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Maritime London

London Matters

24 March 2009

A free fortnightly publication produced by Maritime London

Maritime London members promote UK in Istanbul
Report highlights challenges facing UK maritime sector
Insurers face uphill battle
Technical people still in demand
Clarksons: “challenging market conditions ahead”
New mediation service for shipping
James Fisher confident despite credit crunch
Greek-controlled fleet: fewer but bigger ships
TT Club in port safety initiative
Michael Everard appointed IMarEST president

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Maritime London members promote UK in Istanbul


Ian Luder
Lord Mayor of London

A maritime delegation of 18 from the UK joined the Lord Mayor of the City of London in Turkey last week, promoting the UK's financial, business and maritime services.

The Turkish shipping community was able to benefit from advice from a panel of leading UK experts on a wide range of issues including over capacity of the vessel orderbook; where owners could hope to find finance in the future; how to approach shipyards for postponed deliveries; ship quality and vetting; freight derivatives; legal alternatives for dispute resolution and environmental issues.

Hosted by the Turkish Chamber of Shipping and chaired by Michael Drayton of the Baltic Exchange, the panel consisted of Jonathan Kemp (Eversheds), Neil Rokison (Galbraiths), Alistair Johnson (Holman Fenwick Willan), Nigel Russel (HSBC Insurance Brokers), Nick Burgess (Ince & Co) Ian Teare (Norton Rose), David Peel (RightShip UK) and Karl Lumbers (Thomas Miller). The Lord Mayor delivered a keynote address to the conference focusing on the benefits of the UK's expertise in the shipping market and outlining the potential difficulties facing the international shipping community. Other companies involved included BMT Harris & Dixon, Lloyd's Register, COSMIC, Clyde & Co and V Ships.

Maritime London chief executive Doug Barrow said:

"This was a hugely successful trip and our members met a good cross section of the Turkish maritime community. The collective expertise of our group was second to none and the feedback we have had very postive."

He added:

"Our thanks to the Turkish Chamber of Shipping for hosting such a first class event and to the help and assistance provided by the British Embassy and the UKTI team at the British Consulate General."

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Report highlights challenges facing UK maritime sector

Lord Myners report covers maritime issues

The Professional Services Global Competitiveness Group (PSGC) has published a report into the medium and long-term challenges facing professional services in the UK, including the maritime sector. Co-chaired by the Financial Services Secretary Lord Myners and Sir Michael Snyder, the group’s findings will be reported to the Chancellor.

The report calls on government support and encouragement for the maritime cluster to develop a medium- to long-term strategy, including the establishment of a Maritime Services Committee involving Government representation; ensuring the continued competitiveness of the UK’s Tonnage Tax; protection of the UK’s seat on the International Maritime Organisation (IMO); and measures to boost the numbers of students in maritime subjects.

The group’s report also outlines a number of areas of general focus for the Government, the professional services industry and professional bodies, to ensure that the sector remain competitive, including:

• The role of professional services firms in setting global standards and promoting good corporate governance
• Raising skills levels across the economy, to the benefit of both professional services firms and their client companies
• Combining a tradition for quality and expertise with flexible working practices to deliver innovative products and services
• The UK's continued attraction as a global headquarters for international professional services firms
• Seeking opportunities for synergies with other major professional services centres, particularly in emerging markets
• Continuing to develop an open and constructive relationship with government.

Maritime London chief executive Doug Barrow said: “This is an important and timely report and builds on the work of Maritime London. The UK’s maritime services sector is an important component of the UK economy and working together with the government we can ensure that the UK remains a world beater.”

Financial Services Secretary Paul Myners said: "The UK's professional services industry will continue to be an immensely valuable part of our economy. This report sets out both a compelling vision for the sector over the next 10 to 15 years, and highlights further work required to ensure London retains its place as the leading international financial centre."

Insurers face uphill battle

Marine insurers face an uphill battle as premium income falls dramatically due to reduced fleet values and cargo volumes despite an “encouraging decrease” in claims according to AXA Corporate Solutions. The net result will have a significant negative impact on the bottom line at a time when there is no investment income to bolster results.

Cedric Charpentier, chief underwriting officer – cargo, for AXA Corporate Solutions said that after a number of exceptional years the 2009 outlook for cargo insurance, which makes up about half the total marine insurance, was looking “scary". After five years of massive increases, world growth was projected to fall to half of one per cent in 2009, its lowest rate since World War ll.

Speaking in Miami during the spring meetings of the International Union of Marine Insurance's executive and seven technical committees, he noted: “Advanced economies were projected to be almost all in recession, and while emerging countries were still showing high growth, there were significant reductions compared with 2008. The severe downturn of the world GDP had caused a collapse in demand for manufactured goods from western countries. This, combined with a trade credit shortage, had resulted in a similar collapse in international trade of goods. Between the last quarter of 2008 and the last quarter of 2007, there had been a drop of 45% in world trade values.”

He concluded: “All these factors clearly demonstrate a shrinking of insurable values that will have a direct and massive impact on world marine insurance income.”

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Technical people still in demand

A survey by international shipping recruiter and Maritime London member Faststream has revealed that despite economic difficulties, salaries and demand for technical people within shipping companies and classification societies remain firm.

Based on data collated by the company’s recruiters in the UK, USA, Singapore and Norway between September 2008 and February 2009, the report shows that the average salary across all sectors currently stands at £55,620. The figures reveal that ship operators and managers pay the best salaries (average £59,583) and offer the best packages. Nearly three quarters of candidates placed within shipping companies were offered some form of bonus scheme, compared with only a quarter of those placed with classification societies. Shipping companies are also more likely to offer pensions and private healthcare.

The report also found that the average age of a technical superintendent placed within a company was 41. Faststream says that trainees in the shipping sector are still in demand, particularly from classification societies. The average salary in 2008/09 was £32,843 with an average of eight weeks required to fill the role.

Faststream managing director Mark Charman said: “Faststream’s research shows that despite the doom and gloom, there are still positions which need filling and high quality candidates are in demand. We will continue to monitor the market and update this report later in 2009. We are also currently compiling statistics for commercial roles such as charterers, brokers and managers and hope to publish the results by early summer. "

Click here to download a full copy of the report.

Clarksons: “challenging market conditions ahead”

Although a USD 29.8m charge to settle a legal dispute with Russian shipowners Sovcomflot and Novoship cut pre-tax profit from USD36.4m in 2007 to $25.85 last year shipbroking and shipping services group Clarksons reported a 24% increase in underlying operating profit to a record USD55.6m. Revenue soared by 44% to USD355.5m.

However chief executive Andi Case said that so far this year trading conditions in some markets had caused a significant decline in revenue.

He nevertheless struck an optimistic note saying: "Whilst we expect market conditions throughout 2009 to remain challenging, revenues will continue to be supported by our forward order book and the US dollar exchange rate should they remain at the current level."

Clarksons did though caution in its statement that it was not immune from the crisis in the newbuildings market as ship values plunged, owners faced cash flow and finance problems and newbuilding contracts were put under threat.

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New mediation service for shipping

The Baltic Exchange and the London Maritime Arbitrators Association (LMAA) have teamed up to establish a mediation service for shipping and commodity related disputes. Drawing on the experience of both senior Baltic Exchange members with hands on shipbroking expertise and LMAA mediators, the service will offer companies an alternative to arbitration and court litigation as a means of resolving disputes.

Governed by the LMAA/Baltic Exchange Mediation Terms (2009), the service will offer a flexible means of resolving disputes – mediations may be conducted either physically in one location or by video link or correspondence between the parties and the mediator.

Baltic Exchange chief executive Jeremy Penn said: “Collectively Baltic Exchange members have an unrivalled experience of all aspects of commercial shipping. We expect this new service to be popular with owners, charterers and traders looking to avoid lengthy and costly legal proceedings.”

LMAA president John Tstasas said: “Mediation allows companies which work together regularly to come to an amicable commercial solution. Mediation is not a new concept, but has grown in popularity in recent years. It allows for creativity in resolving disputes to enable parties to continue doing business together.”

Mediators operating the service will be both Baltic Exchange members and as a minimum supporting members of the LMAA, and will be trained as mediators.

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James Fisher confident despite credit crunch

Diverse shipping services group James Fisher has reported a strong performance for 2008 revenue and profit from operations both up by over 28%, to GBP233.6m and GBP27.5m respectively.

In its statement the company says: "2008 proved to be an excellent year for James Fisher. Group revenue and profit from operations were both up strongly and, once again, our cash flow was impressive. The key to our performance was good organic growth in the marine support divisions of Offshore Oil, Specialist Technical Services and Defence.” However operational issues with new tonnage hit the company's Marine Oil division (James Fisher Everard) with divisional profit falling 30.5% to just under GBP6m.

The company says there were phasing problems concerning the fleet renewal programme and issues relating to the new European Maritime Safety Agency (EMSA) contract. The situation was made worse when Svithoid Tankers, the Swedish owner of two of the company’s bareboat charters, went into receivership. These problems have now, James Fisher says, been resolved. Looking ahead the company says that it is difficult to comment too definitively in an economic climate which is changing rapidly and mainly for the worse.

“However,” it says, “the immediate outlook for the divisions has not changed from last year and the company in 2009 is trading to management expectations. On present evidence the company is well placed, with a proven track record, to continue to produce good growth and further value for our shareholders."

Greek-controlled fleet: fewer but bigger ships

Greek fleet is still the world's largest

The Greek-controlled fleet decreased slightly in number of vessels but increased in deadweight and gross tonnage terms, according to latest Lloyd’s Register – Fairplay figures released by the London-based Greek Shipping Co-operation Committee (GSCC).

Greek interests now control around 8.2% of the world’s total number of vessels in service and on order, 15.2% of the world fleet deadweight, or 13.2% of the world fleet expressed in gross tonnage, against 8.7%, 16.4 % and 14.01% respectively, last year. In terms of ships on order, the percentages are 10.3%, 16.2% and 14.4% respectively. The Greek owned fleet remains the first in the world.

As of 27 February Greek interests controlled 4,161 vessels of various categories, totalling 63.6m dwt and 156.2m gt, including 1,072 newbuildings of 53.4m gt still on order. The latest figures represent a decrease of 12 vessels, but an increase of 2.6m dwt and 1.6m gt. The Greek-flag, has also decreased, now comprising 1,121 ships, including 356 on order, against 1,197 ships in 2008, including 422 vessels then on order.

TT Club in port safety initiative

Ports and terminals insurance mutual TT Club and equipment manufacturers trade body PEMA (Port Equipment Manufacturers Association) are joining forces to promote best practice in designing safe port operating equipment worldwide.

The move comes after PEMA’s recent AGM in Amsterdam, where Laurence Jones, director of global risk assessment for the TT Club, presented the results of his recent research into causes of equipment accidents and loss in the port and terminal sector.

A TT statement says: “Given its position as a leading insurer globally to the marine terminal market, TT Club has a wealth of insight into the key factors contributing to such accidents.”

“We are delighted to co-operate with the TT Club in increasing knowledge and awareness of such a vital aspect of the port equipment business,” said Ottonel Popesco, PEMA president.

The club says its research shows that, although human factors were the major cause of accidents, existing systems and technologies could be included in the design of equipment to help operators avoid accidents.

Mr Jones also called for continuing development of new technology to improve the safety of personnel and equipment, citing the example of quay-crane booms colliding with ships – a frequent accident that is easily prevented by the installation of a simple boom anti-collision electronic sensor.

“For about USD10,000 per crane this alone can save millions of dollars in damage as well as injuries and downtime”, says Jones.

“Due to price sensitivity, crane manufacturers often do not provide boom anti-collision as standard or offer a low-cost mechanism that does not provide adequate protection. My aim is to encourage all terminals to specify electronic boom anti-collision sensors so that crane manufacturers fit them as standard.”

Michael Everard appointed IMarEST president

Michael Everard CBE has been appointed the 107th President of the Institute of Marine Engineering, Science and Technology (IMarEST) at its 120th anniversary AGM.

Outlining the challenges facing the institute, Michael Everard said:

"The Institute was never more influential than it is today and the problems facing the marine world never more daunting. I come from a shipping background and understand only too well the difficulties that industry is suffering but it seems we should be engaged on many fronts. The 'credit crunch' has severely damaged global trade and the shipping industry, its chief source of moving commodities around the world. Charter rates are at an all time low and shipbuilding is in turmoil. Climate change is an ever increasing threat to the future well being of our planet and marine and ocean scientists hold the key to our understanding of the major changes that are manifestly endangering our long term existence. The supply of the growing energy needs of an ever developing world in an environmentally safe and acceptable manner was never more important. Marine renewable energy is a major element in the battle to provide for the future.”

"We, as the world's largest marine science and engineering professional body, can contribute and help in many ways to resolving these issues through innovation, engagement with the key maritime agencies IMO, UNCLOS, IOC and by contributing to the Institute's prime objective of the development of Marine Engineering, Science and Technology. If ever an Institute such as ours was needed, now is our time.”