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Impact of COVID-19 on ship construction and maintenance: practical and contractual implications

Part of Maritime London COVID-19 webinar series

Posted on: 15 May 2020

Maritime London teamed up with Ince to organise a webinar entitled “Impact of COVID-19 on ship construction and maintenance: practical and contractual implications”, which was held on 14 May. Hosted and moderated by Maritime London Chief Executive Jos Standerwick, the live webinar looked at the immediate impact of the COVID-19 pandemic on shipbuilding sector, its supply chain and workforce, and what contractual consequences this could lead to. It also discussed how the use of remote technologies is helping the stakeholders to minimise operational interruptions.

Thomas Bracewell, Arrow Shipbroking – Newbuildings division, pointed out that Chinese yards were now essentially back to their previous productivity levels after significant disruption in Q1 that had seen slippage rates of 46% for dry bulk vessels (versus 36% in Q1 2019), 63% for tankers (29%) and 77% for containerships (34%). But challenges remained for both builders and buyers in arranging yard visits, crewing and deliveries, he added, since “China’s borders remain closed to almost all foreigners.”

Looking further ahead, the greatest financial strain for yards could come in the shape of the “impending impact on newbuilding demand,” Bracewell said. With the possible exception of tankers, newbuilding orders would remain “very weak’ for the rest of the year, he predicted, adding his belief that given the further technological and regulatory challenges looming, “builders are going to be in for a rough couple of years.”

Joshua LaVire, Vice President, Regional Operations – Europe, at ABS shared the latest intelligence on how remote surveys can support asset owners and protect crews and surveyors during COVID-19 and into the future. “Remote Survey is here now and is happening. It has the potential to increase efficiency and asset utilization, while also reducing costs”, he said. “Owners can optimize scheduling efficiency without sacrificing time or operational quality. The net benefit, as always, is safety. ABS can now provide remote attendance for a number of surveys, now including annual inspections and we continue to actively develop many digital class capabilities to help bring added value to the industry.”

Chris Kidd, Shipbuilding & Offshore Construction Head and Partner at Ince talked about how the shipbuilding contract could be used to manage the impact of Covid-19 delays: force majeure notices, inspections, tests and trials, claims for liquidated damages and termination.

“Issues have arisen over recent months out of yards seeking extensions of time for delivery as a result of Covid 19 to avoid claims for liquidated damages or possibly cancellation”, he said. “However, yards often find it difficult to succeed with such claims because they have to jump a number of hurdles outlined in the webinar, including proof of critical delay. In practice, contractors, and their delay analysts, often do not come close to meeting the standards required to succeed with such claims, either because they don’t have the evidence to prepare the case properly or, if they do, their analyses are not formulated in the correct way. It is important to record progress as it happens. Actual work progress and the real story, evidenced at the time, is invaluable.”

To replay the webinare visit this link.

 

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