 5% premium increase this year. Bill Milligan, chairman and chief executive of SC Management, said that an overall good result had been achieved in the face of very difficult conditions for shipowners and charterers. And it demonstrated that more than ever operators wanted financial protection against strikes and other delays.

But he conceded: “Of course, premium income will be down; lower charter rates, lower insured amounts, the depressed exchange rate for the euro, will all contribute to the reduction. However, the important thing is that members and brokers are showing strong loyalty to The Strike Club brand, and they are realistic about the increasingly volatile conditions, economic and socio-political, which threaten the prospects for a sustained recovery in the shipping industry.”

On claims, Mr Milligan said that all mutuals have reported a distinctly more benign claims curve over much of 2009, partly reflecting the dismal state of freight markets and the greatly reduced number of ships trading.

“However,” he said, “in the case of The Strike Club, which offers operators cost-effective, constant cover against delays, based on a vessel’s daily costs, we expect the claims environment to remain extremely precarious as a result of labour disputes and many other risks. It could be argued there are fewer strikes because employees are afraid of losing their jobs or work time. Conversely, substantially weakened economies – such as we are seeing at present in parts of southern Europe – are provoking continuing industrial strikes as workers see their earnings reduced by inflation and higher taxes, while there is job uncertainty over plans to privatise ports. So unrest and disorder will not go away.”

The club has recently widened some of its cover of the discovery of drugs on board to include any contraband items – such as drugs, arms, munitions, alcohol, tobacco or precious metals, provided that the member has co-operated fully and at all times with the relevant anti-trafficking agencies of all the countries between which the ship trades. The club added cover for delays caused by piracy in February 2008 and since then has received four claims under its war risk policies for vessels hijacked by pirates.

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Asian Glory

The UK-flag vehicle carrier Asian Glory, hijacked on 2 January, has again been used to support other pirates in trouble, according to press reports. Earlier this month the ship was reportedly used to take the pirate gang off a hijacked dhow they were using as a mother vessel when she ran out of fuel.

Now the Zodiac Maritime-managed ship has been used to bring back a pirate gang in a 10 metre skiff which had got into trouble.

Late last year a hijacked Singapore flagged container ship, the Kota Wajar, was used to pick up pirates who had kidnapped a British couple from their yacht together with the two victims, who remain captive.

The use of the Asian Glory to support other pirates could be a worrying development, the International Maritime Bureau (IMB) told London Matters. Spokesman Cyrus Mody said that the IMB had yet to confirm that any actual support had taken place, but it had issued a warning in late January when the ship first started moving under pirate control.

The Asian Glory is believed to now be back at anchor near Danaane on Somalia's Indian Ocean coast. She has a crew of 25 comprising 10 Ukrainians, eight Bulgarians, two Romanians and five Indians, but no British nationals despite being UK registered.

While Zodiac has been tight-lipped about any negotiations over ransoms for either of the two ships it manages that were hijacked within days of each other the Bulgarian news agency BTA reported the pirates were demanding about US$15m for the release of ship and crew. The lower figure of $3m was reportedly demanded for the other Zodiac vessel, the St James Park.

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Maritime London will be publishing a directory containing the contact details of UK based companies providing professional services to the international shipping industry.

Available online, the directory will also be distributed at the Maritime London pavilion during Posidonia 2010 and by post to shipping companies globally.

All companies will be provided with a free entry, but advertising space and enhanced listings are also available.

See www.maritimelondon.com/media_pack2010.pdf for full details or contact Will Bixby.
E: wbixby@navigatepr.com

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Regulations for the restriction of air pollution from ships will mean extra costs and responsibilities for shipowners, a leading expert at BMT Marine & Offshore Surveys Ltd., a subsidiary of BMT Group, has warned.

Speaking at a London insurance market seminar organised by the marine consultancy, principal surveyor Gerry Williams said: "Burning ships' fuel in an environmental manner is a huge challenge."

Mr Williams said that fuel technology is a discipline, and a science, on its own. Most shipowners currently use a fuel mix containing on average worldwide 2.6% sulphur, but Marpol Annex VI regulations specify a reduction in July 2010 for ships to 1%, and in 2015 to 0.1% in so-called "environmental control areas."

The control areas are the English Channel, North Sea and Baltic Sea. Ships can still burn 1.5% sulphur in the Mediterranean and potentially 4.5% outside the European Union. The US has similar legislation pending, which would create control areas 200 nautical miles off its coastlines. One of 24 nautical miles off California is already in force and has its own separate controls, one of which sets all fuels to or below 0.1% by January 1, 2012.

"Potentially, this could result in some ships carrying four different fuel types at any one time. The complex changeovers will inevitably increase the opportunity for errors which in turn may lead to costly claims," explained Mr Williams.

In order to comply with the legislation, a ship's officer will have to demonstrate in his record-keeping that he has changed fuel in sufficient time before crossing into a control area. The changeover can be done in approximately one hour, but if it is done too quickly "there is a danger you can gas up the engine." A rapid change of temperature can also cause thermal shock or seizure of the fuel pumps.

Commencing in 2010, a raft of legislation limiting sulphur in marine fuels to 0.1% will come into force. This includes EU Sulphur Directive (2005/33/EC) for most ships 'at berth' in EU ports (1/1/2010), CARB Regulated California Waters regulations, mandating the use of ISO8217: 2005 DMA or DMB grade fuels in main and auxiliary engines and auxiliary boilers (1/1/2012) and MARPOL Annex VI for fuel oils to be used inside Emission Control Areas (1/1/2015). Currently, according to a survey, the average sulphur content in heavy fuel oil is 2.46%, although some environmentally conscious owners already have a sulphur limit of 1.5% in their specification.

Yet there is little experience around of the likely effects of using 0.1% sulphur, said Mr Williams, and this experience may come at a premium as this legislation comes into force.

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The UK P&I Club has published a summary of the main existing EU shipping-related legislation and new developments in its Legal Briefing “An update on EU environmental legislation” (February 2010).

The publication compares liabilities and sanctions arising from four recent EU directives, encompassing their scope and implementation, with key features set out in tabular format. Ship owners and charterers have to reckon with increasingly demanding EU environmental legislation impacting on their operations. This encompasses criminal consequences for particular activities by owners, operators, masters and crew. A recent directive set out the circumstances in which ship-source discharges of polluting substances constitute a criminal offence.

In November and December, three more directives are due to be implemented. Two are concerned with the provision of penalties by individual countries for specific shortcomings in respect of pollution and environmental protection; and a third with waste, including marine transportation and discharge at sea.

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Mike Ball was elected last week to succeed Chris Fisher as chairman of the International Bunker Industry Association (IBIA), with effect from April. Currently manager of the bunker department at Gearbulk (UK) Ltd, Mr Ball has extensive experience as an engineer officer at sea and is a former director of H Clarkson & Co, with responsibility for its bunker broking desk.

Speaking at crowded sixteenth IBIA annual dinner at the London Hilton this Monday (15 February) Mr Ball said, "My aim is to make IBIA even more accessible than it already is."

Urging members to communicate their news and concerns on a regular basis, Ball stressed, "If we do not become involved in those issues which impact on our members, we face the increasing risk that our industry will be exposed to rules, regulations and standards imposed by third-party bodies which do not understand how we work, and over which we have little control."

He announced IBIA was pressing ahead with plans to establish an internationally recognised professional qualification for the bunkering industry. The speed and quality of communication between members has now been enhanced by the launch of a new, user-friendly IBIA website which includes, among other initiatives, a paperless billing facility.

Mr Ball urged members to make use of the new website's sophisticated facilities. He also emphasised that IBIA is growing, both in terms of numbers of members and its visibility to global markets. Noting that IBIA now has in place a very proactive executive committee in Singapore, in addition to its existing South African branch, he concluded, "This increasing representation in local markets is a sure indication of IBIA's growth."

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How not to a plug a hole

The Maritime and Coastguard Agency says it has detained a Russian ship after it discovered a crack in the hull had been blocked by a rag.

The Russian registered cargo vessel Baltiyskiy 110 was issued with a Detention Notice due to failure to comply with merchant legislation in Fowey, Cornwall.

MCA Area Operations Manager (South West) Tony Heslop said: “This is a very serious breach of International Maritime Legislation and the vessel after inspection was detained.”

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