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2 November 2009
A free fortnightly publication produced by Maritime London
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Lord Mayor supporting UK maritime
services
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The Lord Mayor of London emphasised the role
that the corporate debt market could have on the future
financing of Indian shipping.
Delivering the key note speech at the 5th
Indian
Shipping Summit held in Mumbai last month, the Lord
Mayor said that a functional Indian corporate debt market
would bring many benefits to Indian companies. “This would
generate savings of up to £2.17bn, if Indian corporates
moved around 30% of borrowings from banks to the corporate
bond market and it could help to tackle investment in shipping,
- ports infrastructure and shipping finance.”
He also noted that the two countries shared
synergies in maritime services, especially in the areas
of shipbroking, insurance, shipping law and training.
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The RightShip team in India
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The event, organised by Maritime London member,
Seatrade, featured a panel session, Finance & Management:
Unprecedented Challenges and Uncertainties, with Nigel Thomas
of Watson Farley Williams and exhibiting was RightShip (UK),
both members of Maritime London. Other members present were
Dr Martin Stopford of Clarkson Research Services and Jesper
Kjaedegaard of the Chamber of Shipping. The Lord Mayor was
accompanied by Baltic Exchange chairman Mark Jackson.
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The UK P&I Club says the 2009 policy year
is showing signs of lower levels of claims due to the downturn
in the world economy and its effect on shipping markets.
The six-month period between February and August 2009 has
experienced an overall improvement in claims reserves.
The club has announced a 5% general increase
in its premium rate for all members from February 20 next
year, along with any further increase to mutual members
to the International Group reinsurance premium for 2010.
The club's board said it was "is imperative that the mutual
premium level in 2010 is set with minimal reliance on investment
income."
The club saw its investments in the year
ending August clock up a 6.85% rate of return, equivalent
to USD 65m. The club said this was due to a switch towards
investment in equities which had performed well. Capital
was up USD34m to USD 368m.
Club chairman Dino Caroussis said: "The Club
is pleased to report that the claims pressures and market
wide investment losses that strained the Club this time
last year have shown early signs of respite, with claims
trending downward and investments producing significantly
improved returns. The strong investment results of around
seven per cent for the first half of this year in part reflect
the decision of the Board at their January meeting to moderately
increase the investment risk by returning to the equity
markets which we had exited in October 2007. The Board remains
optimistic that the second half of the year will allow the
Club to build further on this solid base."
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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.
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Japan’s Ocean Policy Research
Foundation has called on the shipping industry to develop
and use zero emission vessels by the late 2030s and establish
an international research institute to provide the industry
with an independent viewpoint. The foundation, which has
NGO Special Consultative Status to the United Nations, was
in London last week promoting a new report “Maritime Society
in the Era of Global Warming”.
Taking a long-term perspective, the report
assumes that by 2050 the global population will increase
to 8.7bn and that per capita GDP will increase from USD
6,912 to USD 22,280 per person. The foundation believes
that this will lead to a growth in world seaborne trade
to 72,498 bn ton-miles with container shipments showing
a sharp rise from 490 bn TEU-miles in 2005 to 2,894 bn TEU
miles in 2050. Without efficiency improvements, the foundation
believes that the shipping industry will be responsible
for the emission of 2.4 bn tons of CO2 by 2050.
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New
shipping industry guidelines on vessel scrapping stress
the need to follow the new IMO Convention on Ship Recycling,
which was adopted in Hong Kong in May. The Industry Working
Group on Ship Recycling (which comprises ICS, BIMCO, INTERCARGO,
INTERTANKO, IPTA, OCIMF, IACS and ITF) has published new
‘Guidelines on Transitional Measures for Shipowners Selling
Ships for Recycling’.
The move comes as European governments, including
the UK's, are increasingly applying the Basel Treaty to
shipping. The shipping industry organisations do not accept
that Basel applies to shipping.
The Working Group says the Guidelines are
intended to help improve safety and environmental conditions
in recycling yards in advance of the entry into force of
the new IMO convention. They reflect the new ‘cradle to
grave’ responsibilities of shipowners and ship recyclers,
from the time of a ship’s construction to its final demolition,
and explain the various actions that will be required, and
which should be approved by flag states and authorities
in ship recycling nations.
In particular, the Guidelines encourage the
preparation and maintenance of inventories of hazardous
materials, in order to reduce risks to the safety and health
of workers in ship recycling yards. They also recommend,
in advance of the Convention coming into force, that shipowners
endeavour to sell their redundant ships only to recycling
facilities that meet the new IMO standards.
In a statement the Working Group says: “In
the process of recycling ships that have reached the end
of their working life almost nothing goes to waste. Ship
recycling is undoubtedly a green industry and employs a
large workforce in developing countries, the majority of
ship recycling facilities being located in Asia. However,
while the principles of ship recycling may be sound, the
working practices and environmental standards in some recycling
yards can sometimes fall short of internationally acceptable
standards.”
It adds: “The shipping industry therefore
believes that adherence by shipowners to its ‘Transitional
Measures’ should be regarded as a sign of good faith. The
Guidelines represent the commitment of the shipping industry
to implementing the new global recycling standards prior
to the entry into force of the IMO Convention, which the
industry hopes will be ratified as soon as possible.”
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Maritime London member Lloyd's Register Group has reported
annual income up 38% for the year ending on June 30, standing
at £820m largely on the back of exchange rate shifts.
At the same time, LR's marine portfolio fell and the group
warned that the dearth of newbuilding orders was likely
to mean hard times in the medium term.
LR chairman David Moorhouse said: "In Oil & Gas we have
seen an exceptionally strong performance both through
acquisition and organic growth, supported by a strong
market and a strengthening oil price. In contrast, our
Transportation business has been greatly affected as governments
around the world defer or cancel contracts. This same
deferment and cancellation effect has also been encountered
in our Marine business, but here the lead-time for new
construction has afforded us a twelve to eighteen month
period in which we have been preparing ourselves for the
hard economic challenges ahead."
"We recognise that our strong financial performance
this year should be seen in the context of three significantly
more challenging years ahead and the Group-wide cost reduction
work already begun. This has added to our performance
in the reported period and stands us in good stead for
the challenge ahead."
CEO Richard Sadler added: "While we have not felt the
full effect of the recession yet, there is no doubt that,
if nothing else, the scarcity of marine new building orders
over the past year is going to have a major effect on
our new construction and marine component services in
the near future. We are also seeing continued pressures
in an increasingly competitive market."
Meanwhile LR has launched a six-part audio
podcast series addressing the issues that industry
and governments will be discussing during the 15th Conference
of the Parties (COP) in Copenhagen, December 7-18, 2009.
Episode one features an interview with Dr Anne-Marie Warris.
She is Lloyd’s Register’s leading global climate change
expert and will be representing the Group during the Copenhagen
negotiations. Dr Warris provides an overview of the Copenhagen
conference, including what to expect, who might play a
key role, which nations will be at the centre of negotiations
and a closer look at which industries are likely to be
most affected by any possible global deal that may be
signed during the conference.
Episode two will focus on marine and shipping issues
and addresses the possible inclusion of the shipping sector
into a global climate change deal while later ones will
address issues related to the land based transport sector,
the energy sector and the aviation sector as well as the
role that global climate change standards may have in
cementing the deal in Copenhagen.
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Shipping accountant and consultant Moore Stephens has
warned that shipping companies may have to alter the way
they prepare their accounts to comply with changed international
financial reporting requirements.
Moore Stephens Technical Partner David Chopping says,
“A few years ago, the International Accounting Standards
Board (IASB) took note of the complaint that it kept changing
things. It therefore agreed to have a few years when standards
didn’t change - a so-called ‘stable platform’ period.
But that period ends in 2009 and, for companies with a
December year-end, there are 26 new or changed standards
to consider, as well as some new interpretations. In practice,
many of the changes are small, and no company will be
affected by all of them. Some are significant, but have
been around for a long time. A few have come in during
2009.”
He adds: “Disclosure on financial instruments will change
again this year, with companies having to categorise financial
instruments carried at fair value between those at market
values, those at values based on market data, and those
where management has had to use estimates. Companies which
have treated tonnage tax as income tax will have to change
their practice, as the standard-setter has clarified that
this is not an acceptable accounting treatment.”
Some companies can also consider whether they wish to
make massive changes to their accounts this year. In July,
the IASB issued the International Financial Reporting
Standard (IFRS) for SMEs (small and medium-sized entities)
which, in principle, is immediately available to companies
which are not listed and which do not have a public interest
dimension. This standard replaces all other standards,
uses simpler accounting treatments and requires less disclosure.
But Mr Chopping warns, “Although this sounds good, there
is a catch - or rather two catches. Firstly, there are
many jurisdictions where the standard is not currently
available. Companies in the EU, for example, will not
be able to adopt it now as it has not yet gone through
the necessary process with the European Commission. Secondly,
the simpler treatments which the standard for SMEs requires
are not always the ones that companies would choose. For
example, they prohibit all capitalisation of borrowing
costs, which must be written off immediately as an expense
- not necessarily appealing if you are in the middle of
a newbuilding programme.”
A few things have not changed in the year. Mr Chopping
explains, “It seems unlikely that impairment issues will
disappear. Companies will again have to consider whether
they can support the carrying value of their fleets. For
those that have previously used discounted expected cash
flows to support carrying values, there will be a difference
this year: there will be a year’s worth of actual data
to be compared with last year’s projections. This is potentially
helpful for those who have met or exceeded their previous
estimates, but not quite so helpful for those who haven’t.”
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Greek shipowners look set to face higher wage costs following
a new deal on pay, bringing to an end 10 months’ of intense
negotiations. The Pan-Hellenic Seamen’s Federation (PNO)
signed a memorandum of agreement on 26 October with the
Union of Greek Shipowners.
The deal will give both officers and ratings on board
ocean-going vessels over 4,500 tonnes a basic pay increase
of 3.5 per cent backdated to 1 January 2009, as well as
a 3.5 per cent rise on all other allowances.
John Halas, PNO general secretary, commented: “The increase
obtained is almost five times higher than the inflation
rate for the last month and certainly much higher than
the increases obtained for shore based workers.”
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Braemar's London headquarters
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Shipbroking group and Maritime London member
Braemar Shipping Services has announced first half pre-tax
profits of GBP7m, up almost 10% from the year before, though
revenues were down GBP12m from £69.1m.
The company said its non-broking services
now made up a third of its operating profits, and that nascent
signs of an improvement in the dry bulk market and the glut
of capacity in the market and consequent broking activity
meant that prospects for the future were good.
Braemar chairman Sir Graham Hearne said: "These
are strong results considering the very different market
conditions in which they were achieved. While they are down
on the corresponding period in 2008 (a record performance
for Braemar) they represent an improvement when compared
to the second half of last year. Operating in more difficult
circumstances, the Group has benefited from the strategic
decision to invest in a broader range of shipping services
which now account for more than one third of the group’s
operating profits before central costs. We have a solid
platform from which to continue to build as markets gradually
recover."
Chief executive Alan Marsh said: “I am extremely
pleased with the performance of the Group in the first half.
The adjustment to world trade brought about by the financial
crisis and subsequent recession in most economies has been
a difficult environment in which our shipping clients have
had to operate. It is good to see that the Group has been
resilient in this climate and that we are emerging with
a stronger market position. All our businesses can be proud
of their achievements to date and we expect them to continue
performing well in the second half.”
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The inaugural Port
Finance International London Conference takes place
on 17-18 November at 1, Victoria Street. Featuring speakers
from a range of companies including APM Terminals, World
Bank Group, British Ports Assoc, 3i plc and Euroports, the
conference will focus on finance options and development
requirements as well as placing the spotlight on UK ports
and their expansion plans.
Maritime London members are entitled to a
30% on the booking fee – please contact Doug Barrow at Maritime
London for further details.
E: dbarrow@maritimelondon.com
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Maritime London member, the Institute of Maritime Law at
the University of Southampton will be running two courses
on the Rotterdam Rules covering the new UN Convention on
Contracts for the International Carriage of Goods Wholly
or Partly by Sea.
The first course takes place 7 December and
covers transport documents (delivery, rights and transfer);
time-bar, jurisdiction and arbitration; proving the loss
and carriers and shippers’ obligations and liabilities.
The second course is a practical half day workshop on 9
December covering the application of the Rotterdam Rules.
Both courses take place at the Chamber of
Shipping, London.
Contact Christine Segar for further details.
T: + 44 (0) 23 8059 3862 E: C.Segar@soton.ac.uk
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Simulating a cross channel ferry
fire and evacuation
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The Maritime and Coastguard Agency is organising
a major international maritime exercise taking place in
the Channel on Tuesday this week. The multi-agency exercise
'Manchex 2009' will involve Coastguard and the emergency
services from Britain and France. Manchex is a bi-annual
test of the contingency plan developed to deal with major
marine emergencies involving the UK Coastguard, French Coastguard
and the other emergency services.
Manchex 2009 will simulate a fire and an evacuation
from a cross channel passenger ferry in the approaches to
the Southwest Lane of the Dover Strait. The maritime incident
operations will be co-ordinated from the MCA operations
room at Dover Coastguard. A fire fighting team from the
Maritime Incident Response Group (MIRG) will be airlifted
to the vessel. Casualty reception centres will be set up
ashore and emergency services will need to undertake hazardous
chemical decontamination of passengers.
MCA Exercise Controller, Spike Hughes at Dover
Coastguard says: “A major feature of these exercises is
to ensure good communications between all emergency services
and the various authorities involved in the English Channel
during a major incident. To that end French Coastguards
from Gris Nez will work alongside MCA staff in the Dover
Coastguard operations room, as well as Kent Police and Kent
Fire and Rescue Service, enhancing the learning process
and making communications easier.”
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