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Lloy'd List The Future of Shipping
Lloy'd List The Future of Shipping
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Lloyds List
(a trading division of Informa UK Ltd)
Registered in England and Wales number 1072954
Registered Office:
3741 Mortimer Street
London W1T 3JH
an Informa business
2013, Informa UK Ltd
Lloyds List website: www.lloydslist.com
Informa website: www.informa.com
Reprinted material is quoted with permission. Although every effort has been made
to ensure that all owners of copyright material have been acknowledged in this publication,
we would be glad to acknowledge in subsequent reprints or editions any omissions brought to our
attention. All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording
or otherwise, without the prior permission of Lloyds List. This edition published by Lloyds List. For
reprints and permissions contact Lloyds List.
Product or corporate names may be trademarks or registered trademarks and are used only for
identification and explanation without intent to infringe. This book contains information from reputable
sources, and although reasonable efforts have been made to publish accurate information, the
publisher makes no warranties (either express or implied) as to the accuracy or fitness for a particular
purpose of the information or advice contained herein. The publisher wishes to make it clear that any
views or opinions expressed in this book by individual authors or contributors are their personal views
and opinions and do not necessarily reflect the views/opinions of the publisher.
Lloyds and the Lloyds crest is the registered trade mark of the Society incorporated by the Lloyds Act
1871 by the name of Lloyds.
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Acknowledgements
Picture credits
The assistance of the following organisations and individuals is gratefully acknowledged:
ABS; Baltic Exchange; Bernard Schulte Shipmanagement; Corporation of Lloyds; E&Y; GMS;
Guildhall Library, gCaptain; Hapag Lloyd; Holman Fenwick Wilan; Ince & Co; International
Chamber of Shipping; Inmarsat; International Union of Marine Insurance; Keppel; Lloyds
Register; Ludwig Institute for Cancer Research; Maersk Line; Martin Stopford; Michael
Grey; Mission to Seafarers; National Maritime Museum; Protection Group International;
VesselsValue.com; Womens International Shipping & Trading Association.
Lead Sponsor
Associate Sponsors
Intelligence. Risk Mitigation.
Response. Consultancy.
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CONTENTS
Contents
Foreword Koji Sekimizu, secretary-general, IMO
INTRODUCTION
From coffee house to internet caf Richard Meade
11
19
21
PEOPLE
Hail to the good owner and the seafarer Richard Meade
24
29
33
35
37
41
46
48
49
50
52
TRADE
Young at heart Siiam Kallas
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100
todays young seafarers expect social media access at sea Peter Hinchliffe
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111
the role of class in the future Liz McMahon and craig eason
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168
shipping at the crossroads: many pressing questions awaiting an answer Janusz Fedorowicz
170
172
Insurance timeline
173
176
179
182
FInAnce
the future of ship finance and analytics Richard Rivlin
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189
192
194
ten mantras for of the secret of success and sustainability in shipping Ravi K Mehrotra
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199
shipowning: out with the old, in with the new but for how long? Michael tusiani
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204
205
206
cLAssIFIeDs
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Foreword
Making globalisation a positive force
SUSTAINABILITY
There is widespread agreement that mankinds future
development must be sustainable. Shipping, and the maritime
industry as a whole, clearly have a key role to play in spreading
the benefits of globalisation among the developing countries.
But, seen in a wider context, shipping has an even more
important role to play in achieving sustainable global growth.
Sea transport remains by far the most cost-effective and
environment-friendly way to move goods and raw materials in
quantity around the world and the vast majority of global trade
will continue to be carried in ships for the foreseeable future.
Today, shipping and ports cannot be seen in isolation.
They are essential components of a worldwide international
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The history of the world is one of exploration, conquest and trade by sea
A GLOBAL SOCIETY
The ships of the future must be able to meet clear goals
and functional requirements to fulfil the safety and,
increasingly, the environmental expectations of society,
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SHAREd vALUE
These are values which resonate strongly with Inmarsat and
we are delighted and proud to sponsor this commemorative
publication.
As we mark the final printed edition of the List and the
publication migrates fully to an online environment, we can
all draw lessons from this outstanding success story.
Honouring your heritage, preserving your mission and
embracing the benefits of new technologies; these are
not just admirable qualities, they are essential attributes
for any organisation which seeks to serve the needs of its
customers.
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SAF_02_LL_FP.pdf
2013/12/18
4:13 PM
CM
MY
CY
CMY
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introduction
WEB PROXImITY
Information is power in shipping - it always has been.
Our founder Edward Lloyd recognised that back in the
late 17th century when he first started publishing a weekly
newsletter and we believe he would not have thought twice
about decision to introduce Lloyds List in an all-digital
form.
Indeed the principles of Lloyd and his famous coffee
shop translate into the digital world of today rather nicely.
The entrepreneurial Lloyd would perhaps have seen the
commercial advantage to shipowners of the internet long
before it struck journalists or media companies.
One reason: the web provides a kind of proximity that
paper can never manage. It takes time to get an edition to
the printing house, and while those presses groan, new
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A dIGITAL TWIST
Lloyds List is merely continuing this tradition, with a
digital twist.
What started life as a printed notice pinned to a coffee
shop wall in London is now the shipping industrys most
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introduction
Today, readers can access Lloyds List from any coffee shop in the world
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introduction
1884
merges with Shipping and
mercantile Gazette.
In 1837 the Shipping Gazette first
suggested a merger which was
haughtily declined by the committee
of Lloyds. However the merger went
ahead in 1884 and as early as 1890
there were mutterings of discontent
from the committee of Lloyds about
the Gazettes owner, Spottiswoode.
It had originally appeared as the
Shipping & Mercantile Gazette
and Lloyds List under a contract in
which Lloyds undertook to supply
the shipping intelligence but was
not otherwise concerned in the
publication.
1734
The first Lloyds List appears, quickly moving from weekly to
a more frequent publication to keep professionals up to date.
Thomas Jemson founded Lloyds
List in 1734. This paper, unlike
Edward Lloyds earlier Lloyds
News, was at first given entirely
over to shipping intelligence,
taken to be a sign of the growth
of the underwriting business in
Lloyds. Journalists were broadly
considered to be disreputable at this point and the plan of Thomas
Jemson and his ad hoc team of coffee house proprietors was to publish a
morning and evening newspaper with concern for accuracy and a content
tailored to the needs of the customers of the City coffee houses.
1914
Ownership conferred to the Corporation of Lloyds,
incorporated by an Act of Parliament.
It was felt that Lloyds List and the intelligence Lloyds supplied was
propping up the Shipping and Mercantile Gazette and so in 1914
they parted ways. However, in 1916 it was possible for Lloyds List
to buy the Shipping Gazette for a reasonable price and combine it
under Lloyds control and until 1971 it was known as Lloyds List and
Shipping Gazette.
1837
Lloyds List published daily, except Sunday, reflecting
growing demand for reliable shipping news.
The move to go daily came in response to growing competition in
the maritime press. In 1801 a group of post office clerks launched
the General Shipping and Commercial List which largely pirated
the sources from which Lloyds List was compiled. The government
stopped the post office clerks from running a private business
with public resources and closed the publication in 1837. Another
competitor the Shipping Gazette, however, also launched in 1836.
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1973
Ownership transferred to Lloyds of London Press, which
merged with IBC in 1998 to become Informa.
Informa was formed in
December 1998 by the merger
of IBC Group plc and Lloyds
of London Press. Informa is
an international provider of specialist information and services for
the academic and scientific, professional and commercial business
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introduction
1995
Lloyds List website launched.
This first launched as a replica of the
print edition and now has articles
dating back to 1991. A key feature of
the site has been the e-paper which
has replicated the print edition. For
the first time readers could email and
print stories as well as saving them to a clippings folder, enabling
them to create their own personalised archive folder. In 2009 Lloyds
List launched the web first initiative which allowed editors to post
stories online anywhere in the world, taking the focus away from the
print deadline and allowing readers to have access to information
around the clock.
2011
2013
Lloyds List announces move to totally digital
by December 20, 2013.
This landmark
decision represents
a commitment to
continuously innovate
and develop more
dynamic content that
better serves our
customers needs.
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introduction
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introduction
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introduction
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introduction
3,500
Trend Series
3,000
2,500
2,000
1,500
1,000
500
2012
2002
1992
1982
1972
1962
1952
1942
1932
1922
1912
1902
1892
1882
1872
1862
1852
1842
1832
1822
1812
1802
1792
1782
1772
1762
1752
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introduction
Freight Trend
Finish
Length
Start
Finish Av change
1752
1814
62
2000
1815
1865
50
2100
1866
1914
48
1500
1922
1937
15
1300
1947
1974
27
700
250
1975
2013
38
250
270
Notes
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introduction
first ship to arrive in London with the new season tea crop
and its cargo sold at a premium of 2d per pound, an extra
20,966. Incidentally, the Agamemnon had 3 sister ships,
each plying the same trade.
THE COmmUNICATIONS REvOLUTION 1866-1914
In the period, 1866 to 1914 the index continued to fall
by 7.6 points a year from 1372 to 1221 . Having sorted
the steamship design, the next really big change was in
communications. Between 1865 and 1914 the inter-regional
cable network was installed. Many of these cables radiated
from London, and the Baltic Exchange took over the market
role. Lloyds continued to handle the insurance side of
the business, but the meeting place for owners and cargo
interests was picked up by the Virginia and Baltic Coffee
House.
The Baltic had been a popular shipping venue for a
century, in 1744 advertising itself as the place where all
foreign and domestic news are taken in; and all letters or
parcels, directed to merchants or captains in the Virginia or
Baltic trade will be carefully delivered according as directed
and the best attendance given . By 1823 it had a committee,
rules and an auction room where tallow was traded . When
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CONCLUSIONS
This chapter has barely scratched the surface of shipping
during the 279 years since Lloyds List became an
essential accompaniment to the shipowners morning
coffee. Along the way sailing ships have been replaced
by massive container ships; cargo markets have become
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COSY INDUSTRY
When I had myself joined the Industry I recall the
wonderful characters who contributed to Lloyds List:
Jack Frost, Denis Burgess and many more. tangentially
the introduction of Seatrade magazine, which adopted
straightway a commercial as distinct from mechanical
style to its reporting seemed to me to jog Lloyds List
into taking a more inductive role into the commercial
and trading issues of shipping and shipbuilding.
Its earlier style, though attractive, did major on
schedules and on faithfully recording the press
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introduction
UnKnOwn fUtUre
This enormous pile of information often comes free of charge,
accessible whenever, wherever. So how will the traditional
media houses comply in this new environment? They have
huge costs, large numbers of staff, huge challenges when it
comes to choosing the right platforms and technologies for
the rapidly changing and unknown future.
There is something unique reading the written
newspaper physically, you might argue. further, you
will probably say that you will never get used to reading
your newspaper online, or via an iPad or smart phone. I
understand where you come from. I am a true enthusiast
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ADAPt tO SUrVIVe
I still love books. I still have a big shelf filled with my
favourites. I still buy books that are special to me and enjoy
the feeling of touching the paper and covers. But whenever I
travel for business or pleasure, I bring my light, small Kindle
with me. It saves weight, I can download new books from
anywhere in the world, at any time. Its efficient. Its part of
the future.
And this leads me to the point of my story. we need to stay
efficient to stay in business. The media houses will survive
just the same way that any shipping company will survive
by adapting to new times, new technology and changing
environments. They will because they have to. They will
lead us as readers, in the same way we lead our clients and
customers. By delivering the new and optimised solutions
before our competitors.
If I need to get updated on the latest news and
developments, I will not wait on a printed paper. I will read
it digitally, on the bus, at the airport, from a caf in Buenos
Aires or Dubai, or in the peace and quiet of my own bed.
Not two weeks after its published, when I return to my own
office. If something important or urgent happens, I want to
know the details NOw. I will seek it out via Twitter, facebook
or LinkedIn, through a quick Google search or through a link
sent to me by a business partner. I will download the newest
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PEOPLE
Owner.
So who is this mythical beast, the good owner? Perhaps
a useful point of departure would be to describe him in the
obverse. It is very easy to list what bad owner is. Let us first
explore what a good owner avoids we can think of ten
points immediately.
1. A good owner avoids buying ships when rates are
$120,000 per day.
2. A good owner doesnt renege on charter party
commitments because they are onerous.
3. A good owner doesnt spend a weekend in a corporate
golf retreat in Thailand while his company is in
bankruptcy court in Texas.
4. A good owner does not leave his crew stranded in Suez
for six months without pay or supplies, blaming his
banks for the crisis.
5. A good owner doesnt regard the Maritime Labour
convention as a nuisance that requires minimum
attention.
6. A good owner doesnt launch an IPO on Wall Street
offering a highly leveraged business model, then
default, while the shareholders take a bath
7. A good owner doesnt reflag to Mongolia to avoid
minimum safety standards
8. Likewise, a good owner doesnt accept a cargo of nickel from
Indonesia to china without ensuring proper checks that rain
seeping into the hold hasnt liquefied the cargo.
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people
managing trouble
It would seem that to be a good owner in the manner of
the paragon were referring to here the key is how he or
she manages trouble, rather than whether he or she has
avoided it.
That said, you want a good owner to have been truly
successful at least once in a long career. And by success,
I mean more than operating ships in lucky markets when
rates bring in cash with ease. It is easy to look successful
when you happened to have deployable capesize vessels in
late 2007.
Success in shipping is sustained profits over time, which
means that good owners need to have their own views
about when to invest and when to hold back, and the ability
to act on them.
This is no easy profession, and to do well, the winners
tend to be complex people. Martin Stopford, Clarksons
former head of research and author of Maritime Economics,
suggested that the good owner is schizophrenic, or more
precisely, possesses a multiple personality.
One the hand, the good owner must a good combination
of an operating manager and an accountant. Someone
with the spirit of detail who understands the moving
parts of the business, and keeps a vigilant eye on costs.
Shipping in many respects is a lonely business. When
you visit shipping companies, you often dont see a lot of
people in the office. The decision makers are not backed
up an army of bureaucrats that you might see, for example,
in an average industrial company making refrigerators.
Therefore, a grasp of the functions of business and
an instinctive grasp of cost, working capital, status of
cashflow are essential.
Moreover, the good owner in this incarnation of
his personality knows a lot about ships: how theyre
maintained, the timetable and cost of compliance, the
impact of fuel costs, the cost, say, of employing security
guards.
practical knowledge
Very frequently when you meet a good owner youll be
stunned not by an impression of smooth business acumen,
but by practical knowledge. Hell be able to tell you how
to optimise costs in lay up; that a certain port has not yet
built the capacity to accommodate his new post panamax
ships, despite claims by the local government; the cost of
repatriating seafarers that fall sick on board; and a host of
other essential facts that sometimes demand attention. The
good owner is conversant with all of them.
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people
Shippings big personalities, (l-r) Chang, Fredriksen, Moller, Andersen and Ofer
a matter of character
To sum up the second side, this big personality incarnation,
of the good owner, hes able to live large, spot big risks that
are going pay off, and not only sell these risks to the money
people, but get them to go along for the ride with him. And the
convincing involved has little to do with a spreadsheet and a
business plan although this of course has to be acceptable it
has to do with reassurance and trust. Its a matter of character. If
the bankers trust the owner, sense his full operating knowledge
of the business, respect both his common sense and courage,
theyre likely to take the bet with him.
By necessity, this big personality side of the good owner is
contrarian. He makes moves while others have not yet dreamed
of them, and hes not afraid to go against the grain. Its hard to
tell yet whether Nils Andersens decision to invest in a fleet of
18,000 teu ships will be market winner that Maersk intended it
to be. Those ships could well be problematic. But the bold move
to build them is characteristic behaviour of the good owner.
a lonely job
Likewise, Dr Chang Yung-fa of Evergreen held back for years
from ordering ultra-large boxships. Of course, Evergreen
eventually did invest in the ULCCs, but note the timing.
Dr Chang refusal to invest in bigger ships kept Evergreen
in better condition than most peers during the shocking
downturn of 2008 2009. When he finally did allow
Evergreen to invest in the ULCCs, it was at the end of the
ordering cycle and the shipyard price had come down. He
got a sweetheart deal.
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manning problems:
some things never change
The year is 1734 and in Mr Jemsons coffee house (formerly owned by the late Edward Lloyd) alongside
the Royal Exchange, merchants, shipmasters and insurers, along with various brokers and stock-jobbers
are undertaking what, 280 years on, we would describe as networking. Lloyds List is being passed
around and attracting comment
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and the craft employed in the rivers and estuaries also served
as nurseries for young men who could be persuaded into a job
that took them over the horizon and to foreign parts. For the
ambitious, those perhaps with some education, there was the
prospect of promotion, albeit after serving the long and poorly
paid apprenticeship which would provide the qualification for a
post as mate and eventually as master.
soldier, sailor
Seafarers of this era, indeed for the best part of another
century, with the country at war for longer than it was at peace,
were regarded as the total available labour force for both
the merchant service and the navy. They were completely
interchangeable and while seamen might reasonably volunteer
to serve in merchant ships, where wages and conditions,
depending on trade and the type of ship were usually better and
more regular than that aboard a ship of war, they would have
little choice when the navy was looking to man its ships.
With each successive period of hostilities, until the long
Victorian peace was well-established, the brutalities of the
press gangs saw the navy and the merchant service at daggers
drawn, the prime seamen of the latter service the core which
enabled the Royal navy to become all-conquering in the wars
against the French and Spanish. This was the flexible human
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Seafaring has changed, but finding the right crew remains a challenge
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could fight off pirates and privateers, while there were instances
where hostile warships were beaten off by a determined,
wellled complement. Their resourcefulness was legendary
records tell us how shipwrecked crews fashioned smaller craft
out of the wreckage of their ships and sailed hundreds of miles
to safety. A good seaman knew his ropes and whether serving
on a coaling brig, Atlantic packet, Indiaman, or ship of the line,
would swiftly adjust to his surroundings.
dangerous travel
It is important to recall that this was a brutal and dangerous
age both ashore and afloat, but life at sea was undoubtedly
more hazardous that that ashore. On long voyages, disease
and sickness could cut swathes through a crew. Ignorance of
the causes of diseases like scurvy or malaria, the poor hygiene,
insanitary conditions, disgraceful food, climaterelated
illnesses were all hazards to be faced alongside those from
storms and tempests, fire and foe. Seafaring has remained a
dangerous occupation, with many of these hazards persisting
into the 20th century.
What training there was available in the 18th century was
largely done afloat, apprentices bound to their master for
seven years, gradually picking up the skills of navigation and
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cHanging times
The power-driven ship was, however, to revolutionise the lives
of seafarers, of whatever rank, although they did not usher
in any huge improvement in their status as citizens or their
pay and conditions. The merchant service was an industry
increasingly of contrasts. For every luxury liner captain in his
plush suite, there were hundreds of toilers shovelling coal
into the furnaces below, stewards hot-bunking in squalid
spaces beneath the waterline. There might be fine elite
liner companies offering a decent career for professional
officers and contract ratings, but many more rough and
ready trampship operations, where the conditions would be
rudimentary, the feeding basic and the water rationed. And
when seamens unions gradually squeezed the wages and
conditions above what the owners were prepared to pay,
there came the flag of convenience and the economies of a
globalised workforce, from which crews could be obtained.
For the most part, the casual labour which obtained when our
story began in 1734 is maintained today, invariably victims of
the peaks and troughs in demand for their services, then as
now, from one year to the next, whether in war or in peace,
boom or slump.
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flexible friends
True, mechanical propulsion had brought engineering
skills to sea, but seafarers still worked with rope and
wire, with wood and canvas, with cargo and the daily
tasks of maintaining the fabric of a ship. In extremis, they
still proved remarkably resourceful, rigging jury rudders,
plugging leaks, even on a number of occasions hoisting
sails on disabled vessels broken down in mid-ocean. They
could still carry out anchors suspended between boats to
kedge off a grounded ship, undertake repairs with spars of
wood and canvas.
They also remained very flexible folk, moving freely from ship
to ship, taking the seamans adage different ships- different
long splices in their stride, their skills easily transferable from
the liners to the coasters, the tankers to the tugs.
But from the middle of the 20th century, technology
and scale economies both intruded into the seafarers
life. Over a relatively short period, automation, clever
equipment, new materials and above all, far bigger and
more specialised ships were to change the seafarers life
dramatically. The ability of the seafarer to intervene was
diminished by the sheer size of the ships that were to be
operated, while the sorts of skills which were now required
were increasingly tailored to the type of ship and its trade.
Where a seafarers skills might once have revolved around
his ability to squeeze the most out of the prevailing winds,
henceforth it would be concentrated upon the patient
monitoring of increasingly sophisticated machinery.
new skills
The 21st century seafarer would require skills with
mechanical and hydraulic equipment, familiarisation with
evolving procedures and compliance with regulation.
The value of the seafarer would be judged increasingly
by his or her specialist training and experience, with
segmented skills acquired during a career in specialised
tonnage. People of the 21st century would term those
who took their ships to sea, if they ever thought of them,
as the human element. They would rarely see them,
with their lives lived afloat, or in their brief port calls,
behind the high security fences. Their employers would
tend to consider them almost as a commodity, one of the
inescapable costs of ship operation. Intelligent shopping
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Hard times
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bill of rigHts
In 2013 the Maritime Labour convention came into force,
which the Mission has tirelessly campaigned for in the
last 10 years. Known as the bill of rights for seafarers,
it brings into law basic rights for crews, such as proper
contracts and access to medical treatment and port-based
welfare facilities.
The picture in the 21st century continues to be complex.
The financial crisis and global downturn has caused a
second great depression in shipping and more pressure
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succession planning
Lloyds List has been looking at this issue for decades and
it seems clear to us now that there is no onesizefitsall
policy when it comes to succession planning in shipping.
There are those who have trained within the family, ready to
take on the mantle when the time arrives and there are many
who have set out by themselves with their own shipping
ventures. But the sheer volume of offspring choosing to
follow the family line and stay in shipping is a testament
to the vibrant and compelling nature of shipping as a truly
global career brimming with opportunity.
So addictive is it that the next generation is often left
waiting for the previous generation to loosen its grip a little.
Retirement is apparently something that happens in other
industries, but not in shipping.
When we dedicated an entire supplement to the next
shipping generation back in 2012, the upstart examples
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Shipping sisters: Mariella, Manuela and Alessandra Bottiglieri. The three daughters represent the sixth generation of
Bottiglieris in shipping
seen the extremes that a shipping cycle has to offer and risk
management is high on the agenda, even as it searches for the
opportunities that history tells it must be waiting at the bottom.
They are more concerned with corporate governance and
are certainly more transparent than the last generation who
gave up information as if it were their market share.
a different market
Many of those currently on our radar cite the need to focus
on low leverage, strong cash flows and the ability to survive
downturns. Ironically it is the impatient young upstarts that
are taking that long-term outlook.
While the fundamentals of shipping remain, the next
generation will lead an entirely different market that is driven
by new political realities and a rapidly changing global
economic and regulatory agenda.
Perhaps even more significantly they enter an industry on
the cusp of a technical generational shift driven by fuel costs
and the need to rethink much of the global supply chain in
search of efficiencies.
But for all their attempts to differentiate themselves from
the previous generation, many still cite the old values of hard
work, integrity and loyalty as the guiding principles for any
modern business.
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Shipowners must make judgements which could make the difference between survival and sudden death
you have a friendly bank which is a listening bank at times
of need. You need one or two good lawyers but above all get
yourself educated and learn to learn fast. At the end you have
to make judgements which could at times make the difference
between your companys survival and sudden death.
innovation in sHipping
Innovation is about doing business not the usual way.
You have sometimes to put yourself out of the box and not
rely on conventional wisdom only. Shipping is a story of
globalisation and efficient, reliable trade over many years
and is littered with innovative advances in technology,
efficiencies and new business models. So what happens next
and where should a company focus its efforts in the future?
The future in my view is innovation, specifically through
maximisation and optimisation. Developing future maps for
the companies and identifying the resources needed. Then to
seek knowledge through for instance eU funded projects or
specific collaborative research to address a particular need.
We recently established a european platform (www.marifuture.
org) and set up a R&D consortia to identify problems areas and
future needs. We have some 30 transnational partnerships
now each with specific set of tasks seeking either to identify a
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MALcOM McLeAn
THIS year marks the centenary of the birth of the man who
invented containerisation, whose legacy is extensively
documented in Marc Levinsons excellent book The Box.
Malcom Purcell McLean christened Malcolm by his parents,
but choosing as an adult to drop the l and revert to traditional
Scottish spelling was born in Maxton, north carolina, in 1913.
With only a high school education, he started work pumping gas
before saving enough money to buy a truck and launch an ownerdriver trucking business with two siblings.
Within two decades, the fleet had grown to 1,770, making it the
second-largest trucking concern in the US. In 1955, MacLean sold
out for $25m and bought a couple of shipping companies with
the cash.
The following year, backed by a $500m loan [waiting for Dave to
correct figure], he bought two World War II surplus navy tankers
and converted them to carry containers above and below deck.
Although there had been earlier flirtations with this concept, this
development is widely held to mark the birth of containerisation
in its modern form.
Sea-Land, as McLeans company became known, was
eventually swallowed up by Maersk. Other business ventures
some successful, some not followed before McLean died
in 2001.
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LORD IncHcAPe
JAMeS Lyle Mackay personified the British shipping industry in the
decades when the British empire ruled a quarter of the planet and
the make-up of the world fleet reflected that fact.
Between 1913 and his death in 1932, he served as chairman of
both the British India Steam navigation co and the Peninsular and
Oriental Steam navigation co, major carriers of cargo, mail and
people alike prior to the age of air travel.
elevated to the peerage as Lord Inchcape in 1911, he gave his
adopted name to what is today Inchcape Shipping Services, one
the worlds largest agency chains, as well as the entirely separate
automotive retailer Inchcape.
If that was not enough, he was also a vice-president of the
Suez canal co and director of the Anglo-Persian Oil, now BP,
and national Provincial Bank, a predecessor of Royal Bank of
Scotland.
Born in Arbroath in 1856, the shipmasters son took a job with
the owners of BI in calcutta in 1874. He rose up the ranks and
eventually inherited the company.
But his nomination as viceroy was scuppered by prime
minister Herbert Asquith on account of his extensive
commercial interests in India, and the title came by way of
compensation.
ALBeRT BALLIn
SOMe 5.5m Germans emigrated to the US in the years prior to
1914, the majority carried across the Atlantic by the Hamburg
Amerikanische Paketfahrt Actien-Gesellschaft, at that time the
largest shipping company in the world.
The Hapag element in Hapag-Lloyd derives from the acronym,
although the company was known to english speakers as
Hamburg America Line.
At its peak, it was led by Albert Ballin, who born in 1857 as the
son of a man who owned an immigration agency. Taking over the
business on his fathers death, he set up an independent shipping
line to facilitate passage and to carry cargo on the way back.
This bought him to Hamburg Americas attention, and it hired
him as director in 1886, despite the anti-Semitic prejudice
faced by Jews in Wilhelmine Germany. Within five years, he had
inaugurated the concept of the modern cruise holiday, to great
commercial success.
Tragically, he killed himself two days before the armistice that
ended world war one, apparently fearful that the companys fleet
would be confiscated, which did in fact happen.
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But his name lives on in the shape of the Albert Ballin consortium,
the Hamburg state government-led vehicle that is now the major
shareholder in Hapag-Lloyd.
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infLuEnTiaL
PEOPLE
ALFReD HOLT
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DAnIeL LUDWIG
IF YOU are looking for a classic American dream-style tale of rags
to riches, look no further than Daniel Ludwig, who went from
humble beginnings to the top spot in the first-ever edition of the
Forbes 400 list of that countrys super-rich.
Born in 1897, his parents marriage broke up when he was still young,
and Ludwig left school early to earn a living in various entry level
shoreside shipping jobs in Port Arthur, Texas, where he lived with his
uncle and aunt.
Moving back to his native Michigan, by the age of 19 he was the
owner of ships trading on the Great Lakes.
national Bulk carriers went on to own 60 vessels, and after world
war two, Ludwig also moved into tankers, pioneering the use of
larger vessels. He subsequently diversified into oil refining, mining,
banking, cattle ranching, insurance, hotels and real estate.
In 1971, he founded the Ludwig Institute for cancer Research with
his international assets. To date, the Institute has committed over
$1.6bn to cancer research. Upon his death, Ludwig also gifted
his US-based holdings to Ludwig centers at six US institutions.
collectively this international community of scientists is referred
to as Ludwig cancer Research.
His private life was sometimes colourful, although his second marriage
to Gertrude, nicknamed Ginger, lasted until his death in 1992.
YUe-KOnG PAO
from the purchase of its first secondhand vessel in 1955 to become
the largest shipping company in the world by deadweight tonnage
within two decades.
Born in 1918 to an affluent family in ningbo, a port in precommunist china, he was already working in his fathers shoe
manufacturing business by 1931, and thereafter secured a trainee
role with a foreign insurance company. An arranged marriage at 20
provided a stable lifelong partner.
caught in the vicissitudes of chinas mid-twentieth century
history, he took his family to Hong Kong in 1949 and set up an
import/export business, often doing deals with china despite the
trade embargo imposed on account of the Korean War.YK called
the 1970s shipping downturn just right, selling up and diversifying
into terminals, real estate, retail, ferries and trams.
He retired from day-to-day running of his empire in 1986, handing
control of the shipping side to son-in-law Helmut Sohmen and
devoting himself to philanthropic activity.
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FeRDInAnD De LeSSePS
FeRDInAnD Marie, Vicompte de Lesseps, has gone down in
maritime history as the man who both developed the Suez canal
and then started work on a Panama canal project that was never
completed.
Born in Versailles in 1805, into a French aristocracy that had just
lived through the turmoil of revolution, his early years were spent
in Italy, where his father served as a diplomat. He entered the
same trade himself, acting as assistant vice-consul in Lisbon and
then Tunis in the 1820s.
In 1832, he was appointed fully fledged vice-consul in Alexandria
in egypt, at which point he realised the potential for a waterway
linking the Mediterranean with the Red Sea.
The idea stayed dormant until his retirement, and on the
accession of Said Pasha in 1854, he secured the concession. The
canal was officially opened 15 years later.
Well into his seventies, he was appointed head of a company
that sought to repeat the engineering feat in central America. But
hampered from the get-go by a difficult terrain, insufficient capital
and the depredations of malaria and yellow fever, the scheme was
aborted in 1888.
ARISTOTLe OnASSIS
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Lloyds List has helped WISTA so much over the years, and I
am grateful to the paper and everyone there, who in difficult
times, when WISTA was almost unknown among the wider
shipping public, helped us into the limelight!
Lloyds List has reported on our development as an
association, about our members and about our companies,
and this is a credit to the editors over the years and their
team of professionals that had faith in us and brought to the
readers knowledge of our efforts, news and successes.
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our ambassadors
Reading about WISTA-UK through the pages of Lloyds List
in 1992 was definitely a turning point in my career. My
thanks to all the editors who have so brilliantly produced
a wonderful newspaper down the centuries, and we trust
that the big decision to go all-digital will help take us to
further success in the future.
Lloyds List is a companion in our shipping lives. Thank
You. n
WISTA-UK summer gathering in central London; a group of members met in July for the now traditional Christmas in July dinner
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contrarion investinG
The country recovered from losing about two-thirds of
its shipping capacity in the First World War. During the
shipping crisis of the 1930s, Greek owners took the
opportunity to expand when vessels were cheaper, starting
a countercyclical pattern that has been repeated many
times since. Their ability to emerge from a crisis with their
position in the industry enhanced was again evident in
the 1980s and is being proved once more as todays Greek
owners shrug off the severe challenges that have beset
shipping since the collapse of Lehmann Brothers brought
the shipping boom of the first decade of the 21st century to
an abrupt end.
During the second World War the Greek fleet suffered
even greater devastation than during the 1914-18 conflict.
This further setback was only partly mitigated when the Us
allocated 100 or so Libertys and other war-surplus vessels
for acquisition by Greek owners.
These became the nucleus of the post-war fleet and
there was fierce competition for them. some traditionally-
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going public
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SAF_01_LL_FP.pdf
2013/12/18
4:14 PM
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Young at heart
Still young at heart and still going strong, Lloyds List is a mere 280 years old
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safetY research
Regarding maritime research, the eU has targeted
fundamental safety issues such as ship stability, fire
protection and the dynamics of mass evacuation. The
results received so far are compelling: we consider them as
a constructive contribution for us all to improve maritime
safety under the auspices of the iMO.
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European policies stem from the fact that shipping is a global business
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strategic interests
So what of the future for world shipping? i believe that
shipping and ports will remain at the heart of complex
logistics chains but to continue doing that, they will
also need efficient transport infrastructure that spans
and combines different forms of transport, along with
interoperable icT systems.
in turn, that calls for a stable structure of rules and
standards that allows investments to be made in safe and
effective infrastructure.
The european Union has a strategic interest in making
sure that maritime transport fulfils its role as a vital
component of the eUs transport system, securing its links
with the rest of the world. The key to achieving this is
innovation.
Today, Lloyds List is demonstrating some bold
innovation of its own. But it is also staying true to its
independent professional spirit.
i wish Lloyds List every success in its new digital era and
i wish its readership continuing good news from markets
and regulators. n
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DP Worlds London Gateway development has combined technological changes with the thinking process behind the supply chain
Bloomberg
saving what? Time? Distance? The bottom line is money that
everyone wants to save, Mr Sharaf repeats.
If we have one area to hold data from point of loading to
being shelf, what could be the benefit from the saving of the
bottom line for everybody? It would be unimaginable.
Mr Sharaf says this is possible in the future but
it is difficult as the whole world has to come to an
understanding of how the data can be distributed and what
kind of data should be kept.
clockwork network
In terms of terminal performance, he adds that the
shipping world cannot have a full network working like
clockwork if one part of the world is efficient and the other
part is not.
However, he adds that it is likely that the developing
market will catch up much more quickly than it has taken
the US and European market to move towards automation.
It took them [the US and Europe] maybe 50 years to
come into automation and still not many of the terminals in
those countries are automated because of issues but there
are different ways of doing it, Mr Sharaf explains.
We can work with a partly automated system that may
be more efficient than a fully automated terminal while
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changing times
Port automation has come a long way since the introduction of the container
moving boXes
each and every box would take around 15 minutes to put in
place on board ship, much longer than it would take to swing
cargo on board with a well operated ships derrick system.
By comparison, HPHs new semi-automated terminal at
Barcelona today can move up to 52 boxes per hour, per crane.
The average around the world is 30 moves per hour per
crane, and rising.
Says Dr Meredith of the early box experiment: initially,
there was a lot of discussion about whether these things
would really ever work, and ultimately they built cellular
guide ships to solve that particular problem.
But, at first, it was very hard to justify how these things
would be stowed on deck and lashed down securely, jammed
between ships derricks and the side rails.
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Meredith: There will be fewer calls, but larger vessels, but I think the market will adjust, with more cargo moving because the box
rate is attractive enough to encourage even more global trade
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LONGER MONSTERS
Dr Meredith acknowledges that mile after mile of linear quay
line will not be a practical option for most new ports.
However, those ports with the longest and straightest
possible quay line will be able to serve the greatest number
of ultra large container ships and feeders at the same time.
These monsters are getting longer and longer, and every
time you think you have got the length right you dont and
you have to add another phase but in the same straight line.
HPH Trust has made acquisitions of adjoining berths
in Hong Kong from other port groups in order to achieve a
longer linear length for its terminals.
Weve acquired that particular two-berth operation
because it gives us four long berths in a line, which is what
we needed.
Asked about mistakes made by the ports industry with
the advent of containerisation, Mr Meredith remarks that
port operators were caught out by the initial tariff structure
associated with the standard 20ft box.
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Meredith: Those container ports with long, linear, mile after mile berth length are going to be the winners
First of all we had a 20ft box that was 8ft tall, and with a
tariff rate set against it. All of a sudden, the lines introduced
an 8ft 6ins high box which paid the same tariff as before. The
ports argued that the lines were getting more cargo through,
but the lines replied that it was costing the ports no more to
handle it.
And then came the 9ft box. The container kept going
up in height, but also longer, to 40ft. The carriers again
argued that port operators had the same single movement
and so why should they charge more for a 40ft box as a
20ft?
As a result, port operators income shrank because fewer
container moves were going cargo through the port. The
boxes were bigger but the shipping lines were not prepared
to pay a differential for the varying size of box.
So was born a bone of contention between port
operators and shipping companies that still prevails today, in
some aspects.
Dr Meredith says that the growth in global trade, and the
increase in empty boxes, allowed the port operators some
clawback, as they were still being paid to handle a nonrevenue earning container.
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eXpanding range
With determination and in the relatively short time of ten
years, eurasia introduced into the market a combination of
complementary services not only new to Asia, but new to
shipmanagement. These included technical, crew and ship
management; crew recruitment and training; newbuilding
supervision, quality assurance and risk management
consultancies; and port agency, procurement and logistics;
marine travel; marine insurance advisory; and maritime
catering under the emblem Seachef.
With eurasia able to provide seafarers qualified for any
size or type of tanker, dry bulk carrier or containership, Mr
Bajpaee saw the opportunity for expanding the companys
range beyond Asia to all the major shipping centres. The
company embarked on a five year expansion plan delayed
somewhat by the 1997 Asian financial crisis. The company
eventually set up a number of regional offices, with the
ability to offer a global, year-round service befitting the
maritime industry needs. eurasia had also invested in
database and information systems commensurate with its
global scale. By the early years of this century it offered a
suite of services that, uniquely, allowed the shipowner the
flexibility to select those services as suited to its need.
This ability to offer both niche and comprehensive
services allowed eurasia to attract shipowners of any
class or size. Mr Bajpaee , quoted in a study by Hong Kong
Universitys centre for Asian Business cases published
in 2004, shipowners did not care whether a shipmanager
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regulatorY constraints
We are now trapped mentally in a compliance mode; we
are not leading, says Mr Bajpaee, referring to several
forces that have acted on the industry. These include the
proliferation of regulatory constraints from various bodies
often with overlapping concerns and the adoption of iSM
code which effectively superceded the iSMA code. SOLAS
adopted the iSM code in 1994 and by 2002 almost all of the
international shipping industry was required to comply.
Both the iSMA and iSM codes were very process driven,
Mr Bajpaee says. They werent drivers of culture.
The cultural factor affects all ranks and all corners
of a ship. if a seafarer sees a compatriot entering a tank
without a mask he should know that it is his responsibility
to stop the man and ensure safe practice. There is nothing
in a prescriptive code that supports and encourages more
vigilant behaviour or behaviorial change.
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The 171,095 dwt bulk carrier Pacific Fortune is among the vessels operated by BSM
well as chemical and gas operation and safety courses.
employees are encouraged to undertake further training
and education, serving the dual purpose of providing
advancement for talented workers and providing the
company with available pool of workers with technical skills
to meet the most demanding requirement.
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continuous improvement
He continues: We have to constantly innovate, improve
our process and the organisational effectiveness of our
culture. We need to be a standard for benchmarking and
remember that our improvements will be soon copied. We
need to constantly move the goal post towards further
improvement.
Mr Bajpaee has grafted his credo of continuous
improvement on to industry practice as well. His has been
a key player in industry affairs, notably as president of
intermanager during 2003 and 2006 for two consecutive
terms, when he conceptualised and initiated a major drive
to provide the shipmanagement industry with shipping
key performance indicators. Still under development,
the project has already made headway in creating a
workable pan-industry standard. He continues to provide
stewardship of the KPi project as chairman of the Board of
Shipping KPis Association.
creating a benchmarking resource for the common
benefit is one way that Mr Bajpaee reckons the
shipmanagement industrys credibility will continue to grow
and give it a fighting chance of closing the gap between
third-party and inhouse management.
The exercise in transparency and continuous
improvement will continue upheld by responsible parties
in the shipmanagement industry, and within BSM itself.
if you have one candle, you can protect the brightness
of yours alone and the room will be dark. But with that
one candle, you can light 1000 others and the light will
endure. in the end, leadership is about creating more
leaders. n
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changing oWnership
One idea is to open those in need of restructuring to some
private ownership through share sales.
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Cosco has been so cash-strapped it may be missing the benefit of investing now
.
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return to market?
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Chinese manufacturing will remain an important influencer of maritime fortunes along with the governments long terms plans to
rebalancing the economy away from investment-led growth that characterised the past 20 years
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The Ministry of Transport, Ministry of Finance and the
national Development and Reform commission the
top economic planning body has proposed a shippingstimulus package, shelved for more than a year as the new
government establishes its hold.
However, things cannot stay as they are. The excess
capacity is simply unsustainable and the top yards are
increasingly capable shipbuilders and managers.
Moreover, the governments push toward market forces makes
consolidation a natural outgrowth. chinas top shipyards are now
more ready to absorb this consolidation than ever before.
There will be a lot of pain as jobs are cut, but increased
competition will accelerate chinas move up the value chain
in shipbuilding.
As with most changes in china, the one applied to shipping
will probably be a little slower play out but also bigger in its effect
and implications for the world than outsiders are willing to grasp.
The current reform drive in china is tied up with a generational
shift in government. currently, the fourth generation since the
communist Revolution still has a grip on power.
The current house cleaning under Xi Jinping anticorruption drive is partly aimed at consolidating the fifth
generations hold on government a process that will play
out over the next four years until the 19th Party congress,
when the full set of fifth generation leaders will emerge. The
anticorruption campaign has already touched cosco.
in October 2013, Xu Minjie, who oversees safety issues
for cosco Group, was detained by chinas central Discipline
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EUropEs powErhoUsEs
These days, there are no major US container lines, only a
handful of boxship carriers that operate in the protected Jones
Act trades. But once, they were industry leaders.
Today, the worlds top three carriers are all European,
with Maersk having swallowed up the once mighty Sea-Land
Services, and CMA CGM now owning the US Lines brand name.
APL, or American President Lines, may still have a strong
presence in the container trades, but it has been Singaporeowned since 1997. Lykes Lines was acquired by CP Ships which
was then taken over by Germanys Hapag-Lloyd in 2005.
These, though, were among the pioneers of container
shipping, along of course with American trucker Malcom
McLean who is widely credited with first coming up with the
idea of loading cargo into a standard metal box for ease of
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still changing
A glance through croners World Directory of Freight
conferences, is a reminder of just how much the industry has
changed over the past few years. not only have the heavyweight
conferences such as the Far eastern Freight conference and
Trans-Atlantic conference Agreement vanished, after years
of battling with the european commission, but dozens if not
hundreds of smaller conferences have also gone as a result of
regulatory changes in parts of the world.
These days, the global container trades are dominated
by about 20 major carriers which now appear to be engaged
in a new form of consolidation as opportunities for full scale
merger and acquisition opportunities fade. instead, the leading
trio is hoping to set up a giant vessel-sharing agreement
encompassing the three major east-west trades, while the halfdozen members of the G6 alliance are aiming to do something
similar.
But it is the phenomenal growth in ship sizes that has
really fired the imagination. From early capacities of just a few
hundred boxes to the arrival of the worlds first 6,000 teu ship in
1996, vessel capacity grew steadily larger,
even so, a booklet published by Delft University in 1999
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changing destinations
Head of the Manufacturing Advisory Service Steven Barr says:
This marks a major change in approach from five years ago
when Asia and eastern europe seemed to be the destinations
of choice.
Buyers have realised that there is more to the landing
price than meets the eye, with delays in logistics and issues
around quality adding a whole layer of hidden costs.
it appears that bringing production back is having a
really positive impact on the bottom line, with 68% of firms
that have reshored in the past twelve months reporting an
increase in sales.
This trend appears to be repeated in many of the leading
western economies.
A recent survey carried out by supply chain consultant
Tompkins international found that 44% of respondents,
mainly from north America, were planning to relocate
sourcing or manufacturing to the US, while 41.7% said
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Many people are talking about nearsourcing but not many are actually doing it
they were considering moving to Mexico and 11% to South
America.
However, Tompkins international principal Michael
Zakkour says that many people are talking about
nearsourcing but not many are actually doing it.
The survey went on to reveal that 0% of respondents
actually had extensive nearshoring plans, 0% had significant
nearshoring plans, 20% had moderate plans, 35% had some
plans and the remainder had no plans.
Mr Zakkour says the decision on whether to nearsource
needed to be made based on total delivered costs and future
consumption volumes.
He gave the example of one company [that] considered
nearsourcing but it found china would soon become its
second largest market, and so moving manufacturing didnt
make sense.
bringing it home
Another found that many of the the components used to make
the final product were largely sourced from Asia, so moving
manufacturing would actually increase the total landed cost.
However, for certain products it could make sense to
manufacture in the final market because of shipping savings,
he says.
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no threat
But Drewry is of the opinion that nearsourcing is not a major
threat to container shipping at the moment.
its impact on deepsea ocean carriers is unlikely to be
significant in the short term. These are desperate times for
consumers, so cheap prices from Asia are more important than
before.
Predicting the situation after that is dangerous due to the
uncertain growth rate of internet shopping, which will soon
demand same-day delivery.
There is some evidence that the rising cost of
manufacturing of certain products in china is shifting
production to other Asia economies, rather than moving to
another continent entirely.
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REBALANCE RELATIONSHIPS
natural selection? Survival of the fittest? How has this
market evolved to produce a slump worse than that of the
1980s? Tanker owners investment in modern tonnage
offers a tanker fleet that averages less than eight years old.
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Marine transportation is only one link of the supply chain and industry chain
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trade
Unusual definitions
Brokers have been at the heart of shipping since Lloyds List began
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trading places
The Baltic Exchange and Lloyds List have both changed with the times
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growing pains
We all have to remember that shipping is a global
business, he says. You cant have a shift in imports without
exporters shifting, too, for example. In Asia, that shift has
happened very fast, with growth in demand, particularly for
commodities, but also for consumer products. That means
growth in industrial production and shipping operations.
In the end, its a tremendous benefit. Asia may be a relatively
new participant, but it is a new participant in a larger market
for everyone.
Underlying Dr Sohmens comment is the message that
the rise in global trade, buoyed by the rise of Asia, has
created enormous new wealth. WTO figures show a creation
of new wealth in just under 40 years that would have been
unimaginable to former generations. Its the export story that
illustrates that growth best. In 1973, world merchandise exports
totalled $579bn. Over the next 10 years, Asian tiger economies
emerged, helping push total exports to $2trn. By 2003, the
figure had leapt to $7trn. It peaked at $16trn in 2008.
The dynamism underlying the rise in Asias share of export
growth has been driven from China. That nation claimed only
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a champion industry
Pao: legendary figure
controlling rates. And its shipping companies wont benefit
from the efficiencies born of open competition, a force that
has allowed Japanese shipping firms to embrace new models
and remain competitive over decades of change.
nothing to fear
Dr Sohmen is an example of how shipping rewards the counterintuitive move. Dr Sohmen married into the family of YK Pao,
owner of the World-Wide Shipping empire and based in Hong
Kong. Mr Pao was a legendary shipping figure in Hong Kong,
and served as an informal diplomatic envoy between the UK
and Chinese governments prior to the handover of Hong Kong
back to China in 1997. Dr Sohmen led World- Wides purchase
of Bergesen, creating BW, and moved the new companys base
of operations to Norway in 2003. BW Gas listed in Norway two
years later, but delisted in 2009. Dr Sohmens son, Andreas
Sohmen-Pao, today is chief executive of BW Group.
A former investment banker, he seems to be straddling two
worlds that of the family-owned overseas Chinese business,
with a 21st century view of global capital.
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shipbuilding
This was 100% true with Japan, which developed so much
in the way of reserves that they were the first Asian nation
to accumulate huge reserves in the 1960s, continues Mr
Mehrotra. They started to build bigger scales of ships,
slowly. They developed industries to make all the ancillary
supplies. When you build ship supplies, youre running a
city of 10,000 people. Its a lot more than steel plates. You
develop all the supporting machinery and everyone benefits.
Japan started building ships not only cheaper than
Europe, but also its import-export bank was the first one to
develop 8% financing over eight years for 80% of the price of
the ship. The shipowner only had to bring 20%. They started
building cheaper ships. The South Koreans jumped in, with
its Exim bank offering similar terms, but financing up to 85%
of the total value of the ship. You had to put in 15% to build
the ship.
According to Mr Mehrotra, the pricing profile of this model
improves over time. With the supply chain to make equipment
and service shipbuilding is established nationally. In a
few years time, when the owners return to have their ships
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model finance
The chinese model today resembles the industrial shipping
model of the oil majors in the late 1980s (large commodity
companies building their own ships). The majors held to this
strategy for about a decade until the environmental shock of
the Exxon Valdez disaster and a new liability risk profile made
them rethink. eventually, global competition created a new
pricing paradigm and oil majors found that it was cheaper to
shed assets and charter vessels without owning them.
The oil companies were safeguarding their own economic
security. The same might be said for china and its national
security in protecting delivery of commodities to support
infrastructure development, like iron ore and coking coal.
china currently owns a lions share of the dry bulk vessels
transporting iron ore from major shipping hubs in Australia
and Brazil. it could easily dominate in dry bulk and in other
sectors.
This is because approximately 90 shipyards in china
accounted for 38% of global newbuildings (as of 2008). This
is the legacy of the shipping boom when european owners,
led by the Germans who could finance new ships through
the KG system, went on a building spree. As global trade
collapsed last year, the ownership of those ships became
financially unviable. Most were only partially financed. if
the chinese yards, most of which are government owned
and benefit from soft loans from government-owned banks,
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are left with cancelled ships they will almost certainly, the
thinking goes, complete them and sell them at bargain
prices to chinese shipping companies under the chinese
national flag.
The price advantage of operating under that flag has been
mentioned. There is a danger because the shipbuilding
industry is struggling, that to keep them alive directly the
government would be supporting owners and, in fact, placing
new orders so that the national fleet will be built up, says Dr
Sohmen. That could mean, in due course, that you will see a
degree of cargo preference. The thinking here: theyve put all
the money out to make the shipyards continue, so theyll want
to preserve cargoes for their national fleet it amounts to a
degree of protection.
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capital pressure
All indications are that china will need more capital. Two
trillion in reserves is an immense number, said the senior
London shipping banker quoted previously. But it will not be
at that level forever. As it builds up its interior and tries to
sustain its mandated 8% growth, which its government has
declared is necessary to keep its population growing out of
poverty and not, incidentally, to forestall public unrest it
will need to devote more capital to the enterprise. it will have
to do so in the face of diminishing returns on investment.
Right now, china appears to have adopted a strategy
of supporting its shipping industry by owning its ships,
adds the banker. But as capital reduces over time, it is very
possible they will see the benefit of having, say, Angeliki
Frangou [of navios] or the Ofer family [owner of many shipping
interests, including Zim] own the ships and charter from
them.
Whether this point is five, seven or 10 years away is an
open question. But it will happen. When it does, the free
market component of shipping will be on the ascendency
again.
Japans experience is instructive. The world talks of
china. But Japan is still a tremendous force, and yet hardly
strikes fear in public commentary. it wasnt always so. in
the 1980s, particularly in the US, Japan was regarded as a
powerful arriviste that was going to effortlessly dominate
world markets. But Japans adventure with shipping has been
marked by a view that national interest should be tempered
with an open encounter with free markets.
Japan will hold its own because it is an island nation,
says Mr Mehrotra. Japan needs all its raw materials and
the homogenous Japanese population will always carry the
goods. To Mr Mehrotra, this is reflected in Japanese ship
investment. A major Japanese shipping company will own
20% of ship if they find investors willing to own. They then will
guarantee to charter the ship for 20 years. A company like nYK
could own hundred of ships on paper, but very few of these
amount to 100% ownership. The block of ownership comes
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dominate forever?
According to Mr Mehrotra: Theres no such capitalisation in
other countries. The only competition came from the German
KG system, and that capitalisation didnt work.
Whats more, Japan learned over time that to sustain its
shipping industry against competition, it had to embrace
and interact with the world of independent shipowning.
Some 89% of Japanese owned vessels are flagged with open
registries. The transition began as far back as the 1960s
when Japan rushed into its shipbuilding boom. Because of
the rise of flags of convenience and high Japanese costs,
much of Japans merchant marine fleet was chartered from
independent shipowners, many out of Hong Kong under
shikumsen contracts.
Also, Japanese shipbuilders began to be highly
competitive building for the international market. The
shipbuilders made a long-term strategic decision not to
compete with europes ailing shipyards, which had kept
a foothold by building more technically sophisticated
vessels. instead, Japan developed a specialty in building
bulk carriers, generally regarded as the simplest of
vessels. The shipyards did so alongside heavy investment
and focus on refining manufacturing techniques to
improve economies of scale and boost productivity.
The strategy has, remarkably, given the severe shipping
cycles over the past 50 years, held ground. This long-term
thinking distinguishes Japan. its no accident that a Japanese
shipowning company, nYK, is developing an experimental ship
to drastically reduce carbon emissions. Masamichi Morooka,
chief executive of nYK-Hinode Line and chairman of the
international chamber of Shipping: Being environmentally
sound will be the only way to stay competitive in the near
future.
When will china integrate into world markets, rather
than dominating them? certainly, for now, expect china
to do everything it can to defend its national interests
through shipping. For chinese shipowners, the story now
is how to maintain control of the raw material traffic helping
the shipping companies 100% owned by them, says Mr
Mehrotra. Their running costs are the cheapest. if a ship
under an independent flag costs $7,000 a day, they can
operate it on less than $5,000 a day. This is where there is an
advantage.
But heavy protection always incites a backlash, among
nations and independent buyers. chinas owners, and the
policymakers that oversee the industry, should remember
that stone in The Dream of the Red chamber. While the
fortunes of one family fall, others step in. The message is
that there is always another family and no one can dominate
forever. n
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communication at sea
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communication at sea
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communication at sea
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communication at sea
a brief history
Leading the mss industry for over 30 years
1979
2006
2010
Founded as an IGO
Ship Equip
1982
2006
2011
Segovia
1990
2006
2011
1994
2007
2011
1994
2008
2012
Re-org
1997
2009
2013
Stratos
2 satellite launches
2000
2009
Company privatisation
2001
2009
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communication at sea
The technical abilities that helped send man to the moon are being used to create business efficiency
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communication at sea
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communication at sea
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communication at sea
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need To connecT
This is no less true in the emerging economies from where the
majority of the next generation of seafarers (and many future
industry leaders) are almost certain to come. One only has
to look at the extent to which almost universal access to the
internet, smart phones and social media is already transforming
nations such as China and India.
Unless the industry can eventually find a means of providing
sustained access to social media at sea, I fear it is going to be
increasingly hard to recruit the young people we need, almost
regardless of the many other attractions that shipping has to offer.
There is anecdotal evidence that this is a serious barrier to
recruitment already, not least in places like India and China.
The notion that anyone will volunteer to be excluded from all
contact with family and friends, even just for a few days at a
time, is increasingly regarded by the younger generation as
incomprehensible, let alone acceptable or tolerable.
Google has just launched an advertising campaign for its new
tablet showing how lonely seafarers are able to keep in touch with
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predicting BeHAviourS
Using advances in computational methods in such areas as
hydrodynamics, sea-keeping and finite element analyses,
ABS developed the maritime industrys first-ever means of
realistically predicting the behaviour of marine structures
under dynamic loads at sea.
This process began with the development of the finite
element method of analysis for marine structures, a
revolution furthered by the development of the Dynamic
Loading Approach (DLA) to finite element analysis.
DLA represents a holistic approach to evaluating marine
structures, as it enables analysis of a complete hull structure
subject to dynamic loads in a seaway. By enabling designers
to perform structural analyses during design development,
DLA introduced the maritime world to design-by-analysis
methodology.
This opened completely new avenues of development in
vessel structural design, engineering and classification. ABS
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fASt AnAlySiS
This significantly reduced the time required for the analysis,
enabling application of the new criteria to become part of
the day-to-day design process. The new criteria and the
associated analytical tools including the industrys first
simplified fatigue screening tool were combined into a new
product which we named SafeHull.
But far more than being just software, SafeHull combined
the restated Rules criteria, including associated analysis
tools and the software to apply them.
Despite the hype to come years later as the dotcom boom
washed over the shipping industry, this was a real revolution
for the maritime industry.
SafeHull not only assessed designs according to ABS
Rules, it also accurately predicted where fatigue and other
structural problems would develop as the structures aged. Its
unique analytical capabilities made SafeHull far more than
just a means of checking designs against class Rules.
SafeHull was developed as a totally new kind of tool that
designers could use to realistically assess the strength of a
structure, relative to the necessary class acceptance criteria,
throughout the evolution of the design.
Through this, SafeHull encouraged innovation throughout
the maritime world and fundamentally changed the way
industry approaches hull structural design.
Before SafeHull, the industry depended on experiencebased, semi-empirical structural criteria that were not well
understood and as a result, had developed Rules that were
overly conservative in some areas and not conservative
enough in others.
SafeHull not only helped ship structural design evolve
over the last 20 years into a rational process, but because
it explicitly defined and documented everything when ABS
Rules were re-stated, has also helped ABS make rational,
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SAfeHull MileStoneS
First time that Classification Society Rules were based
on engineering-first principles
SafeHull incorporated industrys first-ever screening
tool for fatigue
First use of the net ship concept in any
Classification Rules
First time a two-step engineering approach initial
scantling evaluation and total strength assessment
was used in class Rules
First comprehensive software suite that integrated
hydrodynamics software results with finite element
analysis
First time that class Rules were developed for double
hull tankers (SafeHull for Oil Tankers)
For the first time, class Rules addressed structural
inadequacies of bulk carrier designs (SafeHull for Bulk
Carriers)
Many SafeHull bulk carrier requirements became IACS
Unified Requirements and then were adopted into
SOLAS Chapter XII
SafeHull technology is at the core of IACS Common
Structural Rules (CSR)
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Ship design is becoming more technically sophisticated so rules must also be equally sophisticated
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shipping.
The list had to be refined to exclude innovations that
did not directly involve the ship itself but even so the task
remains daunting. The advancement of maritime technology
is often not the result of inventions for the sea, but of
inventions that were subsequently adapted for maritime use
and have made a substantial impact. This is not a definitive
list but a sample of the key highlights in the history of the
ship during the time Lloyds List. Most of these developments
seem to have been made over the last 100 years, a sign
perhaps that shipping is more adaptable to change than
critics suggest.
1. SteAM engine
The invention of steam and its use at sea solved two distinct
problems liked with sail at the time, namely direction and
regularity. No longer were ships bound to sail a course
limited by the direction of the wind, nor at risk of being
dismasted.
The ability to sail between two ports at a known speed and
with a reasonably accurate idea of arrival times helped create
the passenger liner trades and the notion of fast transatlantic
voyages. The problem was that the main fuel source was coal,
and it required hundreds of workers keeping vast boilers fed.
The first ocean crossing by a steam-propelled vessel was
in 1819, when Savannah, a sailing ship fitted with an engine,
voyaged from Savannah to Liverpool in 29 days. The first
crossing under steam power alone was made in 1838, when
two British companies sent rival ships to New York within
a few days of each other; Great Western made the trip in 15
days, arriving a few hours after Sirius, which had left England
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2. dieSel engine
Rudolf Diesel patented a design for what would develop over
time to be the modern diesel engine at the end of the 19th
century. It was licensed out to the Nobel Brothers petroleum
company where attempts were made to convert it to run off
unrefined oils. The first commercial vessel to use a diesel
engine as an auxiliary engine in a steam ship was built in the
first decade of the 20th century. Selandia was the first vessel
to be built with a diesel engine as its main power source in
1912. Suddenly vessels had a more compact easy to handle
fuel and the capability to extend their range without the need
for huge crews to shovel coal into boilers. Thus the age of
diesel was born, and before long most commercial vessels
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were using this new engine and fuel source to go further and
faster, more cheaply and with less manning.
5. veSSel SpeciAliSAtion
4. Welding
Out of necessity comes innovation. Welding was not a new
invention when the great wars came around, but the necessity
of building vast numbers of commercial and naval vessels
along with aircraft and other structures saw it become a
mainstream means to create a join between two metal
components quickly and cheaply. Welding was a crucial step
in the construction of over 2,700 liberty ships built in a fouryear period to 1945 at 18 US shipyards. These vessels has
a design life of five years, but famously lasted much longer
becoming the founding fleets of some of the industrys leading
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8. communication technology
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ugly ducklingS
The US Maritime Commission had been established in 1936
primarily to develop a shipbuilding programme that would
replace an American merchant fleet that was largely of First
World War vintage. But the outbreak of the new conflagration
vastly expanded the enterprise.
At first, the Commission authorised construction of 50
vessels but the fleet supporting the Allied war effort in Europe
was sustaining greater losses than expected. Building ships
faster than they were being sunk became a critical policy
objective, and one which was ultimately achieved after dozens
of new shipbuilding slipways sprouted on both the east and
west coasts of the US.
The official designation for the Liberty Ships was EC2-S-C1,
describing an emergency cargo vessel of a large size for its era,
powered by a steam engine.
A number of modifications from the British Ocean-class
design were made, the main ones being the replacement of
coal bunkers with oil-fired boilers, and the introduction of a
single mid-ships wheelhouse. However there were many other
changes, for both good and ill.
The Libertys normalised a higher standard of accommodation
than merchant seamen had often been used to on earlier
vessels. In the haste to approve standardised plans, though,
certain modifications were also the cause of accelerated
cracking aboard many of the vessels.
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A class apart
Classification societies disseminate their experience and research knowledge
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environment
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environment
n the past few decades the ship recycling scene has evolved
significantly. Overall, there is greater recognition of the
importance of ship recycling to the wider maritime world.
Over the years Lloyds List has played an important role in
bringing ship recycling news to the shipping world. Heres
my reflection on the historical changes to this date and what
perhaps we can expect from this sector, moving forward.
HisTorical developmenTs
Our greatest glory is not in never falling, but in rising every
time we fall.
Confucius
sHip recycling yards
Prior to the 1980s, Taiwan played a key role in the ship
recycling industry. In the 1980s ship recycling yards in
the Indian subcontinent (India, Pakistan and Bangladesh)
gradually took over as the dominant players in the industry.
Their ascendancy was supported by the large number of yards
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environment
126
P123-147_Environment.indd 126
THe FuTure
The only function of economic forecasting is to make
astrology look respectable.
John Kenneth Galbraith
The future promises to shine brightly for shipping and ship
recycling. As in many industries, changes can be expected.
Some of these changes are delineated below:
Life cycle: More younger ships will be recycled than
they have ever been in the past. The life cycle of ships
will shorten. It will not be uncommon for ships 20 years
or younger to be sold for recycling. Consequently, the
historical model where major owners from the western
world sold their 15-year-old ships to the Greek or Chinese
buyers will change. Most of these owners will end up
selling their ships directly for scrapping.
Value proposition: According to Warren Buffet, price is
what you pay, value is what you get. Shipowners will prefer to
work with cash buyers and ship recycling yards that offer the
best combination of price and quality. Highest price for a demo
vessel will be replaced by fair price and long term relationships.
Cash buyers will play a much bigger role in main stream
shipping by offering a wider mix of products and services in
this sector.
Corporate Social Responsibility will become more prevalent.
More ships will go to green yards (yards with Safe and
Responsible Ship Recycling practices and certificates) than
ever before.
China will build and recycle more ships than any other
country in the world. n
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environment
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environment
going green
Green recycling is a particularly strong thread for GMS
and Mr Sproviero believes a lot of cash buyers will
likely fall by the wayside as environmental and green
recycling picks up. There are always going to be
tighter regulations it is maintaining the balance that
is most important, he says. It is about making sure
the regulations dont stifle what is feasible in the here
and now. Of course the world is changing and evolving,
and the industry is too. That is why GMS has been at the
forefront of responsible recycling programmes. People
increasingly require the green aspect, for their own
CSR reasons and GMS affords owners the opportunity to
properly recycle their tonnage.
GMS describes itself as an ardent proponent of green ship
recycling and was the only cash buyer in the world to participate
in the deliberations leading to the IMOs Hong Kong Convention
for ship recycling. It has set up its own Green Ship Recycling
Programme (GSRP).
nikos Mikelis, based in the UK, is the head of green
recycling for GMS. Interest in green recycling is small
amongst shipowners but it is increasing, he says. It
is primarily interest from companies that have got CSR
policies that tends to be the bigger companies in the
main, but not exclusively.
arT oF persuasion
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environment
working with bare hands and feet. But there is always room for
improvement.
Because at present the shipowner is not being compelled
to undertake responsible ship recycling, those recycling
yards that do take the initiative for responsible recycling
unfortunately dont get proportionate returns, says Mr
Chatzigiannis. The market is basically very competitive
and yards can go under due to fluctuations in steel prices,
currency, and so on. These fluctuations can destroy a yard
that has made expensive investments in order to comply with
higher standards.
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130
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leFT WanTing
Ships have certainly developed, although many will
argue that not enough has been done during this recent
generation, a generation where a new agenda has emerged
and some think shipping, as the conduit for trade, and in the
modern era for consumerism, has been left wanting.
Society has turned a corner and the mantra of
sustainability has gained credence, becoming an accepted
way of thinking.
Sustainability, and with it corporate social responsibility,
another phrase that many still find difficult to define,
are perhaps the offspring of so much environmental and
safety regulation being developed for shipping. They are
the voluntary actions that society, and with it shipping, is
becoming expected to do, even if it is not mandated.
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29/01/2014 14:05
environment
cradle To grave
Rudoph Diesel, the man whose name has become
synonymous with the modern engine fuelled his first
demonstration engines off biodegradable peanut oil in 1903.
The first vessel to be fuelled solely by hydrocarbon oil or
diesel oil, Selandia, was launched in 1912.
Today shipping is on the cusp of another change as
environmental regulations and commercial pressures drive the
search for cheaper, cleaner fuels and better ship operations.
But while there are the commercial realities of shipping
there is this growing need to keep ones shop clean and to
make sure it can be seen as being clean; this is the rise of
corporate social responsibility and sustainability.
CSR has become a growing force in the corporate world.
Interest in sustainability linked financial funds has rocketed
over the years. The creation and increased interest in the
Un Global Compact is testament to this. UnGC encourages
companies to sign up to a set of 10 guiding sustainable
principles. Over 10,000 companies and organisations are
signatories, some are shipping companies. Many are clients
or charterers of shipping companies and their sustainable
demands are being listened to.
In 2013 the World Maritime University hosted its first CSR
conference.
Speakers alluded to CSR as Common Sense Really,
pointing how this drive for business development and growth
in an age of demands for cost efficiency goes hand in hand
with the ideals of a sustainable world.
One of the striking aspects of the World Maritime
Universitys conference focused on the business case for
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31/01/2014 09:23
Untitled-1 1
28/01/2014 11:37:06
environment
134
www.lloydslist.com
Number of vessels
3,324
5,475
Number of vessels
6,051
Number of vessels
2,774
4,421
143m
154m
Number of vessels
Number of vessels
2,053
Number of vessels
4,215
Number of vessels
3,414
94m
99m
Number of vessels
1,119
Number of vessels
Hong Kong
SouthKorea
31m
US
33m
China
36m
Germany
43m
Greece
46m
58m
Japan
6,630
Norway
Singapore
Taiwan
World fleet
Bulk
Tanker
Container
Other
General Cargo
Gas Tanker
Ro-ro
Passenger
Reefer
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environment
environmenT
saFeTy
TecHnology
136
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environment
Shells Prelude floating LNG project earned the prestigious Lloyds List Global Award for Technological Innovation in 2012 and 2013
eFFiciency
Efficiency: The shipping industry is at the start of a journey to
simplify, standardise and speed up end-to-end operations. The
airline business provides a compelling example of how safe and
efficient operations can be delivered consistently across a highly
competitive and large, fast-moving global industry, underpinned
by common practices and operational standards. At the core of
our own efficiency programme in Shell has been forensic analysis
of the 100+ steps that make up each ship journey. The resulting
efficiency improvements have saved more than 90 ship days in
this year alone and we are pursuing industry-wide opportunities
through collaborative working with port and terminal authorities,
shipping companies, suppliers and regulators globally.
people
People: The shipping industrys success has been built on
great technical, operational and commercial talent, both on
and offshore. Looking ahead, the industry will need even
more innovators and diligent, diverse delivery teams to grasp
opportunities as new paradigms emerge. Strong investment
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Regulations, social responsibility, often called sustainability, and costs will see
the introduction of new fuel types, the marinisation of land based technologies
and more demand for oversight.
Those drivers are still relevant in the 21st century. While the industry is in the
midst of the age of diesel, there is now a new drive that is influencing shipping.
The ship of the future will be watched more intently, operated more eciently
and will embrace dierent solutions, some of which may work, some of which
may not. One key element will be to have vessels with the ability to be converted
or retrofitted to meet regulatory or commercial challenges.
Lloyds List looked at what these vessels may possibly include and developed its
own idea for how to modify a modern vessel in service today to make it future
proof, capable of meeting what the future will oer.
CONDITION MONITORING
SOFTWARE AND SERVICES
Planning the journey has never been easier with modern technology.
Companies will now offer continual guidance to make sure the best route from
A to B is made.
EMISSIONS MONITORING
SPOILERS
FLETTNER ROTORS
HULL APPENDAGES
Improvements, or in the
speedy containerships
the ability to switch them
off at low loads, is vital
to improving fuel
consumption.
CREW AWARENESS
Knowledge, experience and
awareness ensure modern
technical tonnage works
like clockwork.
WASTE HEAT
RECOVERY
Hot exhaust gas is the
same as throwing money
away. Capturing the heat
in a separate system and
using it to generate extra
power is a clear bonus.
ENGINE TUNING
A finely tuned engine is any boy racers
dream, just as the optimally tuned engine
for a ships speed is a dream for the
accountant watching the fuel bill.
P123-147_Environment.indd 138
TRIM OPTIMISATION
AIR LUBRICATION
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Specialist in repair
and conversion
As the premier ship repairer and market leader
in FPSO, FSO and FSRU Conversions, we have
come to be known for our flexibility, quality,
innovation, safety excellence and commitment
to customers.
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ShipyardS
conTacT
Keppel Shipyard Ltd
(Tuas Yard Head office) | 51 Pioneer Sector 1 Singapore 628437
Tel : 65 6861 4141 | Fax : 65 6861 7767 | Email : ks@keppelshipyard.com
www.keppelshipyard.com
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ShipyardS
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While Keppel O&M has been formed for only 11 years, the
legacy of Keppel Shipyard, nevertheless, is rich. The name
Keppel finds its origins with Henry Keppel (1809-1904),
master of Meander, which first called to Singapore in 1848.
Capt Keppel is credited as the first individual to understand
the full potential of Singapores natural harbour at Tanjong
Pagar.
I was astonished to find deep water close to shore,
with a safe passage through for ships larger than
Meander, Capt Keppel wrote to the British Admiralty.
He advised that the Admiralty develop the harbour as a
port, a bit of wisdom that was roundly ignored until the
Suez Canal was completed in 1869 and shipping traffic
to the East Asia increased thereafter. Capt Keppel, later
promoted to admiral, was still going strong at 92 years old
when he visited Singapore in 1900. The governor honoured
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ShipyardS
Power of integration
www.lloydslist.com
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143
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ShipyardS
144
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ShipyardS
With the expansion of one of its docks in the Tuas yard, Keppel
Shipyard can now accommodate vessels such as the new
generation of ultra-large containerships which measure 400
metres in length and have a capacity of 18,000 teu or more
Beyond its Singapore yards, Keppel Shipyard is able
to leverage synergies of Keppel O&Ms global network of
yard facilities, resources and capabilities in places such as
Qatar, the Philippines, China, the netherlands and Caspian
in the execution of its projects. These synergies have
allowed Keppel Shipyard to provide value-added solutions
of flexibility in meeting customers requirements for their
docking schedule in various geographical locations.
For instance Keppel Shipyard has worked together with
its sister yard in Brazil BrasFELS to contribute substantially,
directly and indirectly, to the expansion of Petrobras FPSO
fleet.
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P123-147_Environment.indd 145
The FPSO Armada Claire (right vessel) project is the tenth major
collaboration between Keppel Shipyard and long-term partner
Bumi Armada
145
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ShipyardS
146
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29/01/2014 14:05
SHIPYARDS
www.lloydslist.com
147
Holman Fenwick Willan is a global law firm with a long history of advising
businesses at every stage of the maritime supply chain. With 14 offices across
11 countries, our specialist lawyers advise on:
n Admiralty and Crisis Response
n Logistics
n Commodities
n Marine Insurance
n Ship Finance
n Shipbuilding
n Cruise
n Personal Injury
n Shipping Contracts
n Superyachts
We have extensive crisis management experience and offer a 24hr emergency response service:
MARITIME
London
Paris
Rouen
Brussels
Geneva
ADVERT Lloyd's List - 300 Years of Shipping [A4 1pp] December 2013 v5.indd 1
P148-174_RRISK&INS.indd 148
Piraeus
hfw.com
Dubai
Hong Kong
Shanghai
Singapore
Melbourne
Sydney
Perth
18/12/2013 14:37
29/01/2014 13:40
13 14:37
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contact
Paul Dean, Partner
Holman Fenwick Willan LLP
Friary Court | 65 Crutched Friars | London EC3N 2AE
Tel: +44 (0)20 7264 8000 | Fax: +44 (0)20 7264 8888 | email: paul.dean@hfw.com
www.hfw.com
150
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1883
1905
1920-1950s
1977-78
1991-99
2006-11
2009
2013
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Wreck removal costs are going through the roof, says Gosling
will be an interesting issue because many, if not most, eU
countries will have vessels with a Filipino master or crew and
that may lead, depending on the legislation, to a move to flag
away from the eU to other jurisdictions in the Far east, for
example.
If the eU says it doesnt recognise Indian or Filipino
certificates, the owner would have to sack all the crew and
potentially go back to the days of very high cost european
employees the result would likely be flagging out
elsewhere.
Bigger risks
as ships get ever larger, there are increasing concerns about
a number of risks, says James Gosling, partner and head of
admiralty at HFW.
151
29/01/2014 16:50
The nature of the threat posed by West African pirates tends to be quite different from those posed by Somali pirates
our concern is not only on the cargo side but also
on the passenger ship side. Costa Concordia is certainly
not the biggest and so consider the difficulty and
potential impossibility of salvaging some of these megaships.
With an 18,000 teu containership, there is not physically
a crane that you can float that can reach out and take the
containers off the ship if its on fire or grounded. that might
not seem very important, but what if it was grounded in the
middle of the Suez Canal? that would concentrate minds very
quickly.
In the case of a fire, shipowners and salvage companies
have no way of knowing exactly what is on board a vessel
because of potential mis-description, says Mr Gosling. this,
together with the size difficulties, is a major issue the
salvage industry is scratching its head on how it is going to
deal with it.
Similarly, wreck removal costs are going through the roof.
Where US$10 million used to be the rule of thumb for an
average wreck removal, that quickly rose to US$50 million
and now the rule of thumb is closer to US$100 million, he
says.
the International Group of P&I Clubs have got together
and say this is a major concern for them. the Costa Concordia
is a good example salvage costs are said to be around the
US$1.4bn mark, and I suspect there wont be much change
from US$2bn by the end.
Paul Dean, partner and head of shipping at HFW, adds:
the MSC Napoli casualty off the south coast of england was
not much more than 3,000 teu and it was a major headache.
that puts things into perspective. this trend towards ever
larger ships leads to all sorts of knock-on effects.
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OffshOre issues
the floating out of Shells new FlnG vessel Prelude from
Samsung Heavy Industries yard in South Korea raises
interesting questions in the offshore sector, says Paul Dean.
the 488m long vessel the largest floating facility ever
built has storage tanks with the capacity of 175 olympic
swimming pools and will be working off australia when
completed.
the big issue is whether she is defined as a ship or not
and the consequences of that question going one way or
the other are significant. If Prelude is a ship, its owners may
be entitled to limit their liability in the case of, for example,
a major pollution incident. the ultimate definition also
has implications for taxation, admiralty/arrest, technical
standards and safety issues.
also on the offshore theme, HFW raises ongoing political
risks. We have seen in the past what happened in Venezuela
in terms of the nationalisation of foreign assets, says
Mr Dean. During his 14-year presidency, Hugo Chavez
nationalised more than 1,000 companies including, in
2010, 11 drilling rigs belonging to the US company Helmerich
& Payne. likewise, argentinas recent nationalisation of oil
company YPF, including seizing Spanish oil giant repsols
assets, will have a long-term economic impact.
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29/01/2014 16:50
shiP finance
Ship finance is still shaking up, says HFW.
the financial meltdown of 2008 and the ensuing fall in the
freight markets led to major issues for a number of traditional
ship finance/lending banks and the liquidity of these banks
in terms of further lending is still limited. there are issues
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saLvage struggLe
Then there was the 8,100 teu MOL Comfort, which split in
two a few months ago in the Indian Ocean, with each half
subsequently sinking despite the best efforts of salvors.
Another high-profile casualty was the 15,500 teu Emma
Maersk, which was out of action for several weeks earlier
this year after its engineroom was flooded following a
stern thruster failure, while firefighters struggled for days
to extinguish burning containers on the 6,800 teu Maersk
Kampala.
The 10,000 teu Zim Rotterdam had to sail all the way from
the Indian Ocean to London Gateway so unexpectedly
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insurmountaBLe hurdLes
Their request has not been granted yet by other parts of the
industry but Joint Hull Committee chairman Pete Townsend
has been vociferous in his plight to secure further investment
in the salvage industry as a whole. He has appealed to the
International Group of P&I Clubs to come to the table to
devise a solution where industry supports investment.
Nothing definite has come of this yet either but there is
hope. Mr Townsend has warned that if the shipping industry
is not proactive in finding potential solutions for the vessels it
has chosen to build then when, not if, a mega casualty occurs
it will face the wrath of legislators which could have a crippling
impact on what some consider to be an already over regulated
industry.
Where pockets of investment do exist, progress has been
made but it still comes with a caveat. Svitzer Salvage, part of
the AP Moller-Maersk group which owns Maersk Line, operator
of the worlds first 18,000 teu ships, has developed a crane
that will be enable containers to be offloaded onto an adjacent
ship or barge and has urged the industry to invest in this
system.
However, insurers are sceptical over whether this is the
right horse to back as it will only be able to operate on vessels
that have not listed.
A solution which satisfies all parties sufficiently to prompt
investment remains elusive and therefore panic over what
will happen in the event of a casualty of this
magnitude still hovers menacingly over the
industry.
Is it the case that ships have simply gotten
too big for shipping and the hurdles it needs to
overcome are insurmountable?
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e arme
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www.lloydslist.com
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rs
propelle
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IPS IN
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KEEPING SHIPS IN
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hydrex@hydrex.be
www.hydrex.be
BUSINESS
ESS
BUSIN
Lloyds List led the way with its Costa Concordia coverage
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/dunkerqueport
/DunkerquePort
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On yOur side
A mutual mindset underpins
everything we do
www.gard.no
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managing risk
as the northern shipping routes become a reality how will we balance future risk and
opportunity as we look back at the lessons of history?
human error
To put this in context, when the Norwegian, Roald Amundsen,
made the first successful complete transit of the Northwest
Passage in 1906 it took over three years.
Not only did these transits save in time, but there were
fuel savings and, importantly, reduced carbon emissions - a
key requirement for the maritime industry as it enters a new
phase. The routes chosen also removed almost completely
the threat of piracy.
In 2012, Arctic sea ice coverage was at a record low. As
the ice continues to melt, some experts have estimated that
shipping via the Arctic could account for a quarter of all cargo
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history Lessons
And history has taught us that it usually takes a disaster to
instil urgency in implementing previously suggested regulation.
How long will it take for the Polar Code to have legal effect?
The SOLAS convention was devised as a result of the sinking of
Titanic. In the 1970s SOLAS was amended to take into account
the need to rectify inadequacies in oil tanker safety. But the
amendments were not ratified until after the loss of 50 people
when the Betelgeuse exploded at Whiddy Island in Bantry Bay,
South West Ireland in 1979. The ratification in 1980 arrived too
late to impose a simple requirement in relation to inert gas
systems that would have prevented the disaster.
The challenges presented by the drive to operate
heavily in the worlds last frontier are therefore
significant. While the evolution of IMO regulations is very
welcome, it is clear that the marine and energy industries
cannot afford another disaster. Operating in more extreme
environments, together with an increase in the size of
vessels presents significant risks that must be addressed
by industry and government alike.
The fall out following the Macondo oil spill is a reminder
of the consequences of getting it wrong. From an industry
perspective, risk management is critical to corporate social
responsibility and governance. Operations in the Arctic arena
need to be done properly or there will be repercussions for
companies and their associates far beyond the Arctic.
arctic counciL
The dangers associated with this new era in shipping were
brought sharply into focus by a fourth incident which also
happened during the historic transits. In September Nordvick
entered ice waters and punctured her hull while transiting the
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there are, what sort of contracts are in place, who does them
and why, Mr Herring says.
The clients we work for expect us to know what is
happening in the shipping market, they expect us to have
expertise.
On the casualty side, they expect us to have a bunch
of people who have been on board ships, having operated
machinery and navigated them.
So although there are now more shipping law firms than
in the past, most resulting from breakaways from larger
firms, it remains true that these are not the kind of practices
that anybody could set up overnight.
Meanwhile, just as technology has revolutionised the
shipping media, leading to Lloyds Lists transformation into
a website rather than a daily newspaper, so it transformed
shipping legal services.
One thing that Mr Herring has noticed over the years is
the speed with which legal advice must be delivered has
increased beyond all recognition.
When I started at the firm, we depended on the
telex, which wasnt the fastest means of communication,
particularly if you had some long document.
Then we moved to fax and subsequently email and,
because those are pretty much instantaneous, clients now
expect to get their advice more quickly.
The digital era has changed everything. Word processors
have made the previously laborious process task of amending
long contracts far simpler and again virtually instant.
The Supreme Court asks not only for hard copies of papers
filed but also memory sticks, so that they can be viewed on
screen. Evidence in some trials is now shown simultaneously
on screen to the judge and the parties legal advisers and
one recent major trial was paperless.
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Word processors have made the previously laborious process task of amending long contracts far simpler
and again virtually instant
Another new development has been the continuing rise of
regulation.
Im not saying regulation is a bad thing, far from it, Mr
Herring says. But there is certainly an increasing amount of
regulation on the safety side and the environmental side.
That is proving to be a real burden for the owners, in
terms of expenditure, both on the ship and shore side.
There is a lot more form filling and reporting than there
used to be and that has had a byproduct for litigation, in
certain types of cases, for instance seaworthiness cases.
The demand for documentation on the owners side has
definitely increased.
Owners need to be able to produce their International
Safety Management code manual, documentation relating to
repairs, engine alarm printouts and much else besides.
The emails that have replaced letters and memos are also
subject to disclosure.
At the time of writing, there was a widespread expectation
that the shipping downturn is finally coming to a close and
markets were starting to improve.
People are ordering ships again, sometimes in some
numbers, and increased newbuilding activity is always good
news for law firms, particularly if accompanied by increased
market volatility.
If rates improve, some owners will seek the same
opportunities.
Conversely, should rates fall, charterers will seek to
renegotiate in the hope of reducing payments.
Greater numbers of newbuildings will mean opportunities
to review contracts, and if the sale and purchase market
starts to get firmer as it has in the recent past review
work and litigation is likely to follow.
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LEADERS IN
SHIPPING LAW
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Hamburg
Piraeus
Hong Kong
Shanghai
Le Havre
London
Singapore
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Casualties
an innumerable number of disasters have occurred within the shipping and wider marine industries in
the close-to 300 years Lloyds List has been published, but there have been a handful that have had
more of an impact than others
titaniC loss
In response, the Us government and state regulators
introduced new rules that ensured sufficient emergency
equipment was kept onboard vessels.
however, these rules did not extend overseas, and the
sinking of Titanic in 1912 was the first casualty to cause a
major overhaul of international shipping regulation.
After the ocean liner struck the ill-fated iceberg, it
became clear there were not enough lifeboats onboard.
Indeed, only 1,200 people were saved while thousands
perished. Astonishingly, Titanics life boat provision was
more than the required minimum.
Two years after the disaster, new rules forced vessels to
carry enough lifeboats for all those aboard. This regulation
International Convention for the safety of Life at sea was
introduced in 1914, although the outbreak of World War One
meant it did not actually come into force until 1929.
Aside from ensuring requisite lifeboats were on board,
other emergency equipment was made compulsory, new
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juSt in time
Here are some of the questions awaiting an answer.
How do carriers adapt to todays need of delivering across
the seas, and just in time, commodities and all sorts of
manufactured goods? How do carriers survive in a fluctuating
market ridden by recurring crises? Will they find in ever larger
ship sizes an adequate and lasting solution? Would the fight
for bigger market shares not be disrupting the industry?
How far can ports and access channels keep adapting to
such just in time deliveries and growing ship sizes, whilst
being ready to face any slackening trade flows? How do they
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The Rena clear up on Waihi Beach, New Zealand was costly and complicated
particularly when they have to integrate the concentration of
impressively high values, risks and liabilities on each single
ship and voyage?
It is the duty of governments to protect their coastal
environment while having to offer places of shelter for
distressed ships that may be carrying dangerous goods. How
do they reconcile these requirements?
International bodies have to set up conventions and rules
capable of covering the complex situations that are arising.
Can they do it in a way that leads to common interpretation
in order to efficiently meet real-life and situations and avoid
disagreements and litigations?
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information is king
The first publication of the title Lloyds List was in 1734
and it seems to have become an authority in short order. In
1740, the chief waiter at Lloyds was so well informed that
he was able to go to Downing Street where he informed Sir
Robert Walpole, the Prime Minister, that the British
Navy in faraway Panama had won the battle of Portobello.
Perhaps he had seen an early edition of that
days Lloyds List.
In 1750 a naval captain published an ode about a voyage
to Venice which was Printed for Lloyd, well known for
obliging the Public with the Freshest and Most Authentic
Ship News. Today, Lloyds List remains the place to go
for the most up to date news, although it is more likely to
arrive by satellite than via the purple prose of a romantic
sea captain.
For more than two centuries, the Lloyds Market and
Lloyds List worked together to provide the marine industry
with everything it needed, from war hull insurance to
information. Both were international organisations
centuries before anyone had coined the term globalisation;
the Lloyds List of 21 December 1813, exactly 200 years
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insurance TimeLine
1568
1986
1574
Office of Assurances oversaw standardisation of polices and clauses
and reduced the volume of legislation
1578
Queen Elizabeth I deprived the Hansas of their trading privileges and
expelled all Hansas from England
1601
1988
The Piper Alpha disaster, and Lloyds struggles to quantify its potential loss to the event, highlighting the deficiencies some syndicates
have in monitoring their exposures, and the realisation of the socalled LMX spirals existence
1991
Marine Insurance Act 1601 (Elizabethan Act) by Sir Francis Bacon titled An Act Touching Policies of Assurances used among Merchants
- included regulations for a Court of Arbitration
Lloyds posts a loss of more than 500m for the 1988 year of account
the single largest loss year in its history, reflecting claims from
Piper Alpha and heavy losses from asbestos, pollution and health
hazard (APH) policies written in the US in the 1960s
1653
1992
1680s
1994
1769
Names monopoly on providing capital to Lloyds ends with the market welcoming the introduction of corporate capital for the first time
1771
Formation of the Society of Lloyds - 79 underwriters contributed
100 each
1774
Lloyds evolves into a more formal society and moves into new premises at the Royal Exchange on Cornhill.
1996
The creation of Equitas reinsures each syndicates liabilities for policies written up to and including the 1992 year of account
1997
Conclusion of Reconstruction and Renewal Lloyds Settlement proposals are accepted by 95% of the markets members
2006
2012
1906
1928
Lloyds moves into new premises at 12 Leadenhall Street
1958
Lloyds continues to expand and moves into the newly constructed
51 Lime Street, since been demolished and now the site of the Willis
Building
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A history of piracy:
how it has changed over the years
Lloyds List archives track the changing face of piracy
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INSURANCE LOSS
DECLARATION OF PARIS
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COLLABORATION
Whether this combined effort has such a definitive end to
piracy in the region as the Declaration of Paris remains to be
seen. Another area where modern piracy is a problem is in
the Gulf of Guinea. This is not a new problem but it has got
progressively worse and now pirates are not only hijacking
for cargo but also holding crew members for ransom. The
solution which worked in the Indian Ocean cannot be applied
here as a large proportion of activity occurs in territorial
waters where international navies and armed guards are not
permitted.
Easing the problem of sea robbery in the Gulf of Guinea
will depend much more on shore-based solutions in Nigeria
and finding some way of easing the corruption. This will not
be an easy task and depends on a fundamental shift in the
way the country is governed.
It seems that piracy or robbery at sea will always exist
in some form, as it does on land. Vulnerable environments
allow it to thrive and it is then that the shipping industry is
forced to search for solutions to ease the problem. However,
they also need the cooperation of governments in order to
effect any change and if this is not forthcoming then fighting
piracy can be an expensive and difficult task. n
The UK Royal Naval Museum supported the historical
research in this article.
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inteLLigence
PGI acquired Olton a technology-led intelligence services
in March 2013. Olton has specialised over the last 13 years in
mining the internet including the 88% that is not accessed
by search engines - for information. This capability means
we can quickly analyse vast quantities of data from the open
and closed internet as well as social media sources to spot
patterns and trends and provide early warning.
technicAL
Any cyber offer is underpinned by people with high-end
cyber security skills who can analyse the technical threat
huMAn
The most high-profile and it can be argued damaging
government data losses of recent years have been caused
by insiders Manning and Snowden. The human remains
the most vulnerable part of the computer system. PGI
The most high-profile and damaging government data losses of recent years have been caused by insiders
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Physical
It is easy to forget in the high-tech world of cyber crime
that the most effective access is often the door. The
attack on Antwerp port I mentioned earlier was in part
facilitated by a physical break in to gain access to the
network.
ExPEriEncE
Cost-effective cyber security requires a company to
balance investment across measures to reduce human,
physical and technical risks. PGIs senior executives can
draw on considerable experience of similar investment
decisions in senior roles in government and industry
to help clients with these decisions. We can also offer
analytic tools and methodologies to bring rigour to
the decision-making process. A multinationals global
architecture cannot be uniformly secure. Since effective
cyber attacks are not limited by geographical boundaries,
those looking to steal a companys information or
disrupt its operations are more likely to target the
weakest points in its global network human, physical
or technical - and are more likely to be successful if
they do. We encourage companies that are considering
investment in upgrading their cyber security to start by
looking at geo-specific cyber risks. This work can be used
to develop a prioritised plan which inform investment
decisions and allow vulnerabilities to be addressed in a
logical order and gives a baseline against which riskreduction can be measured.
TEchnology
At a time when staff with cyber skills are in short supply,
it makes sense to automate and let a machine do the
work wherever possible. PGI draws on its own and best
of breed commercial technologies to do this including its
own Mi:Fusion platform which underpins its intelligence
and analysis work. For more effective network defence,
the next generation of network monitoring systems, led by
Hawkeye G from Hexis, bring all the benefits of the more
traditional perimeter and endpoint monitoring systems,
the defence in depth systems and automated monitoring
products in a less resource intensive package. They add a
much more advanced, sensitive and automated approach
that is capable of addressing both the insider threat
both malign and careless and Advanced Persistent
Threats. It can reduce the detection and remediation rate
from hours and days to seconds without the need for
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Training
While Hawkeye G can help reduce the demand for
those hard to find cyber skills, PGI is also playing its
part in increasing the supply. PGI is the first company
outside the US to offer high-end cyber training in an
immersive environment. It has been working with KEYW
to take three of its courses covering advanced threat
methodologies, digital forensics and cyber skills for
managers - and develop them for UK and international
markets. Our first courses will be launched in the UK in
May. In the long run, this may turn out to be the most
important contribution we make to making cyber space a
safer place to do business. n
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conclusion
Future excellence in shipping is going to depend on how
we handle the ever greater number of signals coming our
way. n
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sTudenT success
In 1985 we were observing and analysing the withdrawal
from or decrease of their financial activity of major providers
of shipping loans; these were banks such as, National
Westminster, Bank of america, Chase, Chemical, Bankers
trust, let alone the badly wounded Continental Illinois. In
this climate of banking losses and lack of banking capital we
turned our attention to capital markets, which we believed
were a viable development for certain kinds of shipping
companies. during that period, we expressed our views, which
were published in Lloyds List. that was the beginning of a new
school of thought for shipping Finance.
In 1986, Nikos tsakos, then a student of our Msc course,
wrote a dissertation on raising funds for shipping companies
in the Us capital markets which, after two years, he put into
practice by raising equity funds at the New york american stock
exchange; and in 2003 at the New york stock exchange. Many
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changing TiMes
In april 2007, when the renaming of our centre was
announced, Lloyds List published a special issue where
the contribution of the centre was presented and the views
of leaders of the shipping industry were recorded. By that
time, and since 1991, many academic papers of our then
young staff (Professor kavussanos, Professor tamvakis,
Professor Nomikos and dr alizadeh) had been reflected in
Lloyds List and, at a later stage, extracts appeared from
papers of dr Papapostolou and dr Pouliassis, and a number
of Phd students in shipping finance and, more generally, in
risk management.
Looking briefly at the some of the issues that will keep us
busy I can see that many of them are very familiar to us, but
they will be at a more advanced level.
Banking? Of course, many banks have decreased, or
ceased altogether, their financing to the shipping industry.
Capital adequacy has been an important issue in the last
three decades and of course profitability of the financial
institutions remains another related major issue which
will impact the bank shipping decision. But shipping
provides profit to banks not only via shipping loans but from
auxiliary services as well. Cost of banking funds of course
has increased and may increase further until the moment
the banking system that finances shipping companies will
increase its reserves and its capital base will have been
replenished. then, and if the market changes from a banking
to shipowning market, pricing of shipping loans may become
more competitive.
Capital markets, equity and bonds? yes, they are for
experienced shipowners and possibly for relatively new ones
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R
N
READY
NOW
Finance
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finance
A life in shipping
a long view on what it takes to succeed in shipping
A mArk of quAlity
Its quartered flag first flew in the 1830s and the familiar initials
a decade later. This is a mark of quality is what was said.
Times and ships changed, but one thing did not: the founders of
P&O set the highest standards in their vessels, the people who
operated them and the services they provided, and I did my best
to remain true to this philosophy into the 21st century.
State-of-the-art ships, up-to-the-minute port and logistics
facilities and cutting-edge information technology get nowhere
without the right people to run them and to treat customers
properly. Throughout P&Os existence it strove to have
motivated highly-trained staff and top-quality leadership, at
sea and ashore across the world, putting into practice common
standards: quality of service quality of people, an international
viewpoint, an entrepreneurial approach, pride in P&Os
reputation, care for its image.
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finance
critical mass
The Falklands Campaign in 1982, and especially the attention
given to Canberra the Great White Whale together with
all the other company ships that went with the fleet, renewed
national appreciation of P&O. But the loss of 193 lives in the
Herald of Free Enterprise casualty in 1987, belonging to the
newly acquired Townsend Thorensen Ferry Line, due to a lack
of positive reporting, reminded us of the fragility of life at
sea and the importance of people in our businesses. It was
paramount that passengers and crew deserved the highest
safety standards. The highest safety regulations were enforced
group-wide.
Although by now we were 45% of all British shipping we
needed to be considerably larger in world terms to have critical
mass. I was never fond of joint ventures and consortia in the
shipping industry so it made sense to be able to buy out our
partners in Overseas Containers in 1986, bringing in at that time
Robert Woods to the Group. Ten years later we bought out the
Nedlloyd share of North Sea Ferries. We combined our container
shipping business with that of Royal Nedlloyd to make it into
one of the key companies in the container world.
By now we were feeling the pressure from the City to reduce
our diverse holdings and we carried out an disinvestment
programme to concentrate on our global interests, enlarging our
container and cruise division and in particular our fast growing
world-wide ports business.
In 2000 we decided it would be advantageous to float our
cruise division, P&O Princess, and wanted to get together
with Royal Caribbean Cruise Line but Carnival Corp, realising
how powerful that combination would be as a competitor, was
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Finance
He interest and strategies of private equity, an illdefined and nebulous group of disparate investors,
in shipping itself a fragmented industry of mostly
private and disparate operators are never easily
defined in sweeping terms.
the idea, though, that most of these new players to ship
financing are simply playing the cycle for the short-term,
as traditional banks pull back and lick their wounds, could
be an overly generalised, and misleading, label. those that
have deployed capital are entrenched and for the others
who have yet to pull the trigger; they are still waiting, even
as asset values and day rates begin to creep up.
still, when capital market participants do talk about an
exit for private equity, they usually point to the taking their
targeted investments through the initial public offering
process. the number of these public stock offerings
are likely to increase one of the many tools
available to an ever increasing financially sophisticated
ship operator but not so that the industry will
dramatically transform to one that is dominated by public
companies.
Private equity investing in shipping will need to be patient
with respect to their exit window, because of the shipping
cycle, said Jeffrey Pribor, global head of Maritime Investment
Banking for Jefferies. the market is receptive today, but its
very difficult to predict where its going to be in three-to-five
years from now. Windows of opportunities vary with the cycle
and it may not correspond with their exit strategy.
exiT sTraTegies
Putting private equity interest in context, using the
traditional american measuring stick of a baseball game,
the wave of investing is now currently in the third inning,
according to Jay rodin, chairman of Brock Capital Markets,
which helped advise a $700m partnership between eletson
Holdings and Blackstone this fall.
Mr rodin, who believes there will be further pouncing
by private investors, said that private equity will likely look
to exit shipping just short of the final ninth inning.
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you never know the bottom and you never know the
top, he said. you never want to exit when the game
is over, because you dont realize its over until its too
late.
One example of the long-term commitment to the space
is the creation by private investor kohlberg kravis roberts
of a $580m specialty finance company called Maritime
Finance Co. that firm, established in august, will look to
provide flexible capital that can withstand the markets
volatility, according to kristan Bodden, the companys chief
executive.
Maritime Finance Co is not here to call the top or
the bottom of any shipping cycle, he said. We are
here to transact deals that we believe make sense with
counterparties we believe make good partners over the long
haul.
Others, however, believe private equity is a passing
phase, in that the new players coming to the market are,
in fact, betting on the cycle. svein engh is the global head
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Finance
fleeTing inTeresT
CIt deals, this year, included providing a $61.8m
senior secured credit facility to a portfolio company
of alterna Capital, a private equity firm based in
Connecticut. alterna will acquire three medium-range
tankers.
also in 2013, CIt provided a $83.7m loan to Pst tankers
to help finance eight product tankers.
Mr eingh sees private equitys interest as fleeting.
I dont think this is permanent capital coming in,
he said. Private equity sees that the time is right now
and they will exit in time, through sales or IPOs. It is
a good thing, because there is a need for capital.
still, despite a high level of interest from private
investors, the deal flow has been limited, Mr Bodden said.
Private equity money needs more than vessel owners pounding their fists on the table saying that this is the bottom of the cycle,
Mr Bodden said
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Shipping remains very much the place to be for ambitious young Greeks
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undersTanding wildcards
a shipowner understood that it would be his or her unique
ability to smell unexpected events that could result in a huge
profit opportunity. Wild cards, such as wars, strikes, canal
closures, embargos, sanctions and accidents, would be the
difference between merely surviving and thriving. the ability
to capitalise on any of these events was the key to making
fortunes overnight. If owners took too much risk and their
noses proved wrong, the consequences would be borne by
the next generation.
today, the industry and the business world have changed
dramatically. Markets, financial and otherwise, move very
quickly. Volatility is sought after. rapid communication, via
email, texts or instant message, is now inescapable and has
had many positive effects on the industry. technological
advances are being made at a far greater pace and trade
patterns are complex and difficult to analyze. However, as a
result, decision-making has become reactionary.
We find ourselves in the midst of a major industry shift
driven primarily by changes in the ownership structures of
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Finance
changing TerMs
With the shift to other peoples money, the primary focus
for public shipping companies is to demonstrate quarterly
progress. For private equity, the time horizon may be longer.
Most company directors spend more time with their equity
partners and potential investors or financiers than they do
with customers and brokers. as there is a greater pressure
to produce quicker returns, commercial decisions are made
accordingly potentially compromising operational integrity.
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Not every shipping company can tap the bond or equity capital
markets
capitalization is only $30bn, a tiny fraction of the overall
Us market capitalisation. this shows the potential for
further growth.
shipping companies are becoming part of a core
investment portfolio for institutional and individual
investors, who in the Us, account for almost half the market
activity. Vehicles such as master limited partnerships meet
the demands of investors for yield while providing shipping
companies with the ability to raise significant amounts of
capital for expensive assets with long-term employment,
such as LNG vessels.
Capital markets are expected to play an increasingly
important role in shipping, providing permanent or longterm funding to this highly capital intensive industry. and, in
the process, this will transform shipping into a much more
corporate activity. n
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Finance
accelerating change
as shipping peaks and troughs become more frequent, shipping must look to altenative funding sources
We have seen an upsurge in equity deals and the reemergence of the capital markets, particularly in New york. We
expect to see a further increase in these types of transactions
into 2014 and beyond. In the Us, where the shale oil and gas
boom has the potential to change the shape of the global
shipping industry, a number of the major, private equity
players are making increasingly encouraging noises regarding
their continued interest, and their intention to expand their
investments, in shipping.
the bond market is also playing a greater role. shipping
companies need capital and the bond markets are providing
this. While the Nordic bond market has been a traditional
choice for the global shipping and offshore industry, we
are advising on more and more transactions in debt capital
markets as diverse as Germany, singapore, the dim sum
market in Hong kong and the samurai bond market in Japan.
the Us bond markets are also becoming increasingly active.
While these alternative sources of finance cannot meet the
shortfall in bank debt finance in its entirety, they are leading to a
more innovative approach towards ship finance and drawing in
new investors, which can only be good for the industry in the longer
term. I suspect we may well see, first, the commercial leasing
models that have dominated aviation finance, emerge in shipping,
albeit in a slightly different form, and secondly, export credit
agencies playing a role in helping to create a secured bond market.
corporaTe realignMenT
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asia
toM LeandeR, editoR-in-chieF, asia
Twitter: @TomFortLeander
LinkedIn: hk.linkedin.com/pub/tom-leander/4/183/946
area of expertise: dry bulk, particularly capesize ships, general industry reporting across all sectors, analysis and
commentary. Most of my coverage is based in asia, but i periodically coverage us-listed companies and companies based in
the Middle east.
What does digital mean to me: My digital ambition for 2014 is to become active on twitter and join discussion groups on
Linkedin. More broadly, to expand Lloyds Lists social media presence in asia.
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containeRisation inteRnationaL
Janet PoRteR, editoR-in-chieF, containeRs
Twitter: @JanetPorter_LL
LinkedIn: uk.linkedin.com/pub/janet-porter/3b/b5b/a19
area of expertise: vessels may be slow-steaming, but container shipping is an industry that can change very rapidly, whether
in terms of corporate ownership, trade patterns, vessel sizes, financial results or regulation.
What does digital mean to me: i have monitored these structural developments and market volatility over the years as
containerisation evolved from largely regionally-focused operators and cargo interests to a truly global business, and
welcome the way in which digital products and social media is enabling us to deliver news and insight faster than ever to all
readers, wherever in the world they are located. With 2014 promising to be another year of upheavals, this ability to reach all
stakeholders with the latest developments as quickly as possible is absolutely vital.
www.lloydslist.com
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PRoduction
JuLian McgRath, digitaL gRaPhics editoR
Twitter: @LloydslistJM
LinkedIn: uk.linkedin.com/in/julianmcgrath
area of expertise: My area of expertise is mobile content, having pioneered responsive email within Lloyds List to increase
engagement with our audience. this includes responsibility for the strategy and implementation of our e-coms and website.
What does digital mean to me: With mobile being the biggest growth area for the digital audience it is my aim that that in
2014 the amount of content being produced by Lloyds List that is ready for mobile consumption greatly increases, so that any
subscriber can access the information they need on any device at any time.
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CLASSIFIED
www.maritimex.com.mx
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CLASSIFIED
For any trouble at sea call VERNICOS +30 210 429 2201
We manage the biggest and most powerful fleet of
tugs in the Eastern Mediterranean
35-39 Akti Miaouli,185 35 Piraeus, GREECE
Tel: +30 210 429 2201 Fax: +30 210 429 2200
Email: tugs@vernicos-argonaftis.gr
Web: www.vernicostugs.gr / www.argonaftistugs.gr
Tel: +30 210 4595100, Fax: +30 210 4287334 /5, Email: cmm@cmm.gr Web: www.cmm.gr
Pursuing Excellence
Through Commitment
Tel: +30 210 6194100
www.product-shipping.com
Aethrion Center 40, Ag. Konstantinou Str. Maroussi, Athens Hellas, 151 24
212
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www.cmlo.com.cn
www.sinosino.com
Head Office
Rua Consiglieri Pedroso n430
P.O.BOX 888
Maputo /Mozambique
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Address:
Kilo 7,
Sanaa Street,
P.O Box 3337,
Hodeidah, Republic of Yemen
GUR, established by its founding partner Mr. Tevfik GR in 1984, is one of the leading Turkish law firms which has
different departments including Shipping and provides a wide range of legal services tailored to its clients needs and has
numerous local and international clients in various sectors.
GUR is committed to offering the highest quality representation to its clients. GURs solution-oriented attorneys provide
clear, precise and pragmatic advice, always with the clients best interests in mind. GUR aims to establish long-term
relationships with each of its clients based on mutual trust and understanding. GURs aim is to add value to our clients
businesses byproviding excellent legal advice and representation.
GUR greatly values its clients and regards them as its long-term friends.
GUR LAW FIRM
Smbl Sok. No:61
34330 Levent / Istanbul / TURKEY
www.gurlaw.com
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United Kingdom
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ukmpaoffice@yahoo.com
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Email: turkonukmarketing@turkon.co.uk
Website: www.turkon.co.uk
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