The close ties between the UK and Greek maritime communities were reinforced at the Greek-British Shipping Forum in Athens organised by Maritime London and the British Embassy in Athens at the end of November. The event was opened by the British Ambassador to Greece, David Landsman.

An audience of 150 delegates heard from fourteen distinguished Maritime London members who covered a range of specialist topics. Owners, bankers, lawyers, brokers, insurers and P&I clubs were all present and attended panel discussions and presentations about refinancing/debt restructuring, environmental challenges, the legal and insurance aspects of piracy and Baltex, the new FFA trading platform recently launched by the Baltic Exchange.

Maritime London chief executive Doug Barrow told the delegates:

“The Greek/UK axis not only exists but is flourishing. I can assure you that the maritime community of the UK is working with our government to demonstrate that, in the words of our Prime Minister – Britain is open for business and may I add that it is particularly open for your business!”

The event was one of a series undertaken by Maritime London throughout the year aimed at increasing the profile of the UK maritime services cluster. Other events in recent months have been held in China, India. Maritime London is hoping to organise further promotional trips to Turkey, Cyprus, Greece, India, Russia, China and Brazil in 2012.

A further report on the event can be found at http://bit.ly/vdP2fg

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Despite continuing fears about the global economic climate, and the Euro zone crisis in particular, it appears the shipping industry was marginally more confident, and more likely to make major investments in the quarter ended November 2011, a survey has found. But it also found an expectation of a rise in finance costs and a high level of concern about the negative impact of overtonnaging on the market.

The latest Shipping Confidence Survey from shipping adviser and accountant Moore Stephens says that in November 2011 the average confidence level was 5.4 on a scale of 1 (low) to 10 (high), up on the 5.3 recorded in August 2011. But, together with the February 2009 figure, it remains the second lowest confidence rating since the survey was launched in May 2008 with a rating of 6.8.

Confidence among owners was up from 5.1 to 5.3, but down on the part of charterers, from 5.0 to 4.9. There was a small increase in confidence in the broking sector, from 5.1 to 5.2. Confidence was highest among managers, unchanged at 5.6. Europe, up from 5.0 to 5.1, was the least confident region.

In May 2008, European confidence stood at a high of 6.6, and as recently as August 2010 was running at 6.1. Confidence in Asia rose from 5.7 to 5.8 and in North America from 5.1 to 5.8.

The Euro zone crisis featured prominently in comments from respondents. “Above everything,” said one, “it is the European financial crisis which will decide how things turn out for shipping in general and for shipowners in particular.”

Another remarked: “Volatility remains high, with prospects for a solution to the European debt crisis a long way away.” Apparently a comparison with the Lehman Brothers collapse does not seem that far-fetched at the moment.

Lehmans was also on the mind of another respondent who noted: “What is still unknown is how the Euro zone crisis will unfold and what sort of knock-on impact this will have, not only on global demand but also on the availability of finance for trade and asset acquisition. When this is coupled with the increasingly strident demands from governments and regulators for banks to build up more and more capital to avoid further state bail-outs, what you have is a toxic financial brew that makes 2008/9 and the collapse of Lehman Brothers look like a vicar's tea party. These are deeply uncertain times.”

State intervention was also foreseen by another respondent who noted: “The supply overhang in almost all sectors remains a serious challenge despite slippage and cancellations. Cancelled newbuildings will still be built, especially in China, where they will simply be owned by state-supported yards and operators and will therefore continue to add to the level of over-supply. Ship finance will be available to only a few, financially strong companies.”

Moore Stephens shipping partner, Richard Greiner, says: “It says a great deal for the resilience of the shipping industry that, despite the problems facing the sector, and notwithstanding the acute difficulties bedevilling the world economy, our survey showed a small increase in confidence. Like a boxer who refuses to lie down, shipping is fighting to ride the punches and to bounce back off the ropes. There was even an increased expectation that respondents would be making a major investment over the coming 12 months. This is encouraging, and supports the belief that now is a good time to buy for those who have access to funding.”

“Nevertheless,” he adds, “it is undeniable that shipping is struggling on a number of fronts. Seldom, if ever, can classic problems within the industry have coincided with such a severe economic downturn and acute debt crisis. Overtonnaging is the issue dominating responses to our survey and, even when other concerns are raised, overtonnaging is still the elephant in the room. It will doubtless remain so for some time, but the situation could be eased in the shorter-term by sensible renegotiation and resourceful financing.”

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External trade by sea by the EU-27 and the US has stagnated below pre-crisis levels, dipping by four and five percent respectively according to the latest global freight data collected by the International Transport Forum at the OECD.

Based on data up to and including September 2011 the report highlights concerns over macroeconomic stagnation. EU-27 and US trade by air, considered as a lead indicator, suggests near-term decline, the report says. Exports by air in the EU-27 fell back to their pre-crisis (June 2008) levels.

However US and EU-27 exports by sea to Asia (especially China) improved since June this year. More generally dependency on Asia-led growth increased. Exports to Asia, and more specifically China, by sea continued to increase in the EU-27 and the USA. The September figures show exports by sea from the US and the EU-27 to Asia were, respectively, 17% and 28% above their pre-crisis levels respectively.

The report notes that advanced economies’ demand remains weak. Imports by sea to US and EU-27 have remained below their pre-crisis levels. The latest data on imports by air indicate further weakening of demand. Only German imports seem to have resisted otherwise downward trends.

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Law firm and Maritime London member Norton Rose has issued a summary of the Supreme Court judgment and its general significance for the shipping industry in relation to the Kookmin Bank refund guarantee dispute.

The long running dispute centred on the enforceability of refund guarantees issued by Kookmin Bank, in Korea, in connection with a shipbuilding contract entered into between Rainy Sky SA and Jinse Shipbuilding. In November the Supreme Court ruled in the case in favour of Greece-based shipowner Metrostar, allowing the claim for payment of $46,620,000 plus interest under refund guarantees issued by Kookmin Bank.

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Major Turkish ports

From 1 January ships must use fuel with a maximum sulphur content of 1% ruling for vessels at berth in Turkish ports and transiting its inland waterways, according OW Bunker. The global bunker supplier has highlighted the potential safety issues that ship owners and operators will face in Turkish waters when new local sulphur legislation comes into force.

It says the ruling delivered by the Turkish Chamber of Shipping and the Turkish General Directorate of Marine Transport states that: “marine fuels whose sulphur content exceeds 0.1% by mass cannot be used as of 01.01.2012 in the inland vessels and in the vessels on the quay.’”

“This is a significant move by the Turkish authorities and is much more restrictive than current sulphur regulations,” says Steffen Kortegaard, technical director, OW Bunker.

The new Turkish regulations mean that 0.1% sulphur content gas oil must be used by vessels calling at Turkish ports between the end of the sea passage and the commencement of the sea passage including in port anchorage areas. However the new regulation will not apply to vessels transiting the Bosporus or Dardanelles, even if they drop anchor providing the vessel maintains transit status. Passenger vessels with domestic liner permit, such as ferries, ro-ro and sea buses must consume 1.5% sulphur content IFO from 1 Jan 2012. This regulation will also not be apply to cruise vessels, according to OW.

Mr Kortegaard warned: “As we have seen in California, vessels that are used to burning heavy fuel oil face significant technical and safety challenges when switching to low sulphur products in order to allow them to manoeuvre. Unless the correct procedure is followed and there is a deep knowledge of the technical process, ship owners and operators could face real issues including a loss of power and potentially engine damage which could have a significant impact on downtime and associated maintenance costs.”

Sibel Buyuk, general manager of OW Bunker’s Turkey operation, said: “This move stresses the emphasis that the Turkish authorities are placing on environmental progression ahead of existing international regulation. As well as making sure that our customers have access to quality low sulphur products to guarantee compliance, we are also working with them to ensure that they have a full comprehension of the technical challenges that they face. The implementation of the new ruling is less than three weeks away, and it is vital the ship owners and operators are prepared accordingly.”

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The UK government has published guidance on the process for gaining authorisation for the carriage of armed guards and the factors ship owners should include in a risk assessment as well as advice on selecting a private security company. The move comes as increasing numbers of vessels are using armed guards while within range of Somalis pirates, apparently contributing to the pirates' recent lack of success. One fishing vessel was hijacked in November but no large merchant ship has been hijacked since October.

However, International Maritime Bureau director Pottengal Mukundan told London Matters that the main reason for the lull in hijackings was the very effective actions of the navies in the region in recent months. He particularly singled out their success in targeting motherships.

Meanwhile, following the Prime Minister’s announcement that armed guards are to be allowed on UK ships, seafarer's union Nautilus issued a statement saying that it is seeking more talks with the government. The Union has given a cautious welcome to the announcement – welcoming the recognition that seafarers deserve greater protection against piracy, but expressing concern at some of the implications arising from the use of firearms on merchant ships.

General secretary Mark Dickinson commented: ‘While we are pleased that the UK has legalised the use of armed guards, we do not believe this in any way reduces the necessity for a strong naval force in the area. We also believe it is essential that action is taken to ensure that private security teams used at sea are properly vetted and accredited, and that their training, experience and competence are at acceptable levels. It is also of critical importance that clear procedures are in place to govern the type of weapons that may be carried and the circumstances in which they may be used – including the command and control structures and the potential liabilities arising from their use.”

Mr Dickinson added. ‘“Arming ships should be seen as an exceptional response to exceptional circumstances, and we do not want to see it become institutionalised. It is therefore essential that we have further discussions with government over a much wider package of measures to provide long-term and effective action against piracy and improvements to maritime security.”

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Scrapping levels soar

In excess of 25m dwt of shipping will have wound up on the beaches of India, Bangladesh and Pakistan for scrapping by the end of this year, according to the American P&I Club. The club's magazine Currents includes a comprehensive review of ship recycling in the Indian subcontinent and beyond.

Shashank Agrawal, legal advisor at Wirana Shipping Corporation in Singapore, describes recycling progress as being in leaps and bounds as the worldwide shipping industry struggles against some of the toughest times it has ever seen.

Wirana purchases vessels on the basis of 100% cash. It then sells the vessel to a recycler in any one of the ship recycling countries. For vessels purchased “as is”, the cash buyer takes over the ship at the delivery port and then boards its own crew to sail the vessel. Meanwhile, the vessel is reflagged, given a brand-new name and provided with fresh insurance cover for the voyage to the recycling yard.

Mr Agrawal describes in detail the legal situation as it affects ship recycling in India, Bangladesh and Pakistan, the recycling capacities in those three countries, and the state of ISO certifications in them.

Discussing the intervention of the judiciary, he says that in India the arrival of the passenger liner-cum-cruiseship Blue Lady (ex-Norway) caused a huge uproar because of the alleged onboard quantities of asbestos and other hazardous materials. The wrangle eventually landed up in India’s Supreme Court, which after many months laid down extremely stringent rules and regulations for governance of the ship recycling industry. These came to be followed by all sectors and industries involved in recycling.

The second part of the ship recycling survey will appear in the spring 2012 edition of Currents.

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Lloyd's Register (LR) says that a chemical tanker newbuilding constructed to its rules will emit less SOx, NOx and particulates across Europe's inland waterways. LT says that the inland waterways tanker Argonon is the world's first new LNG-fuelled tanker heralds the start of a new era of cleaner shipping for Europe's local waterways. In a statement LR says that the delivery of the 6,100-dwt dual-fuelled chemical tanker Argonon, represents a significant milestone for the Deen Shipping subsidiary, Argonon Shipping B.V., in its pursuit of cleaner transport solutions for Europe. LR says it helped the owners and regulators to identify their risks, meet regulatory requirements and overcome the technical challenges for the precedent-setting tanker.

"This has been a great project and it is a significant first," said Piet Mast, Lloyd’s Register's marine business manager for Western Europe. "The nature of inland waterways traffic, which passes through or close to major population centres, makes LNG an attractive way to reduce harmful local emissions. We had to look carefully at the risks and worked closely with the owner and the regulators to ensure that they understood, and were comfortable with, the technical solutions that were developed."

The dual-fuel system is designed to burn an 80/20 mixture of natural gas and diesel, reducing Sox, Nox and particulate-matter emissions, as well as reducing the greenhouse gas emissions from tank to flue. The LNG is stored in a transport tank located on deck, supplied by Cryonorm Projects, based near Amsterdam.

"The inland shipping industry, as far as we know, is the safest and cleanest mode of transport. But, to keep this lead, we have to take a big step forward in environmental performance," said shipowner Gerard Deen. "I think that the dual-fuel principle is a way to reduce the emissions in our sector. Lloyd’s Register was very pragmatic in their approach to finding solutions to convert seagoing regulations into inland shipping rules regarding dual fuel."

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Draft legislation for the 2012 UK Finance Bill contains both good and bad news for non-UK domiciled taxpayers (non-doms) and also leaves some uncertainties, according to shipping and insurance adviser Moore Stephens LLP. The firm's head of Private Client Services, Gill Smith said: “One major disappointment is the fact that the proposed statutory definition of residence is to be deferred until 2013, pending further consultation,” says at. “The present rules are not to be found in legislation but are based on cases decided by the courts, in some cases many years ago. Some taxpayers are in limbo because it is virtually impossible to determine their residence status with certainty, and it is disappointing that they will have to wait another year for the position to be resolved. Nevertheless, it is better to wait a year and emerge with workable rules than for the government to rush into making changes before it has got to grips with all the issues.”

The firm noted that for non-doms, the changes are as expected. One element of the package is being deferred until 2013, but this is a measure dealing specifically with individuals who are resident but not ordinarily resident in the UK, and who carry out duties in the UK and overseas under a single contract of employment. It will not affect most non-doms.

Gill Smith added: “It is disappointing, but not unexpected, that the government is sticking to its plan to increase to £50,000 the annual fixed charge for non-doms who want to use the remittance basis, for individuals who have been UK-resident in twelve out of the previous fourteen years. The relief from tax for amounts remitted to the UK for commercial business investment is very welcome, but many of the practical problems that were identified in the course of the consultation still remain. In addition, it is disappointing that investments in listed shares are excluded.”

There is however one significant administrative simplification. “The capital gains tax exemption for gains and losses on withdrawals from bank accounts denominated in foreign currency is very welcome,” says Smith. “This applies to all individual taxpayers (and trustees), not just non-doms, but it will be particularly valuable in simplifying calculations for non-doms taxed on the arising basis, where the time spent in making calculations is often out of all proportion to the resultant gains.”

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