Shipping Industry Glencore

THE MAGAZINE OF THE WORLDS SHIPMANAGEMENT COMMUNITY
ISSUE 8 JULY/AUGUST 2007
COVER STORY
SHIPMANAGEMENT FEATURES 22 How I Work

SMI talks to an industry achiever and asks the question: How do you keep up with the rigours of the shipping industry?
52 Regulation Once stung, twice as determined

Brussels is so resolute in realising its goal of a single voice for European shipping that it will not refrain from pushing for Community observer status at the IMO, even if this is against the wishes of the majority of the EU member states
16 Cutting the heart out of the tanker market
57 Regulation
Do third party managers get paid fairly for what they do?
DISPATCHES
S P E C I A L R E P O R T
76 On my mind
Dr Alkis J. Corres - Chairman of the Hellenic Association of Maritime Economists, Director ISMT Services, Ability & Knowledge Metrication Organisation and Director Newbuildings, Naftotrade Shipping & Commercial
plus 20 Vetting - hurdle or opportunity? 6 STRAIGHT TALK NOTEBOOK

Could the last one out please turn off the lights?
REGIONAL FOCUS 8 Shareholders profit on the back 13 Interorient now an owner of AESM sale The Cyprus-based company has seen an 9 Fleet chief slams sale rumour
Fleet Management has moved to quash market speculation that it is about to be sold explosion in its shipowning activity in recent years and has a proud orderbook to match
Greece
28 Bagging the riches is more than a waiting game

With 1,200 owners controlling a fleet of over 167m dwt, Greece is a hot hunting ground for third party managers hoping to bag a ship or two. But beware...
Off the cuff

Hoegh LNG boss, Sveinung Stohle, runs the rule over third party managers
OnTheRecord
Tor Svensen, Chairman of IACS
Overheard
Burghelle-Vernet, Head of the EC Maritime Safety Unit, outlines his zero-tolerance vision
14 Harry steps on the gas

StealthGas is set to raise in excess of $120 million from the stock market to help finance its recent influx of new vessels.
11 Worlds largest simulator is installed Schulte claims business as usual
Cyprus
Bleeding rumours!
"haemorrhaging crew down in the Philippines"
36 Surival of a superpower
Can Cyprus keep pace with the international demands of modern shipmanagement or is the Mediterranean superpower set to decline as its once loyal subjects start to vote with their feet?
JULY/AUGUST 2007 ISSUE 8 SHIP MANAGEMENT INTERNATIONAL
TRADE ANALYSIS 26 Dun & Bradstreet

Country Riskline report for Greece
BOOK REVIEW 71 What Im reading

With Ugo Salerno, Chief Executive Officer, Rina plus reviews of TANKER: The
48 Towage & Salvage

Salvors on green offensive
78 Shortsea Shipping
Investments across a broad front
History and Development of Crude Oil Tankers, Little Green Book of Getting Your Way and Getting the Goods: Ports, Labor, and the Logistics Revolution
SHIP REPAIR 44 LNG - The dash for gas

By Alan Thorpe
LIVE NEWBUILDING 47 Korean yeards win in homogeneity stakes BUSINESS OF SHIPPING 58 AdHoc
Spit it out Shipbuilding gets a Carribean flavour Trot-on, trot-off Free video sets pulses racing Fredriksen FC? Publish and be damned! Managers put to the test Thought Provoking
74 Objects of desire
Get yourself geared up for the summer
INSIDER 83 Compliance alone is not enough in tanker management MARKET SECTOR 84 Flag state audit: necessity or purely Machiavellian?
Europe wants compulsory audits on EU flag states but does this smack of unilateralism gone too far?
73 A Volte-Face on Competition
Companies operating in Europe probably value certainty above everything else in terms of the regulatory and legal environment. Risk management is only possible where there is a clear set of rules. This Franco-German intervention has muddied the rules, at least for the time being
BUSINESS VIEWPOINT 88 Getting Personal

The most amazing thing about my visit to Charles R. Webers offices in downtown Piraeus was that Roman Abramovichs yacht Pelorus was moored right outside the front door. In fact that was how Basil Mavroleon told me to recognise his office
DISPATCHES 62 Nuclear fallout

Shipping is targeted as UN fights Irans WMD threat. Thomas Land reports from the International Atomic Energy Agency in Vienna
LIFESTYLE 92 Dortmund Devil

German tuners have created the worlds fastest soft-top from the skin of a Porsche 911. The 9ff TRC 91 is a symphony in motion and can even tame the Autobahn. Andy Pierce takes a drive on the dark side
67 Tit-for-tat is a game worth playing

In the dog-eat-dog world of third party shipmanagement, the major players are jockeying for position in an environment where only the biggest or the best will survive
94 Proms
The BBC Proms is evolving but its global feel is nothing new
SHIP MANAGEMENT INTERNATIONAL
STRAIGHT TALK
Welcome to
Ship Management International
July/August 2007 Issue No. 8 www. shipmanagementinternational .com
The Shipping Business Magazine todays owners and managers have been waiting for
Published by
Elaborate Communications Acorn Farm Business Centre Cublington Road, Wing, Leighton Buzzard, Bedfordshire LU7 0LB United Kingdom Sales/Accounts +44 (0) 1296 682241/682051 Editorial +44 (0) 1296 682356 Fax: +44 (0) 1296 682156 Email: editorial@elabor8.co.uk/sales@elabor8.co.uk www.elabor8.co.uk Ship Management International Editorial Board Rajaish Bajpaee Guy Morel Nigel Cleave Dirk Fry Sean Moloney Svein Pedersen (Bernhard Schulte Shipmanagement) (InterManager) (Epic Ship Management) (Columbia Shipmanagement) (Elaborate Communications) (EMS Ship Management) Sean Moloney Andy Pierce David Tinsley Jean Winfield Martine Frost Karen Cray Roger Morley Irene Morley Phil Macaulay Martin Bou Mansour
Could the last one out, please turn off the lights
Andreas Droussiotis (Bernhard Schulte Shipmanagement)
Editorial Director: Assistant Editor: Technical Editor: Advertisement Director: Sales Support: Advertising Sales: Research Manager: Accounts: Design & Layout: Photography:
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Additional Photography: Cyprus Department of Merchant

Shipping
Editorial contributors: The best and most informed writers currently serving the global shipmanagement and shipowning industry.
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Approved and Supported by
he biggest non-event in shipmanagement took place at the beginning of June when it was publicly-announced that third party shipmanagers were on the fiddle. It was a nonevent because the claim is as old as the trees and also what do you expect if the selection criteria is based on how much a ship manager charges for his services rather than what an owner actually gets for the management fee he pays? There will always be a temptation to make a quick buck on the mark-up. It's not condoned, but judging by the rate-cutting and margin-squeezing practices carried out daily by all sectors of the shipping industry, surely it's more a matter of if you can't beat them then at least make sure you are the first to nab the crumb falling from the table. The illicit practices assertion in the trade press caused ripples. There was no doubt about that. After all, scandal sells newsprint but remember, today's newspaper is tomorrow's fish and chip wrapper. And don't think I am here to beat the drum of the substandard ship manager, because I'm not. Similar to those upstanding quality-conscious and fully-resourced members of the third party shipmanagement fraternity, anything that fails to deliver the minimum standard demanded by the market should not expect to come to the party. After all, isn't that what selfassessment is all about. I think the time has come for us all to consider the situation objectively. One manager I spoke to summed the situation up perfectly when he said: "In times of poor freight rates, we struggle to get the ships. In time of freight rate largesse, we don't get higher management fees, we just get more tonnage offered to us." And he's right. Owners are not unique in wanting something for nothing themselves, but we need to get rid of this feeling of resentment; of this 'because I need you, doesn't actually mean I like you', attitude. Some owners are the first to boast about driving down management fees. Indeed we have heard of managers being paid as low as $60,000
per ship per year. But calculated on an hourly rate, these unfortunate shipmanagement practitioners are being paid a paltry 3.42 per hour. Or to put it bluntly, 36% lower than the UK minimum wage of 5.35 per hour. So let me get this right. Some owners will pay their office cleaners over a third more than the company they have entrusted to look after the prized $150 million asset an asset that if operated badly could cause death and environmental devastation and could completely ruin even the largest shipping organisation. Hmmmmn. Something wrong here. Whether the shipping industry likes it or nor, substandard shipping has had its day. The charterers, the markets and the regulators are seeing to that. But this increase in legislation and the heightened fears over crew shortages have brought an understanding of the qualities of third party managers to the fore. Surely the time has come for owners and managers, customers and service providers, to better appreciate each other and help each other achieve the levels of quality they both know they are capable of. Ship managers need to shed their petty competitive practices and embrace an open policy of best practice to further the quality image of their industry while ship owners need to acknowledge the value of what they are receiving and take a more realistic stance on management fees. Oscar Wilde described a cynic as a man who knows the price of everything and the value of nothing. The only cynics around here if the industry fails to value what it has to offer will be the regulators and the seafarers who will start believing that shipping's image may not be all its cracked up to be.
Sean Moloney
NOTEBOOK
SHIPMANAGEMENT NEWS AND REPORTS FROM AROUND THE WORLD
Shareholders profit on the back of AESM sale

Profit-taking was believed to be the motivator behind the deal to sell 27% of Hong-Kong-based AngloEastern Ship Management (AESM) to Belgium's CMB and the existing shareholders have not ruled selling even more of their stock should the right deal come around. CMB was quick to announce that its 100% subsidiary Bocimar Hong Kong had concluded the agreement to acquire a 27% stake in AESM. However, Anglo-Eastern Chief Executive Officer Peter Cremers told SMI that he still had to fly out to Belgium to conclude terms of the deal. Under Belgian stock market rules, if a publicly-quoted company like CMB "makes a commitment, even on the back of an envelope, it has to be announced. But nothing is signed, yet," he said. The tie up between AESM and CMB is logical considering the fact that Anglo-Eastern manages all of CMB's tonnage. But as Peter Cremers said: "We wanted to park some of our shares in the company somewhere and we thought this was the best hope for us." Cremers would not deny that the AESM shareholders would sell more of the stock given the right opportunity. He told SMI: "I can't say absolutely no. There may be deals around and it would be foolish of me to say no way. But there is no action plan on this. We have two established companies which are shareholders, Denholm and CMB. They have been long-term in this business and they are not looking for a quick sell. I still have a large shareholding myself." In an announcement CMB said the acquisition was still subject to due diligence but that it expected to finalise the acquisition during August. "Through this acquisition, CMB will establish itself in this specialised sector and secure its access to ship management and crew management services," a company statement said. Anglo-Eastern was purchased in 1998 through a successful management buy-out by Peter Cremers, Marcel Liedts and Richard Wong. The three owners remain at the helm and are actively involved in the day-to-day operations of the business.
NOTEBOOK
Fleet chief slams sale rumour

Hong Kong-based Fleet Management has moved to quash market speculation that it is about to be sold, claiming it still has the total support of its owner the Noble Group. Fleet Managing Director, Kishore Rajvanshy, said he was angered by market talk that the company was up for sale and was keen to put the record straight. He said: I can tell you, categorically, that there is no such intention whatsoever to sell. Any talk of the impending sale of any part of Fleet Management is completely unfounded. Fleet, an independent company owned by the Noble Group, operates around 180 vessels from bases in Hong Kong and London. Only last month it opened a new office in Cyprus. It also has plans to establish a new centre at Houston, US. Talk of Fleets impending sale has been rife in shipmanagement circles in recent months. However, Mr Rajvanshy
OVER
HEARD
Philipe Burghelle-Vernet
Head of the European Commissions Maritime Safety Unit
We are trying to get rid of all substandard ships from European waters. By establishing a traffic
explained that he has no idea where the rumours originated or what the underlying motivations could be. Fleet Management continues to have the full support of the Noble Group and will continue to operate as an independent body, free to make its own business decisions, Mr Rajvanshy said.
monitoring system and through port state control we have proposed to improve the European system. The idea is for us to be able to control 100% of ships visiting EU ports, not only 25% of ships as we do now. Today, there are ships which are never inspected in European ports simply because the individual activity of member states makes it possible to escape. As long as we establish a common objective covering 100% of the vessels nobody could escape. We have suggested that risky ships be inspected every six months and low risk ships every three years. We aim to establish a ranking system, involving several criteria, between ships which call at European ports. High risk ships would be inspected very often and good ships inspected less often. We also want to reinforce the banning system. Today, bans can be lifted after 24 hours that is simply not normal. The situation should be improved including establishing a complete ban in order to ensure the worst offenders will never be permitted to enter into European waters. Clearly the policy is conceived as zero-tolerance to substandard ships.
OnTheRecord with Tor Svensen,

Chairman of the International Association of Classification Societies (IACS) How convinced are you that taking action as an industry against shipboard emissions will hold off action by the unilateral regulator?
"The regulators are well aware of what the industry is doing and if they see that the shipping industry is taking action, they will back off a little bit. What they dont like is an industry which just sits back and does nothing. You have to put it into perspective that shipping is by far the most environmentally-friendly way of transporting cargo. Even the EU is trying to get cargo off the roads and onto ships throughout Europe. If shipping can show it is improving then there is no alternative to ships transporting goods. We will still get unilateral action and that is not necessarily a bad thing. I don't like it but proactive governments and local governments like California are putting it on the agenda and they are making the rest of the world react. There is a balance there in that those that are trying to do things locally are also driving the agenda. In principle I believe in international regulations but in some cases you need a certain amount of push and they contribute to that push."
NOTEBOOK
Schulte claims business as usual

German ship owner and manager Bernhard Schulte has denied suggestions that its decision to merge its four shipmanagement units into one operation controlling in excess of 500 vessels is linked to any future plans to sell the business. In a statement, the company said it regarded shipmanagement as a core business together with shipowning, and would not divest, whether by IPO or sale or any other means. "The last thing on our mind would be to sell what we consider core to everything we do," it said.
Worlds largest simulator is installed

Association of Japan and the PhilippineJapan Manning Consultative Council. The installed system is made up of the tank simulator, hybrid computer simulator, control room, classrooms and related equipment. Loading, unloading, cargo transfer, tank cleaning and all other actual operations undertaken aboard chemical tankers can be reproduced by the entire system. A suitable training programme will be launched in November after a more concrete education curriculum for the intensive training of Filipino seafarers for deployment to chemical carriers has been formulated.
The world's largest chemical and products tanker simulator has been installed in the privately-run Maritime Academy of Asia & the Pacific in the Philippines. It was installed with the help of the All Japan Seamen's Union-associated Marine Officers' & Seamen's Union of the Philippines Training Levy Fund and was institutionalised under the framework of the Foreign Seafarer Labour Treaty. Simulators for VLCCs, LNG carriers and diesel engines have already been installed at a number of seafarer training centres in the country and the latest addition is the fourth seafarer training facility operated by the International Mariners Management
It went on to stress that the Schulte family remained fully committed to the business "and representatives of the next generation will join the management of the company, in due course". Schulte took the shipmanagement sector by surprise when it announced it would merge its autonomous units Eurasia, Hanseatic, Dorchester Atlantic Marine and VBSK into one company Bernhard Schulte Shipmanagement. It said it had merged the units in response to developments in the shipping industry, "which require substantial investments in personnel, training, information technology and quality assurance resources". Overall responsibility of the new company will be in the hands of the Executive Board which is drawn from the previous heads of the autonomous units.
JULY/AUGUST 2007 ISSUE 8
11
NOTEBOOK
Interorient now an owner

Interorient Navigation has revealed it no longer wishes to be considered a third party ship manager following its steady evolution into a shipowning entity. The Cyprus-based company has seen an explosion in its shipowning activity in recent years and has a proud orderbook to match. Captain Peter Bond, Interorient General Manager, said: The message we want to get out is that we are a ship owner and not a ship manager. We now have a very large fleet of our own with a large newbuilding programme. Its not that we dont want to bring any more ships into management, because we still have the resources for that, but the company can certainly make an awful lot more money out of owning a ship than we can managing a ship, Captain Bond added. Interorient started as a crew manager in Cyprus in 1979 and now has an owned fleet of approximately 60 vessels, with a further 70 under crew management. We still have third party customers and we will remain loyal to our existing clients. But we are not seeking any [new] third party business, Captain Bond said.
OffTheCuff
Sveinung Sthle. President & CEO, Hegh LNG

What do you think about third party managers?
We do everything in house because it allows us to have better management of our fleet. Also, using an integrated model helps us to develop technical skills in-house that you can keep and use to develop additional services. The biggest challenge for the industry is to find enough qualified seafarers, particularly officers. This is why we believe having an integrated shipmanagement model is good, because we can train our own people. This way at I know I have them. People have contracts and can obviously go to other companies. But our system allows us to make plans in a different way. You can have a contract with a ship manager, but one day you might ask him for crew for a vessel and he wont have any. That will cost you a lot of money.
NOTEBOOK
Bleeding rumours!
How we love a bit of gossip. But the word on the grapevine is that one major shipmanager is having his own problems securing crews from the Philippine market. According to a smiling competitor, the company in question was described as "haemorrhaging crew at the moment down in the Philippines" and desperate to fill much needed crew slots. I guess its a case of what goes round, comes round.
Harry steps on the gas

StealthGas is set to raise in excess of $120 million from the stock market to help finance its recent influx of new vessels. The Nasdaq-listed company is in the midst of a major fleet expansion project, with at least nine new additions expected to take the fleet to 38 before the end of the year. The latest windfall has been earmarked to pay the outstanding balance on five recently-purchased LPG carriers. StealthGas gained the funds after it upped the scale of its planned secondary share offering by 20%. The company was expected to issue 6 million shares, but surprisingly raised it to 7.2 million. The stock issue price of $18 per share is expected to please StealthGas owner, Harry Vafias. When the company was listed in late 2005, shares were worth 14.50, although they topped $20 this year at the height of a summer hot spell.
14
DISPATCHES
S P E C I A L R E P O R T
Cutting the heart out of the tanker market
Oil traders are the dominant players in today's tanker markets. But with so much tonnage under the control of these cargo interests, are the markets in danger of being held to ransom? Sean Moloney reports.
SPECIAL REPORT
DISPATCHES
n early June a little known Singapore-based tanker operator took the tanker sector completely by surprise when it swooped on the fledgling Middle Eastern products carrier newbuilding market and ordered four 50,000dwt medium range vessels in a deal valued at $175m. The contract, which included four options, was by far the biggest ever signed by Dubai Drydocks. But with delivery scheduled between early 2009 and 2010, Navig8 Chief Finance Officer and New Business Director, Modi Mano, said his company's order was placed at the Dubai repair facility because the yard could promise much earlier delivery dates. So what was so special about this order? Well, Navig8 is an example of the growing band of highly active shipowning, time-charter trading, derivatives trading, risk management and commercial as well as technical management entities now dominating the tanker markets. It was set up only three months earlier and owns four MR tankers under construction in South Korea that it acquired as newbuilding resales. But, more interestingly, it is reported to control a further 60 or so product tankers in the water and newbuildings through time-charters, bareboat charters and management contracts. Another example of this new phenomenon that is currently gripping the tanker markets is oil trader Glencore. Recently, it announced that it was lifting its newbuilding orderbook in South Korea by booking a series of MR product tankers at SPP Shipbuilding, through its tanker shipping subsidiary ST Shipping (STS), for delivery in 2010. According to press reports, STS is understood to have contracted four 50,000dwt MR tankers plus two options at SPP late last year for more than $48m each. The company recently exercised the options, which are also due for delivery in 2010. Including the six ships booked at SPP, STS now has 14 MR tankers on order at yards in South Korea. STS turned to shipowning only last December, when it ordered four 51,000dwt tankers plus two options at around $49m each from SLS Shipbuilding for delivery in 2008 and 2009. In February, it bought four 51,000dwt newbuilding resales contracted by Gulf Energy Maritime at Hyundai Mipo Dockyard. Two of the vessels will be delivered in 2009, followed by a second pair in 2010.
"The downside is that these traders are very efficient by nature. They can schedule ships in and out like no one's business. They can reduce their ballast times like you won't believe. They have the cargoes and cargo is king." He added: "The tanker business survives on inefficiencies because as a ship owner you want your ships to be as efficient cost-wise as they can be, but you want your competition to be inefficient and you want the market overall to be inefficient. If there are more traders with cargoes wanting more ships then how can you tell how the market will be affected if these ships are effectively taken out of circulation." What is clear is that this situation is a new dynamic and, as a result, few market watchers are able to predict the oil traders' next move, especially if the market starts to go down in a serious way. By having a relatively small number of interests control a large amount of tonnage this can restrict the tonnage available for say period cover. This will mean much higher rates and, due to price resistance in the market, could exacerbate the potential problem of even more ordering of new tonnage to meet any new demand. And so the boom and bust scenario goes on. As one broker SMI spoke to stressed: "These guys controlling the ships have a vested interest in keeping rates up because they are mak-
These traders are very efficient by nature. They can schedule ships in and out like no one's business. They can reduce their ballast times like you won't believe. They have the cargoes and cargo is king
Glencore shipping chief Jan Andersen reportedly told the press that it was a natural progression for the company to move from short-term to long-term charters and on into shipowning. He said that in the past, the company has tended to control its shipping through various joint ventures but looking ahead intended to work a little more for itself as it continued to grow. Industry estimates suggest that at the very minimum, STS currently operates a fleet of 14 handy size tankers, 74 MRs, 31 LR1s, 21 Aframaxes, and six Suezmaxes. So how influential are these new tanker market players? Well, further analysis of charter market statistics shows that the role currently being played by the oil traders in the tanker markets is significant. At the very minimum, 45% of the global MR fleet is currently in the hands of these 'traders', while a whopping 42% of the VLCC market is also under their control and the figures could be higher. So what is the problem? "If so much tonnage is currently being controlled by companies which trade ships but who also have cargoes then how do we know what the real market is?," one broker told SMI. ing money out of the cargo. That is the case that tends to disguise a bad market because there is an element of price resistance that isn't normally inherent. "Both sides of the equation want the rates to stay up. That means that if there is a real downturn it could hit quite hard and to be honest, it has happened before (post-1973), where we had massive bankruptcies in the oil business." The biggest problem facing the tanker market at the moment is the high level of newbuilding activity. Sceptics say that with a 50% increase likely in the 700 or so strong tanker fleet over the next three years, there is nowhere near enough anticipated growth in oil demand to fill these new and existing bottoms. One major US tanker broker put the situation into perspective. "The Glencores and Vitols of this world have massive commitments to time charters at high rates and this is a whole new approach. They have made more money in shipping than they have in trading. The question is if the market goes down will they exit? Will they cut and run? It's difficult to say, we can only wait and find out," he said.
17
DISPATCHES
SPECIAL REPORT
But what would happen if the market did decline? Well, according to one New York broker, the market would have to stay down for a long time because there is so much money around that people can support the losses for considerable amount of time. Hence, this is why tanker owners are reluctant to fix their ships long-term because they say they want to be there for the upside when it comes. "This year will be fine, next year probably will be OK, but with 70 VLCCs coming onto the market in 2009, it depends how many single hulls actually go for conversion to bulk carriers, FSO/FPSOs or for scrap. If you have a 1990-built single hull VLCC and you sell it today for $40m, then what do you do. It's great if you go and retire on the beach but if you want to reinvest that money a new VLCC? Forget it, it's too much money," he said. The accelerated activity of the oil traders in the tanker markets also has the potential to affect the single hull/double hull balance. Because if the traders take double hulls out of the market, then could it be reasonable to assume that all that would be left would be an oversupply of largely unwanted single hulled vessels? "No one takes a single hull on long-term charter unless it was done
The avalanche will come. And I hate to be all doom and despondency. The absolute crunch for tankers must be 2009 because of record deliveries. There must be a point between now and 2009 when people realise that things are not as good as they thought they were
some time ago," stressed one broker we spoke to. "The consensus is that everyone should go for double hulls. That is convenient even for the broking market, because if demand for single hulls is not there, then they will be scrapped and everyone wants ships to disappear from the trading fleet because it helps with the surplus," he told SMI. But what is the composition and style of the charters currently being undertaken by the traders? "We don't know because they are all private. But what the traders have done in recent years is forge links with certain owners, through profit shares etc. They want control of that owner's tonnage and they can get high returns for the ships. They throw their books open and share their results with the owners and the owners have done very well out of it. But it doesn't help the market overall," one broker said
SPECIAL REPORT
DISPATCHES
"If we had a sustained downturn in the market and there are plenty of ships available for charter then charterers would come in and say we will take the charter which is what normally happens. But they can't do that because there arent any ships. So what do they say well we will order our own, because we need to control the situation, which makes the surplus even bigger. This whole situation is forcing more new construction," he stressed. However, some market observers believe the future is very clear. "The avalanche will come. And I hate to be all doom and despondency. The absolute crunch for tankers must be 2009 because of record deliveries. There must be a point between now and 2009 when people realise that things are not as good as they thought they were. Even if we have a Katrina 2 and refineries are knocked out and product demand goes back up, these are short-term factors, only noise. Once the noise goes away what is the real market? one broker said. "At some point more efficiencies will be realised and in the face of more ships, rates will come tumbling down. The interesting point is who will be the casualties. Are they the traders of course not. If they have vessels on period charter they can easily dump them. They can renege; they can just not renew. "They can cut their losses at a weak point in the market. You can say the owners can stomach it because they have so much money but if all of their ships, each one of them, loses money, then how long would they have enough money around to support them? he said. So what can the tanker owners do to protect themselves. Well according to one broker, tanker owners can ensure their ships are committed on long-term charters or contracts of affreightment with reputable names. That way they spread their risk. The only other way owners can survive and level the playing field is by taking a share in the cargoes.
"If they start to get into cargoes in the same way the traders have got into shipping then they have a chance. Anything is possible. They can buy the expertise buy an oil trader. But you know its a downhill story when OMI sells. And people only do this because they have no money or they want out," he speculated.
DISPATCHES
SPECIAL REPORT
hurdle or opportunity?
he impact vetting has on out-charter business is not always recognised in the strategic operational and commercial management of tankers. Some fleet managers take the view that the vetting process is outside their control and when a tanker is rejected, often throw their hands up and 'blame' the unfathomable 'whims' of the vetting organisation concerned. This is a mistake stemming from a lack of understanding of the objectives of the vetting function; the processes being used and the actions that can be taken to positively influence a vetting review. While it may be understandable that fleet operators dislike or feel threatened by vetting 'assessments' (or in their view 'criticisms'), they can, with management understanding and action, use the vetting data to improve their business. The days when tanker 'vetting' consisted of an ex-seafarer reviewing a ship inspection report and making a vetting decision are fast disappearing. Charterers vetting departments use a wide range of data and, in some cases, use sophisticated computerised data analysis systems to evaluate potential third party risk to their business. While a fleet man-
By Tim Knowles
assessments will start by looking at the total fleet management and may not, in general, be broken down by individual owners, under the rationale that the ship manager's safety management system should be consistently applied on all of the ships, regardless of who the principal is. To understand how fleet managers can use vetting to their advantage, they must first understand the importance of vetting to the charterer and, secondly, perceive vetting as a potential business improvement opportunity and not simply as a hurdle to be jumped. Oil Majors carry out vetting primarily to protect their people and assets; exercise and demonstrate due diligence in their business dealings; and to provide necessary paper trails in the event of an accident or serious casualty. By directing their business to quality operators, they can also minimise their transportation risk. Investment by the charterers in terms of manpower, expertise, computer systems and management of the vetting process is considerable. Apart from utilising OCIMF's Tanker Management and Self Assessment (TMSA) system as well as port state control detention records and ship inspection reports, they increasingly use sophisticated
The primary objective of the charterers vetting function is to accurately assess, through their vetting process, the quality of the operator and the vessel being offered or, put another way, the risk to their own business of using a third party ship
ager has an opportunity to improve the interface with the charterers vetting department, this raises a number of questions such as: have tanker fleet managers kept pace with the vetting changes; are they managing the process to achieve a good vetting outcome or are they paying insufficient attention and suffering the business consequences? The answer is that not all fleet managers have kept pace with vetting requirements so consequently some are failing to adequately manage their part in the vetting process. The outcome may be an adverse impact on their out-charter business because their tanker may not be accepted by the charterer or terminal operator. The primary objective of the charterers vetting function is to accurately assess, through their vetting process, the quality of the operator and the vessel being offered or, put another way, the risk to their own business of using a third party ship. Historically, individual ships were vetted and were either accepted or rejected. It is increasingly the case that where a fleet operation falls short of a predetermined standard, the entire tanker fleet will not be eligible for longer-term charter business. In the case of shipmanagement companies, there is the possibility that the assessment of the managed fleet can be adversely impacted if the ships of one owner perform to a lower standard than the rest of the fleet. This is because some vetting
scientific data analysis systems to handle the myriad of data gathered. These systems do not dispense with the need to use marine expertise but can achieve rapid and consistent analysis by breaking down the vetting process into discreet components, including the quality of the operator; quality of the ship; and the nature of the voyage. Analysis of these components provides an overall voyage risk assessment that leads to a vetting decision. A major driver is to enable consistent analysis of every evaluation (oil majors may carry 80,000 plus such evaluations a year), to record every detail and enable its retrieval in the event of an incident. The vetting activity put in place by the tanker fleet operators should respond to, and dovetail with, the vetting activity of the charterers. But does it? It would be unreasonable to expect fleet operators and managers, especially the smaller companies, to employ the numbers of people or have the sophisticated systems used in oil major vetting departments. However, the actions taken should be commensurate with their business needs.
20
SPECIAL REPORT
DISPATCHES
In my experience, fleet managers sometimes fail to recognise the growing importance to their business of effectively managing the vetting interface. Many operators do not put in place the investment (in terms of manpower, training, equipment and computer data analyses of vetting key performance indictors) to meet their business needs. As a consequence misunderstanding and confusion arises. For example, many tanker operators employ a technically competent 'vetting superintendent' to manage the vetting interface with the charterers vetting departments. This may be a standalone role or part of the role of the DPA or Safety Officer. The task typically includes arranging tanker inspections (often the major part of their work), meetings with oil major vetting departments, taking the lead in vetting audits and providing post-incident information to the charterer. Their reporting line and interdepartmental communications should ideally ensure good working relationships with the fleet operations group and also the chartering department. These usually hard working and technically-competent people often suffer from a lack of management support, lack of understanding of the vetting process and see the task as mainly responding to oil major post ship inspection deficiency questions. They are ill-prepared or trained to manage their interface role with the vetting organisations, especially when it comes to representing their company at difficult meetings with charterers vetting managers. It is not unusual for them to approach the charterers vetting people as 'fellow mariners' rather than customers representatives and as a result are not adequately prepared for the management systems related questions that are often raised. Tanker fleet managers should therefore ensure that the management structure needed to interface with the charters' vetting organisations is consistent with the business objectives of the company and that the vet-
ting process is reviewed and understood by fleet management. The vetting interface role should also have a clear and comprehensive job description that takes account of all the activities involved in the process including the 'customer interface' activity. And the person responsible for the vetting interface should focus on activities for which they are qualified and not be over burdened with administration work such as arranging inspections. It is essential that those involved in vetting are trained accordingly. This should involve process and system training as well as training for meetings and interpersonal skills. The vetting interface function should be supported with data, system access and equipment so evaluation of the fleet performance is at least equal to that carried out by the charterers' vetting department. Meetings with charterers' vetting people should only be carried out when necessary, with properly prepared personnel armed with the data pertinent to the meeting objectives and data that accurately represents the performance of the fleet. Data should not consist of information that the charterer has from other sources such as the fleet list, unless requested. Also, international databases that contain information on the fleet and feed into the charterers computerised systems should contain accurate data and it is important that post incident interface communications and data are heavily managed. And last but not least, the charterer's vetting department should be treated as a customer and be supplied with the service and data they demand.
Tim Knowles was Manager of third Party Tanker Q/A in the Marine Services division of International Marine Transportation and was responsible for managing the global processes of third Party Tanker Screening for those tankers considered for ExxonMobil affiliate use. He now advises tanker owners, managers and operators on vetting issues. timknowles82@btinternet.com
SHIPMANAGEMENT
HOW I WORK
work
SABYASACHI HAJARA
Chairman and Managing Director, Shipping Corporation of India
You see, specialisation and technical expertise are important, but only up to a certain level. Beyond that, you are basically an administrator. There will be lots of people with technical expertise to help you make the final decision, but you actually turn into a general management person when you hit the most senior levels
How I
SMI talks to an industry achiever, and asks the question: How do you keep up with the rigours of the shipping industry?
One of Sabyasachi Hajaras most abiding regrets is that the pressure of being Chairman and Managing Director of India's national carrier Shipping Corporation of India (SCI) has left him with insufficient time to indulge his favourite hobby classical singing. Indeed, he is never happier than when he is running his fingers across the keyboard of his beloved harmonium and giving vocal vent to the tunes that reside in him. Most of the time, it is the walls of his home in Mumbais exclusive Malabar Hill area that resonate to his warbling but there was a time when audiences of over a thousand swayed to his beat. I am a great lover of Rabindra Sangeet, the songs of Rabindranath Tagore and have even performed solo in the one of the largest auditoriums in Calcutta, Rabindra Sadan, some three decades ago, he said. This love of singing is a hobby I have enjoyed throughout my life but I have neglected it for the past three or four years. Up until 2003, when Mr Hajara became increasingly involved with his duties as Director of Human Resources on the SCI board, he would make it a point every Sunday to go to the home of the poet and Tagore expert, Nalini Madgaonkar, who has translated the great Indian poet from the Bengali into several Indian languages. Tagore
I took up golf in 2003 and have become addicted. Whenever I am in town, I travel at dawn to the Willingdon or the US Club to get in a round. If I can manage, I like to play five days a week, but I travel so much with my job that I can rarely get that many golfing days in
22
HOW I WORK
SHIPMANAGEMENT
I am a great lover of Rabindra Sangeet, the songs of Rabindranath Tagore and have even performed solo in the one of the largest auditoriums in Calcutta, Rabindra Sadan, some three decades ago. This love of singing is a hobby I have enjoyed throughout my life but I have neglected it for the past three or four years
first wrote his poems at the age of eight and published his first substantial poetry under the pseudonym Bhanushingho ("Sun Lion") and wrote his first short stories and dramas in 1877, at the age of 16. Nalini has a small singing group made up mostly of amateurs, but who have, on occasion, performed in large auditoriums. I had been a part of this group for many years, but have stopped over the past four years because I have been too busy with SCI work. Nevertheless, once in a while, when there is a little time, I sit at home with my harmonium, and exercise my vocal chords. Believe it or not, I used to play the guitar a long time ago, even for a few years after I left college, but have since lost the skill. There are a few people in the Indian shipping industry, notably SKS Shipping chief R.V. Shahi, who organise musical programmes, and certain 'corporates' like the Indian Oil Corporation hold a `Sangeet Sabha (music meet) every few weeks. Mr Hajara and his wife's interest in music and singing are well known and they have been invited to many of the functions. The other major stress-buster in what can be a very demanding job is the game of golf. The SCI chief is a keen amateur golfer and plays to a modest 23-handicap. I took to the game in 2003 and have become addicted. Whenever I am in town, I travel at dawn to the Willingdon or the US Club to get in a round. If I can manage, I like to play five days a week, but I travel so much with my job that I can rarely get that many golfing days in. Golf is only the most recent indulgence of a man who has always had sport in his blood. In his college days in Calcutta (now Kolkata), he played cricket, football and table tennis. Then, in his early college days, he took up tennis, and became reasonably adept at it. I was a fairly good club standard player, he reminisced. I represented the Saturday Club, Calcutta, in inter-club tournaments; and was friendly with some of India's Davis Cup players. I occasionally played tennis with them, of course, not at their level, but at the same time, was rarely disgraced on the court.
This love of, and indulgence in, sporting activity is what has kept the 55 year-old Mr Hajaras blood pressure at a steady 120/80 level and kept him free of the hypertension and other such diseases that have been the bane of executives at his level in the industry. That, and his innate coolness. I almost never throw tantrums. Either on the golf course or while exercising my voice in the bathroom, I let the tension flow out of me. I am also proud of my man management skills and my ability to motivate and bring the best out of my colleagues. That cannot be done by screaming at them. Strangely, although Mr Hajara was Director of Human Resources (HR) when he was picked by the Public Enterprise Selection Board (PESB) in mid-2005 to take over the SCI reins from the long-serving Prabhat Kumar Srivastava, his background was as far removed from administration or human resources as you could get. He graduated in chemistry from the Calcutta University with a good first-class degree and a silver medal helped him get into one of the premier business schools in the country, the Indian Institute of Management (IIM) in Calcutta, from which he completed his Masters degree in Business Administration, majoring in marketing and operations research. It must be mentioned that in the first year of the course, every student was given knowledge of all the different aspects of management, including finance, administration and HR, so it was not as if I was a total greenhorn at HR, he said. When the Shipping Corporation of India came calling at the IIM in April 1973, Mr Hajara became a campus recruitee. SCI is the only company I have ever worked for, he recounted with pride. I am one of the unique MBAs who has not job-hopped. I have been here for 34 years. Throughout his first quarter century in SCI, Mr Hajara was a commercial shipping man. He was originally involved in liner shipping, at a time when containerisation had not been fully launched in India and it was all conventional breakbulk liner shipping.
23
SHIPMANAGEMENT
HOW I WORK
I shifted to containerisation when it came into India in a big way in the late-1970s. In SCI, we had a great tradition of rotating employees in as many departments as possible. So subsequently, I moved to dry bulk, chartering, specialised tankers like liquefied natural gas (LNG) tankers, liquefied petroleum gas (LPG) tankers, phosphoric acid carriers and ammonia carriers. When a board-level vacancy for Director of Human Resources came up in 2001, Mr Hajara went to his predecessor, Mr Srivastava, and asked him point-blank whether he should appear for the interview for that post, since he had never majored in HR or personnel management. "His answer, in hindsight, was an excellent one, said Mr Hajara. He said that there was no HR professional, as such, in SCI. The corporation had always relied almost exclusively on seafarers like master mariners, chief engineers, who had looked after the seafaring personnel. As far as shore personnel were concerned, it was generally staff who had come up from different functions that had taken care of the HR function. So, he told me, I was as well- or as ill-equipped as any of the other contenders for the post. A board-level vacancy is a boardlevel vacancy, PK said. If you are appointed to the board today, you would be senior to any person who comes on the board after you. In a government organisation, seniority does count. Since you have age in your favour, go for the interview and give your best; and dont bother what happens. It was advice of the highest order, and Mr Hajara gratefully acknowledges the role of the previous chairman in shaping his career. I thoroughly enjoyed my time as HR Director. It was a new area of shipping and I got so deeply involved in HR that I represented, not only the Indian National Shipowners Association (INSA) but also
Having been an SCI man for 34 years and involved in Indian shipping and then in world shipping, I have developed a tremendous passion for my organisation and for shipping in general. I try to pass on that passion to my colleagues
the International Shipping Federation in the high-powered International Labour Organisation (ILO) committee. I even chaired an ILO committee. Looking back, I must have been generally liked and admired since, despite the fact that I had been in HR for barely four years, I was asked to chair an ISF International Manning and Training Conference in London where the secretary-general of the ITF was the keynote speaker. The ILO was the first body where Mr Hajara got superb exposure to international shipping, and became known to the global shipping fraternity. And his four-year stint as an administrator and juggler of human resources at SCI helped his later career enormously. You see, specialisation and technical expertise are important, but only up to a certain level. Beyond that, you are basically an administrator. There will be lots of people with technical expertise to help you make the final decisions, but you actually turn into a general management person when you hit the most senior levels. For me, the job of a senior person is man-management. At the centre of your success as a senior manager is your ability to motivate your team. And how do I motivate my team? I like to put in my own best and sincere efforts. Having been an SCI man for 34 years and involved in Indian shipping, and then in world shipping I have developed a tremendous passion for my organisation and for shipping in general. I try to pass on that passion to my colleagues, he said. Mr Hajara draws attention to a study done by Bharat Petroleum Corporation and the Public Enterprise Selection Board together, in conjunction with the Hay Group, where a theory was propounded that the success of a CEO depended on his competency. Of course, `competency is a word regularly used in shipping, with a different connotation, Mr Hajara claimed, with a chuckle. Actually, competency is nothing but a combination of knowledge, skill and attitude. The theory was that knowledge and skill are the tip of the iceberg, whereas the underlying and enduring part of competency consists of
24
HOW I WORK
SHIPMANAGEMENT
the personal attributes of a person, vis--vis his self-confidence, empathy with his colleagues and his attitude. When you come across giant multinational organisations like GE, it is standard operating procedure for the CEO to take a few days out every few months and invite six to eight senior key personnel for a meeting at a secluded place to discuss, threadbare, the companys present status. Everyone comes out with his own ideas and the CEO also gives his own input and acts as a mentor to the others. Mentoring is, in fact, an important function of a CEO. And what is Mr Hajaras management style? Is he a hands-on man or is he a delegator? The SCI chief feels the answer lies somewhere in the middle. He likes to delegate responsibility but tells his colleagues that he must be kept informed at all times about what is going on. I have to be kept in the loop, he says. For example, if a ship is stuck or stranded somewhere for whatsoever reason, perhaps because of a shortage of personnel, I would like to know immediately. I hate surprises, so I should be told about anything unpleasant that has happened. It is not nice to get a call from the Shipping Ministry or from a reporter that something untoward has happened to an SCI vessel. It has happened on a few occasions and it has upset me tremendously. I like to delegate but the person has to accept responsibility with the authority given to him. The SCI chief has put his money where his mouth is and comprehensively revised the Delegation of Power order in SCI. This had remained in a status quo position for many years. Since the time that Mr Hajara took over the helm, the order has been revised and updated. Financial limits for decision-making at different levels have been revised upwards many-fold. Despite his dislike for losing his temper, Mr Hajara classes himself as a basically impatient person. He says he likes to see things getting done within the timeframe he allocates and gets impatient if that does not happen. Then he starts pushing. "Sometimes people have told me that I am a hard taskmaster. But then, I dont spare myself, either. So there are no double standards. Yet, because of my nature, I find it almost impossible to be curt to people. On many occasions, I find myself spending a lot of time explaining things even when I know that nothing is going to come of it. In particular, at a social level, my wife tells me that one of my drawbacks is my inability to say no. On the official front, I suppose I can; but not on the personal front. One of Mr Hajaras most endearing traits as a CEO is his open-door policy. Any of his colleagues, and not just the senior ones, can walk into his office and talk to him. Of course, he does have structured meetings with his senior managers every week but they have the right to walk into his sanctum whenever they have a problem. What drives me is my passion, he said. I feel that most of us in India who have had the privilege of receiving higher education have received a huge contribution from society at large; and that it becomes incumbent upon us to give something back. This is because education in India is highly subsidised. It is the society and nation that contributes to your grooming. And I feel it is your moral obligation to give something back. But what frustrates him? The road-blocks placed in my path when I try to move forward. he admits, frankly. Whenever I find that my zeal or drive to get on with it gets stonewalled by procedural bottlenecks, I get frustrated. But then I try to work my way around the problem. I dont like to throw up my hands and say I have been beaten. And this is where my family feels that I do too much. They tell me that if I am convinced that I have done my best, I should leave it to God instead of getting emotionally upset. But fortunately or unfortunately, I am an emotional man, and get emotionally attached to whatever I do.
Sometimes people have told me that I am a hard taskmaster. But then, I dont spare myself, either. So there are no double standards. Yet, because of my nature, I find it almost impossible to be curt to people
And how does he deal with the rigours of working in a taxing industry like shipping, where international travel often takes up 10-12 days a month, and domestic travel another week? I am fortunate in that I dont suffer from jet-lag at all. I can recall an incident when I had gone to Houston to discuss certain matters with Enron, with whom we had a partnership for the Dabhol power plant LNG transportation. But I received a call from my predecessor, Mr Srivastava, who wanted me to attend a crucial meeting in Mumbai. So I curtailed my stay in Houston and travelled for something like 22 hours, via Paris. I arrived at Mumbai at dawn, had a shower, attended the board meeting and went home at the end of the day. And I was alert the whole time. I believe that I can live by the clock of the place where I am at a particular time. Luckily, I can sleep like a baby on a flight. At the same time, I have managed to stay awake even for a continuous 24hour stretch without yawning and wanting to shut my eyes. Sabyasachi Hajara was in conversation with Shirish Nadkarni
25
TRADE ANALYSIS
DUN & BRADSTREET
C O U N T RY R I S K L I N E R E P O RT
GREECE
aged to bring its fiscal deficit to 2.6% in 2006 and aims to reduce it to 2.4% in 2007, achieving a balanced result by 2010. Prime Minister Costas Karamanlis of New Democracy (ND) has confirmed that fiscal adjustment will continue over the short term, but at a slower pace. An improved fiscal situation is highly desirable if the government is to gain some room for manoeuvre in case the economic climate suddenly changes. However, continuing with the fiscal consolidation without considering its consequences could, paradoxically, threaten recent advances. Given the opposition faced by ND, a more moderate fiscal adjustment may help Karamanlis to win the next parliamentary election and subsequently increase the pace of fiscal reform. We consider that Karamanlis will call an early election during the coming months. Greece's extraordinarily large current account deficit underlines the process through which the country has lost competitiveness in recent years. Competitiveness has been adversely affected by inflation, which has been persistently above the euro-zone average for many years, and losses in competitiveness may ultimately undermine the country's growth performance. However, as the current account deficit may persist for some time (given the favourable external environment), the adjustment in relative prices (and wages) that is needed to increase competitiveness is likely to be deferred. Without high price flexibility in the economy, the adjustment may affect the level of economic activity.
USUAL TERMS:
90-120 days
Normal period of credit associated with transactions with companies in the stated country. Several data suggest that the Norges Bank tightening policy will continue in the short term: core inflation rose by 1.5% year on year (y/y) in March, credit expanded by 14.7% y/y in February and the unemployment rate decreased to 2.1% in March. Moreover, the main trade union reached a 2007 wage deal for private sector employees that will result in a wage rise of 4.5% this year.
TRANSFER SITUATION
LOCAL DELAYS: 1-2 months
The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.
FX/BANK DELAYS:
1-2 months
RISK FACTOR
The Greek economy continues to show strong momentum. During Q1 2007 real GDP expanded by 4.6% year on year (y/y), the highest rate for nine quarters; the most recent figure means that the economy has grown above 3.8% y/y in all but two of the past 25 quarters. A combination of factors has contributed to the strong economic growth seen in recent years. The hosting of the Olympic Games in Athens in 2004, an expansionary fiscal stance and the increasing inflows of immigrants from neighbouring countries have all boosted the economy. Meanwhile, as a consequence of joining the euro-zone, relatively low interest rates (along with financial market reform) have resulted in an investment boom. More recently, reforms in the tourist sector, banks' expansion in the fastgrowing Balkan economies and increasing demand in the shipping sector have also fuelled growth. The strong expansion in recent times has underlined some imbalances that could affect Greece's medium- to long-term prospects. The strong fiscal stimulus that boosted the economic expansion significantly undermined the fiscal balance (in 2001-05 the shortfall was above the EU limit of 3% of GDP). The government, helped by the upward economic trend, man-
The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on foreign exchange controls, foreign exchange availability and the efficiency of the local banking system
IMPORT COVER:
0.1 months
USUAL TERMS
MINIMUM TERMS: SD
The minimum advisable form of documentation or trading method under which D&B advise customers to pursue any form of export trade with stated country.
The amount of foreign exchange a country has in relation to the average monthly value of imported goods and services. Only liquid foreign exchange reserves from which a country can service its import requirements are included in this calculation. According to figures released by the central bank, the current account deficit widened to EUR9.0bn (13.9% of GDP) in Q1 2007, up by EUR924m compared with a year earlier. Direct investment in Q1 showed a net outflow of EUR2.0bn, but there was a net inflow of EUR11.0bn in portfolio investments for Greek government bonds and shares in local firms.
RECOMMENDED TERMS:
LC
D&Bs recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customers payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms.
26
DUN & BRADSTREET
TRADE ANALYSIS
This DB Rating Indicates: Low risk

Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher volatility of returns at a future date. Trend Stable - The country's overall risk outlook has not changed appreciably, even though some minor changes to its political, commercial, macroeconomic, and/or external risk environment may have occurred.
DB2c
ECONOMIC INDICATORS*
2004 Real GDP growth
%
THE DB RISK INDICATOR

2007f 2008f
2005
2006
4.7 3.0 -7.9 10.5 -6.2
3.7 3.5 -5.5 9.8 -7.7
4.3 3.3 -2.6 8.9 -12.1
3.9 3.1 -2.4 8.7 -10.8
3.5 2.9 -2.2 8.2 -8.0
Inflation
annual ave %
The DB risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country. Essentially, the indicator seeks to encapsulate the risk that countrywide factors pose to the predictability of export payments and investment returns over a time horizon of two years. The DB risk indicator comprises a composite index of four over-arching country risk categories:
Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment;
Govt balance
% GDP
Unemployment
%
Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions;
C/A balance
% GDP
**The long-term interest rate chart tracks ten-year government bond yields.
Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth and a commensurate expansion in business opportunities; External risk - the current account balance, capital flows, foreign exchange reserves, size
of external debt and all such factors that determine whether a country can generate enough foreign exchange to meet its trade and foreign investment liabilities. The DB risk indicator is divided into seven bands, ranging from DB1 (lowest risk) through DB7 (highest risk). Each band is subdivided into quartiles (a-d), with an a designation representing slightly less risk than a b designation and so on. Only the DB7 indicator is not divided into quartiles.
Long-Term Interest Rate*

(% per annum) Q3 05 3.4
5 4.5 4 3.5 3 2.5 Q3 05
Q4 05 3.6
Q1 06 3.8
Q2 06 4.3
Greece
Q3 06 4.2
Germany
Q4 06 4.0
Q1 07 4.3
While the editors endeavour to ensure the accuracy of all information and data contained in this report, neither they nor Dun & Bradstreet Limited accept responsibility for any loss or damage (whether direct or indirect) whatsoever to the Customer or any third party resulting or arising therefrom.
Exchange Rates
(London, 18 June 07)
Glossary
KEY CLC CWP FX L/C LT MT OA SD ST Confirmed Letter of Credit Claims Waiting Period Foreign Exchange Letter of Credit Long-term Medium-term Open Account Sight Draft Short-term
Q4 05
Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
GBP JPY* USD

*(x 100)
1.4792 0.6057 0.7483
Copyright
Copyright 2007, Dun & Bradstreet. All rights Reserved. This report is provided for your internal business only and may not be reproduced or re-distributed in any manner whether mechanical or electronic without the permission of D&B. Whilst D&B attempts to ensure that the information provided is accurate and complete, by reason of the immense quality of detailed matter dealt with in compiling the information and the fact that the data are supplied from sources not controlled by D&B which cannot always be verified, as well as the possibility of negligence or mistake, D&B nor the publishers of Ship Management International do not guarantee the correctness or the effective delivery of the information and will not be held responsible for any errors therein or omissions therefrom. The analysis shown on this page is taken from D&Bs monthly publication, International Risk & Payment Review, which covers 132 countries around the world. To obtain the latest analysis,, please contact D&Bs Country Risk Services Group on 01494 422700 or visit www.dnbcountryrisk.com.
REGIONAL FOCUS
GREECE
Bagging the riches is more than a waiting game

With 1,200 owners controlling a fleet of over 167m dwt, Greece is a hot hunting ground for third party managers hoping to bag a ship or two. But beware. Newcomers are not that welcome and if you want to make a name for yourself you had better start learning how to run your ships the way the Greeks do
tamatis Molaris has never used third party managers in his working life and does not believe he should be regarded as an ambassador for promoting the benefits of third party management to the Greek shipowning community. Not to put too fine a point on it, he sees technical management as being an integral part of his companys overall vessel operating strategy. And he is not alone in his views. This is not to say the Quintana Maritime President and CEO doesnt appreciate the role third party managers play in todays shipping industry. Because he does: he accepts they have a mission to fulfil as the industry strives for greater openness and transparency. But when it comes to infiltrating the traditional Greek family-owned shipping businesses, third party managers should look elsewhere unless they are interested in managing more sophisticated tonnage, he warned. And only then should they start to exploit the biggest weapon they have in their armoury: their access to seafarers. Many Greeks like to operate the assets they own and it is very hard to change that mentality. A Greek ship owner believes he is the best operator in the world. That is the perception and we have to live with such perceptions, he said. According to Molaris, the Greek shipping company has little or no corporate structure and family members traditionally fill important
positions. It was a very simple operation even down to the financing of the ships where everything is based on the back pocket of the ship owner as well as through financing from traditional shipping banks. More than 90% of the ships bought many years ago were financed in this manner, he said. The management style of these traditional companies was also very introvert with secrets being kept, not only from the outside authorities and classification societies but also between different departments within the company, he said. Greeks have always been very good and reliable shipping operators. They see themselves as the best at managing their ships because most of the ship owners, themselves, have a Captain or a Chief Engineers background and so believe they know how to operate ships better than anyone else, he said. I think it is the mentality, agreed Niki Pappadakis, of AG Pappadakis and Chairman of the dry cargo shipowners association Intercargo. Do not forget that traditional Greek shipping companies are family businesses. Some of these families have been in the shipping industry for three or four generations, he said. According to Professor John Tzoannos, Secretary General of the Greek Ministry of Mercantile Marine, Greek shipping has historically
28
GREECE
REGIONAL FOCUS
Many Greeks like to operate the assets they own and it is very hard to change that mentality. A Greek ship owner believes he is the best operator in the world. That is the perception and we have to live with such perceptions
Stamatis Molaris, President and CEO, Quintana Maritime
been dynamic, adjusting as a whole to new developments, institutional developments, regulatory developments and technological developments. Of course from person to person, you might have different attitudes and different types of investment, but overall, I think there is this ability to adjust and take risks in an international game like shipping that exists without captive markets.
This is the strength, the ability to adjust without captive markets. If you have captive markets, it is a bit easy going. Therefore, I think the future looks good because of all these dynamic elements, he said. It is this capacity to adjust which many believe sets the Greeks apart from other shipowning communities. If you go back a number of years, Greek ship owners owned a larger proportion of the older element of the worldwide fleet so they built up skills managing overaged assets, said Stamatis Molaris. Then came increased regulation of the shipping industry, prompted by OPA 90, which forced many owners, including those in Greece, to rethink the way they traditionally operated and managed their ships. The traditional Greek shipping company had no corporate structure to speak of, but when OPA 90 was enforced, people realised the regulators could come after them and seize not just their ships but their villas, yards and the whole family fortune could be at stake. So the liability concern was vital in changing perceptions in traditionally-run companies, Mr Molaris said. Globalisation also changed the thinking of so many industries including shipping. Expansion of the world fleet and the sheer volume of newbuilding orders meant there needed to be better qualified hardware in place which in turn put pressure on the human element of the operation. Human capital suddenly became very important. This is one of the biggest challenges the industry will face in the future, said Stamatis Molaris. Where will we get 80,000 to 90,000 seafarers in the next three to four years based on the strength of world newbuilding orderbook. It is not just a matter of getting the numbers, but getting qualified people. This was a point echoed by Mr Pappadakis: I heard from one colleague that between now and the end of 2010, we will need 5,000 qualified chief engineers and 5,000 qualified captains. There might be a gerrymandering of training and legal requirements but that can only happen at the expense of experience. That is where there might be a problem. So has the Greek shipping market adapted to these changes? I think it has, said the Quintana boss. If you compare the ships the Greeks own today with those they controlled five years ago, there is no comparison. Greeks are controlling a major part of the double hull tanker fleet and have modernised their dry bulk fleets quite significantly. We have seen many traditional shipping companies that
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Its the individual and the company structure that creates the money. There are a number of ways you can skin a cat: you can do it publicly or you can do it privately. Some companies are doing both
George Economou, Chairman and CEO, DryShips Inc.
used to operate in the bread and butter dry bulk market jump into higher value assets. Also, we have seen a recent phenomenon in some Greek owners adopting a more public face as they seek to raise money on the US stock markets. George Economou, Chairman and CEO of major bulk carrier owner DryShips Inc, said he believed that both elements of todays Greek shipowning community the traditional family and the publicly-quoted were equally sustainable. Its the individual and the company structure that creates the money. There are a number of ways you can skin a cat: you can do it publicly
or you can do it privately. Some companies are doing both. The Greek flag, thank God, has become very attractive now, especially for the tanker market as the Greeks traditionally have more officers in the tanker trades. The problem is that we dont have enough people going to sea so we dont create the right inventory for the seafarers that are needed. Thats going to be the big issue, not the flag anymore, Mr Economou added: Will these changes mean the traditional Greek shipping market will have to rely more on third party managers? I do not know about the third party managers but definitely, we will have to get qualified seafarers from different sources. I think the third party management sector is an attractive option for companies that have gone public but for traditional companies I think it is not. That is my personal opinion but I might be wrong, stressed Mr Pappadakis. This was a point supported by George Gourdomichalis, CEO of G. Bros Maritime, who said that while third party managers can draw on some business in Greece, they are still a long way from being a dominant player in this market. There is still tradition and know-how locally and within family offices that can provide what shipmanagement functions are necessary. Nicholas Fistes, Chairman of Intertanko and President of the new bulker and tanker outfit, Newfront Shipping, said that while there was a shortage of seafarers worldwide, it was the abundance of shore-based personnel in Greece that would work against third party management infiltration of the Greek owning market. Yet a lot of the younger and more publicly-facing ship owners had realised that their business is to look at the commercial side of the shipping industry and let somebody else who knows the technical side better do the nuts and bolts. So there is still a tendency for the new owners to subcontract this operation. Some of the traditional families are, however, turning their backs on third party managers, he said
PUBLICDOMAIN
"It doesn't matter that we have seen a number of good years in shipping because the industry will always be cyclical. Our job is to try and smooth out the cycles as much as we can by making investment decisions that are linked to the long-term employment of our vessels. We are trying to operate a different model from typical shipping companies so the majority of our income is pre-fixed for a long period of time. This kind of visibility makes us more stable but we may be much less profitable during the boom times but on the other hand we have very good protection against this cyclicality. "Regarding the doom and gloom scenario facing the ordering of new tonnage, we are in a period of extreme optimism and we see a lot of investment from the yards in new capacity.
Dr John Coustas
President and CEO of Danaos Corporation
It is a bit strange to see capacity requirements for 2012 onwards as being more or less the same as was the case pre-2002/3. The difference is we have experienced trade growth which is here to stay which is why I do not think we will return to the old levels. At least the shipyards have learned from mistakes in the past. They are trying to be more flexible in terms of their expansion. The majority of the yards have expanded through non-core capacity and joint ventures which they are better able to trim when they meet a crisis. I am not saying we will not see a correction is ship prices but it all has to be seen in the context of the overall costs of the industry such as raw materials, and this sets a kind of different floor than the one that was around 10 years ago."
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According to the Mr Molaris, there may be a "There is still tradition and need for third party managers when it comes to know-how locally and within managing more sophisticated tonnage like tankers family offices that can provide and gas carriers. what ship management Tanker companies are receptive to third party functions are necessary" managers because its a way of outsourcing pollution liability. Vetting concerns are also important. George Gourdomichalis, Third party operators are better equipped in my CEO, G. Bros Maritime opinion to get tankers through the vetting approval system. Oil majors will feel more relaxed knowing they are dealing with quality third party managers, he stressed. far away in the distance. If the managers are going to attract substantial But the challenge ahead for third party managers is understanding owners they will have to embrace that. It will be easier to attract the how to merge their own management culture with those of their varismall owners, he explained. ous clients, irrespective of whether he has two ships or 20 ships, Nicholas Papalios, Director of Piraeus-based Primal claimed Mr Molaris. Shipmanagement, claimed that some Greek owners were looking at This was a point repeated by Roberto Giorgi, President of V. Ships, the third party management sector from the other side and setting up who acknowledged that the identity of the Greek market has changed as third party managers themselves. over the years. This is something I am doing here as a management office and I In the past six years we have been able to penetrate the Greek marhave been talking to some other owners about taking delivery of some ket with 31 clients and 105 vessels, of which 55 are fully managed. The more vessels. There are a lot of investors who buy ships, do not know approach to the Greek market is different because many of the ship how to run them and give them to managers to run for them. There is owners know how to run a ship/purchasing or procurement department nothing wrong with that. Running ships is what Greeks know how to as well as we do. So we have to talk about customerisation. One thing do best. we have been lucky to learn from in the leisure sector is that in any one Some of the publicly-quoted Greek companies like StealthGas and day we have to service not one client but 1,000 clients. If you do not Top Tankers enthusiastically courted third party managers when they perform in the frontline in this sector, you are finished. The same confloated but are beginning to take their ships back in-house because cept of service has to be given to the Greek market. If you have custhey feel they can manage them more effectively and more cheaply. tomerisation and respect you will get the business. And, some say, more passionately. Conceding there is an opportunity for third party managers in Greece It is not a matter of passion; it is a matter of results. To a certain as long as they adapt their management style to the Greek requirements, extent, the large third party managers have economies of scale, which George Economou said it would take time for the two cultures to teach is great but from then on, I think the personal attachment in managing each other. The opportunity is there, but its not going to be easy, he said. that particular vessel is more important than the economies of scale. Mostly, the Greek owners are close to the ships in terms of commuYou will have a 5% to 10% lower operating expenses but one operanications and the time spent around the ships talking to the people. Its tional mistake in todays market might cost you 50% on a daily rate. an investment but also a closeness. A ship is not just something that is There is no benefit for the owners, said Mr Papalios. Dr Alkis (John) Corres, Chairman of the Hellenic Association of Maritime Economists and Director of Newbuildings at Naftotrade Shipping and Commercial, said he believed there was a market in Greece for third party managers, but it will take time due to the fears, which are not entirely unfounded, and which have to do with certain managers in the past not exactly doing what they should have been doing, to put it politely. There has been a widespread hesitation to embrace outside managers, he stressed, for a long time 30 years or more. The opposite has been the case with the Cypriots running the large management companies, which of course were not Greek, but German, Danish,
There are a lot of investors who buy ships, do not know how to run them and give them to managers to run for them. There is nothing wrong with that. Running ships is what Greeks know how to do best
Nicholas Papalios, Director, Primal Shipmanagement
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GREECE
"I think the third party management sector is an attractive option for companies that have gone public but for traditional companies I think it is not. That is my personal opinion but I might be wrong"
Niki Pappadakis, of AG Pappadakis and Chairman of Intercargo
Norwegian but not Greek. In Greece third party management has had a slow start. But it is progressing, slowly Third party management companies thrive on small ownership. When you have 100 ships you rarely consider letting anybody else run them. When you have one or three ships it doesnt make any sense to set up any office to run these ships because it will cost a lot in overheads. This makes you the first candidate to fall down if the market collapses. So it is a defensive and perhaps wise move to have somebody else handle the management for you. And they can, perhaps, do it as well as you would, or even better, provided he doesnt do hanky panky. By that I mean kick-backs from the insurance, kick-backs from the agency and a little 50 cents on each tonne of fuel and lubricants and crew suppliers, he warned. Now, if the third party manager is able to prove his seriousness I think there is an enormous market here: Simply enormous, he added. As Stamatis Molaris emphasised, third party managers have to place more emphasis on the human capital. In the past, it was very important to have a Greek Master onboard, a good Master, a family operation. Now, this changed because Greek owners could not find the people to man the ships, they had to open up and put more emphasis on bringing in competent people. Not just on the ship but also onshore, he said. I think that the environment in the Greek shipping market now is more receptive to third party managers than it was in the past. And judging by the number of calls I am getting, I believe many reputable shipmanagement companies are trying to set up offices in Greece. Crewing is very important and is the only way to get a foothold in the market. If you have your first meeting with a ship owner, that is probably the first question you have to answer. You should use that as a vehicle to penetrate his organisation further, he said. Whether that is enough to convince Quintana Maritime to hand its ships over to third party management remains to be seen. But rest assured, his phone will continue ringing with offers.
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CYPRUS
Cyprus is under threat as a shipmanagement hub. Its tax situation is tempestuous and adversaries, both old and new, are ready to pounce on the slightest sign of weakness. The crucial question is can Cyprus keep pace with the international demands of modern shipmanagement or is the Mediterranean superpower set to decline as its once loyal subjects start to vote with their feet? Andy Pierce reports.
survival of a
C
SUPERPOWER
If the tax is not renewed on the same terms companies will leave, said Robert Thompson, Deputy Managing Director at Unicom Management Services. At the moment the status quo remains, but if that doesnt change by the year-end then we could be exposed to some retrospective taxation issues which would not be a clever idea. There would certainly be a lot of thinking to be done if that happened. There are a lot of other com-
yprus is a shipmanagement stronghold, an empire. Its fleet, in tonnage terms, is the third largest in Europe and ranks tenth in the world. Cyprus also boasts a proud record of never losing a major client to a rival on the world stage. However, like all superpowers, Cyprus is not infallible. Whisper it quietly, but chinks are beginning to appear in its formidable armoury. Following its accession to the EU in 2004, Cyprus won the right to retain its tonnage tax scheme (a key incentive for ship operators on the island ever since the first system was introduced in 1963). This was a major battle to win, but it was not the end of the war. As history shows us all good things must come to an end. The three year agreement, negotiated with the EU at the time of accession, ran out on May 1st this year. Now Cyprus, in line with all other EU member states, has to renegotiate its tonnage and corporate tax scheme as if it were a new Bill. The outcome of these discussions could have a major bearing on the future of shipmanagement in Cyprus. The island's shipmanagement community feels a resolution is needed, and fast.
The government needs to get its act together on taxation. If it gets that right, everything else will fall into place. Cyprus, infrastructure wise, is still far superior to Dubai and probably much more economical than Singapore. The packages you have to pay there for your senior staff are significantly higher than we would have to pay here
Robert Thompson, Deputy Managing Director at Unicom Management Services
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petitive nations now who would welcome, with open arms, the number of ships we manage as an island. An exodus is certainly possible. Shipmanagement companies are notoriously mobile and can up camp in a matter or hours if they wished to move to more favourable shores. And even if unsettled companies decide to stay, Cyprus status on the world stage could be diluted. It would be very easy for the islands operators to move ships offshore to a more attractive fiscal centre. "If a company says it will leave Cyprus it is a statement of how seriously it is considering the matter but it does not necessarily mean it will leave, a leading industry voice explained. Cyprus-based managers could conceivably set up a management company outside EU territory. This new company could then, for a small fee, subcontract business back to Cyprus. In such a scenario, Cyprus will be the loser as the other company is my wholly owned subsidiary, and funds can be transferred back to Cyprus without any tax, as the profits are tax-free in the hands of the recipient, he continued. There is a solution, but we dont want to resort to these extremes. We want to convince the Cyprus government and the European Commission that if they do not approve [a new tax scheme] the Cypriot economy will be damaged, he warned. If the European Commission doesnt agree to the industrys terms, the potential fallout would be felt way beyond Cypriot shores. Thomas Kazakos, Secretary General of the Cyprus Shipping Council, said: This is a win/win or lose/lose situation. If we win, our government wins, our economy wins and the entire EU shipping fraternity wins. If we lose then the outside EU shipping jurisdiction wins. If an open registry and established shipmanagement base loses its battle, then, for sure, not all of the clients would remain within the EU. Failure is not something Kazakos is prepared to contemplate. He is
Ships have moved out to the German KG system. But there is a lot of back office work undertaken in Cyprus. We still find it ideal for ship owners in the West. We are international and Singapore is extremely important for us in terms of our international market. But I think Cyprus is better for instance than the Isle of Man or Bermuda and these more expensive locations
Nigel Cleave , Chief Executive Officer, Epic Ship Management
convinced the lessons learned since the last round of negotiations three years ago will increase the chances of success. Because we knew about it for three years, we were not just sitting idle and glorifying our victory, but learning from the difficulties we had in convincing our then colleagues and partners in the EU, in the Government of member states, Commission officials and other shipowning associations around Europe. The years between 2004 and 2007 have passed by very quickly. But we have made good use of the time to prepare ourselves and maintain our title as the good student in the class. Whether or not the outcome of our discussion will bring 100% success, I dont know. I dont have a crystal ball. But I am more confident than I was in years passed when I was going into the unknown without any additional support, he added. SMI believes the latest tax proposal intends to extend the incentives currently enjoyed by ship owners and managers in Cyprus to include charterers and other shipping practitioners. This is a bold move, but is it enough?
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Andreas Droussiotis, Chief Executive Officer of Bernard Schulte Shipmanagement (Cyprus), is not convinced. Surely, there are a number of areas where the Government could offer more incentives in order to make the industry more competitive. At the same time, Cyprus could increase the income out of it, either directly or indirectly, he reasoned. He acknowledges there are limitations to what can be offered in the new EU era, but believes an industry which recruits 6,500 people every year (4,000 of which are local) deserves more support. The government could, for example, offer subsidies in certain areas for personnel and educational programmes. It could also reduce the tonnage tax for Cyprus-registered vessels. We have been very strict with regulations but we could have imposed further reductions to owners under the Cyprus flag if a vessel was managed from Cyprus, he explained. Joining the EU has done more than limit the arsenal of business incentives at Cyprus disposal. Cyprus is not a cost effective place of operation. The salaries of the staff are quite high, the taxes are quite high and the Cypriot Pound is very strong, explained Kishore Rajvanshy, Managing Director of Hong Kong-based Fleet Management. The financial uncertainty are further complicated as Cyprus is set to join the Euro Zone. However, this did not put the Fleet boss off when he was looking for a European operating base. The company opened its first Cyprus office in June 2007. We felt that Cyrus, as an established centre, would give us access to ship owners located in the Mediterranean Greece particularly, he said. It also gives us a centre from where superintendents can visit the ships in the Mediterranean without having to travel from Hong Kong and India. That saves money for the owners as the money for access to the ship is reduced.
Cyprus is small and, sometimes, small is beautiful. We have a direct relationship with our ministers for shipping, our directors and even our parliamentarians. If I need to say something to the minister, I pick up the phone and talk to him. We meet on a regular basis and it is a mutually beneficial relationship. We help our government and the government helps us to take the right policy decisions for Cypriot shipping in general
Thomas Kazakos, Secretary General, Cyprus Shipping Council
Serghios Serghiou, Director of Merchant Shipping at the Ministry of Communication and Works, believes being part of the strong EU maritime cluster has increased both the quality and the image of Cypriot shipping. The flags move from the Black List to the White List of the Paris MOU supports this claim. However, as Dirk Fry, President of the Cyprus Shipping Council and Managing Director of Columbia Shipmanagement, acknowledges, one of the motivations for Cyprus joining the EU was to overcome the Turkey trade ban, a situation which still shows little sign of resolution. When we joined the EU we had very big hopes that the Turkish ban would be lifted. There have been several attempts at a resolution but we are still in the same situation we were in 1987. The latest state of affairs is the talks have been frozen and nothing will happen before 2009, Mr Fry revealed.
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"The actions of other EU member states are doing little to promote the Cypriot cause. France's new President Nicolas Sarkozy is totally against Turkey joining the EU. That will take any leverage away from Cyprus that we may have had in the past. If Turkey isnt going to get in, Cyprus cant then play the EU trump card, Mr Thompson said. And the EU-induced obstacles do not stop there. It has been a major nightmare for us that third nations require visas and permits to work here," he added. "The red tape has been absolutely abysmal. People who have been living and working on the island for 10 years have been grounded for six months because they couldnt get a residents permit. This is a major headache for us. Its a pain more so for us as we are a Russian company, but it does affect other managers as well. Even if the visa issues were resolved, it may still prove difficult for ship managers to attract expatriate labour to Cyprus. With the demise of 'duty free cars' and many former tax benefits there is no longer any reason for expatriates working in northern Europe to move to Cyprus, explained Captain Peter Bond, General Manager at Interorient Navigation. We are finding it difficult now to get key positions filled. This is something the government needs to look at to find out how it can help the industry to attract the technical expertise it requires, whether that be through tax breaks, social security or some other means. Unfortunately, the local labour market cant provide enough for the needs of the industry here. Eighty five percent of our staff are Cypriot, but the key positions are still held by expatriates. I know there is a shortage of officers at sea but its the same in the shore-based positions, Captain Bond added.
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CYPRUS
How has growth in German KG system impacted upon you?
It is not quite correct that companies have moved from here to Germany. They have set up offices in Germany or they have strengthened their offices there. It is not correct that everybody should forget about Cyprus. We are growing our business down here and the boys in Germany, who are part of us, are growing their business there
Dirk Fry, President of the Cyprus Shipping Council and Managing Director of Columbia Shipmanagement
While Cyprus faces many battles on the home front, there are strong forces in the east waiting to exploit the slightest sign of weakness. From Cyprus point of view this is not so much David preparing to slay Goliath as Goliath duelling with an equally strong and more youthful adversary. Singapore certainly has a more aggressive stance on promoting shipmanagement and ship ownership. It is very much on the boil and is keen to grab the business, said Nigel Cleave, Chief Executive Officer at Epic Ship Management. Dubai Maritime City has been equally as bold. It has stated an ambition to be a leading shipmanagement centre within five years. Closer to home, Gibraltar has claimed it wants to be a shipmanagement hub within 10 years. With this threat on the horizon, Cyprus could be forgiven for running scared. But it couldnt have built its shipmanagement empire if it didnt have the stomach for a fight, and it is in no mood to let its prized managers go now.
Dirk Fry, for one, is not concerned about the young upstarts in Dubai. I was talking to a colleague of mine recently. He was heavily critical about the increased costs in Dubai, particularly the increased cost of expatriate personnel. Maybe the agents situation in Dubai is more competitive than the one we have in Cyprus, but if my costs are getting higher and higher by the day Im not to sure it would be in my interests to relocate there, he said. Cyprus is an established and large maritime cluster and it is more competitive than other places in Europe. We have the infrastructure here. Sure, it would always be nice to get more incentives, and, yes, we are pushing discussions for additional areas where we feel Cyprus could become more competitive. Serghios Serghio is equally dismissive of the threat posed by other centres. He knocked back the suggestion of the islands managers leaving at a stroke and remains convinced Cyprus retains key advantages over its rivals. I believe Cyprus is in a very good position because Dubai and Gibraltar dont have the unique advantages, the infrastructure and experience, we have here. We have common working hours with both New York and Japan. This isnt the case with other centres. We are close to Europe, the Far East and Dubai, he added. Not everybody is so dismissive of the rival centres. Thomas Kazakos welcomes the competition, believing it will have a positive impact on future EU policy. Not only are Singapore, Dubai and Hong Kong our competitors in the shipmanagement industry but there are other centres as well where the competitive legislative framework is comparable and in some parts even better [than Cyprus]. It is a good thing that we have healthy competition because it helps us to convince the government and the EU of fair international competition. When we tell the government and the Commission that in Dubai they do this and in Singapore they do that, they have to react in a positive way. If we were always seen to be the most attractive all-round option, then, of course, there is no incentive for the EU or our own government to be on their toes and make sure that we are staying within the competition level. Fighting battles on so many fronts may have taken its toll on Cyprus. We need to see more activity in terms of attracting new business. Between you and me: Cyprus has lost its way a little bit. It has to get moving again. It is complacent and has lost that get up and go, one high-profile manager reasoned. Dirk Fry was quick to dismiss such claims. I dont believe Cyprus has become stale or complacent. We are very active to assist all trade associations in doing the right thing on a global scale. Whether this is in reduction of air emissions or the criminalisation of seafarers, the Cypriots are there fighting for the industry interests. If anybody says we are a little complacent, maybe they should focus their attention to be sure that their company has not become complacent. It is always easy for a person from within the industry to say: I want this, that and the other. It is not always so easy for people within the government to satisfy everybody every time somebody comes up with a good idea, or something an individual thinks is a good idea. But we have a very good relationship and our interests are in good
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hands with our government partners. This does not necessarily mean it will accept everything we dream up. But it will certainly consider things and if it feels a proposal is good for Cyprus, or will enhance the competitiveness of the industry, I am sure we will have its support. Andreas Droussiotis also played down talk of complacency, attributing any perceived lack of action to the inertia of government. However, with presidential elections looming, Mr Droussiotis believes now could be the time for the ship managers of Cyprus to get some political assurances. Perhaps now with the election campaign underway we will be more successful with our requests. The election is in February next year, but the campaigning has started already. It is not really the out-
Surely, there are a number of areas where the Government could offer more incentives in order to make the industry more competitive. At the same time, Cyprus could increase the income out of it, either directly or indirectly
Andreas Droussiotis, Chief Executive Officer of Bernhard Schulte Shipmanagement (Cyprus)
What can Cyprus do to protect itself from the threat of emerging centres?
come of the elections which is important, it is how we can use them now. We have three candidates and because each one needs votes you can get commitments from them. If we get commitments from all of them, we will succeed no matter what the result is, he smiled. In the next few months an important chapter in the history of shipmanagement in Cyprus will unfold. Whether the island has become uncompetitive and stale will be resolved if its managers vote with their feet. But before we write off Europes shipmanagement superpower, perhaps we should all remember that what doesnt kill you makes you stronger. Mr Droussiotis, for one, still sees a bright future for ship managers in Cyprus. Our strength will be in the quality. The shipmanagement companies here are quality, all of them. And I believe, judging by the number of years we have been in business, that we will only become bigger and better.
From what I understood there is a willingness to discuss the future of the maritime industry in Cyprus and connected laws on high governmental level (Council of Ministers) also in comparison with other centres of shipmanagement including Malta, Dubai and Singapore. Sometimes it seems that some ministries who are not directly involved in maritime affairs are not aware of the important role the maritime industry plays in the Cypriot economy.
Bernt Gienskey , Managing Director, I. C. Shipmanagement
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SHIP REPAIR
LNG
The orderbook for large LNG carriers is substantial across most sectors of the world fleet. However, in the highly capital intensive LNG field, the fleet is set almost to double over the next few years
The dash for gas

By Alan Thorpe
ccording to recent Clarkson statistics, as of October 1st 2006, the 214 strong fleet of LNG carriers with a total carrying capacity of almost 26 million cubic metres (cu m) is set to grow by another 137 vessels, aggregating a further 23m cu m. And, in this highly sophisticated shipping market, the ships are undergoing some pretty fundamental changes in design. Most noticeable is the increase in size. The standard size for conventional long-haul LNG carriers used to be around 135,000 cu m, increasing slowly by about 10,000 cu m in recent years, to around 145,000 cu m. Now these vessels are about to be superseded by a new range of far larger ships. At least six 265,000 cu m LNG carriers, for example, have been ordered recently at South Korean yards by the Qatar Gas Transportation Company which is now thought to have a total of 22 ships of more than 200,000 cu m on order. Next there is the question of propulsion. Traditionally powered by steam turbines, LNG carrier owners have largely switched to diesel power in one form or another. The repair of the worlds fleet of large LNG carriers is lucrative. Only the largest yards in the Far East, Middle East and Europe are involved. The process of winning such contracts starts with yard and service audits from the owner and operator and normally also includes some type of training or licence with one of the containment designers, such as Moss Rosenburg, for spherical tanks, or Gaztransport/Technigaz (GT) for membrane systems. Last year was a record year for LNG carrier repairs in Singapores Sembawang Shipyard, having repaired a total of 13 such ships. This compares with 10 LNG carriers repaired the previous year, which was the most for any shiprepair yard in the Singapore area. Dubai Drydocks repaired 11 such vessels; Singapores Keppel Shipyard repaired nine; Frances Sobrena, Brest had five; Spains Navantia also five; Malaysia Marine & Heavy Engineering (MMHE) three; Japans Kawasaki Heavy Industries with two; Germanys Blohm + Voss Repair also two with Portugals Lisnave. Frances Sobrena, Brest, is most probably the most successful of the European shiprepair yards, through its alliance agreement with Shell International for the repair of owned and managed LNG carriers operating in the western hemisphere. This is similar to Singapores Sembawang Shipyard, which has the same agreement for the eastern hemisphere. This year the LNG repair market is even more active. During late 2006 and early 2007 Shells 81,472 grt LNG Port Harcourt was in Sobrena for 60 days undergoing a life-extension refit. This was followed by Shells 114,354 grt LNG Rivers and her sistership LNG Sokoto both during May this year. Also later this year work will be carried out onboard the LNG Lagos, which is a sistership of the LNG Port Harcourt.
In Singapores Sembawang Shipyard, work was recently completed onboard Shells 94,934 grt Granatina, and work is expected onboard the 88,581 grt Galeomma, which is due to be drydocked in Sembawang during August this year, and the 88,938 grt LNG Delta, also due in Sembawang later this year. Navantia has already repaired the Golar Barbers 95,879 grt Golar Freeze and the 96,235 grt Gimi, as well as the 81,265 grt carrier LNG Ramdane Abane from North Africas Hyproc Shipping Company. Meanwhile, Singapores Keppel Shipyard has had a busy start to this year with work from the LNG repair market Golar Torms 111,835 grt Golar Mazo was drydocked during April this year, and Qatar Gass 111,184 grt Doha and the 111,161 grt Al Wajbah, both technically managed by MOL, have also been drydocked. One of the largest projects from this market due this year will involve the partial life-extension of NYKs 102,390 grt Banshu Maru, which is expected in the yard within the next month for a stay of some 50 days. Keppel Shipyard also has the contract from Golar to convert a yet-to-benamed LNG carrier (Moss Type) to a Floating Storage and Regassification Unit (FSRU). The LNG repair market is very important to Dubai Drydocks, three such vessels from NYK (Singapore), Oman Gas and K Line have already been repaired this year the 94,058 grt Raahi, from NYK
The standard size for conventional long-haul LNG carriers used to be around 135,000 cu m, increasing slowly by about 10,000 cu m in recent years, to around 145,000 cu m. Now these vessels are about to be superseded by a new range of far larger ships
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SHIP REPAIR
The searing pace of Middle East expansion in LNG-related business has provided a strong catalyst to the ship repair sector as various principals scramble to integrate vertically and win a slice of the lucrative future LNG repair market
However, QGTC does not intend to pay out millions of dollars to third parties in future repair bills on its fleet which, it is envisaged, could comprise of 60 vessels by 2010 and as many as 100 by 2015. And, in a joint venture with Keppel Offshore & Marine, it is developing a new repair yard at Ras Laffan which is intended initially for the repair and maintenance of its LNG tankers, as well as other owners tonnage in due course. The new yard, due to be commissioned in 2009, is to be developed in four phases at a cost thought to be around $500m. Facilities there will include two large drydocks and a floating dock. The fact that the yard will be conveniently located at one end of a series of constant LNG trades extending for decades into the future ensures an immediate and steady base-load of business for the new facility. But those behind the new facility are believed to be designing it with a capability for new construction in the future and it is understood that rig building and the construction of offshore service vessels certainly feature in the medium to long-term plan. Meanwhile, Omani-Government owned Oman Dry Dock has recently announced its intention to spend up to $400m on a new repair facility in the south of the country, also to be commissioned in 2009. This time, development of the facility is being undertaken with assistance from South Koreas Daewoo which will provide management, administration and technology transfer in due course. The new yard, at Raw ADuqum, is intended to focus on the repair of tankers and LNG carriers. It is understood that the design of the Omani facility also envisages the possible undertaking of new ship construction in the future. Facilities will include several kilometres of breakwaters, port facilities and quays with 16m water depth alongside. Repair capacity is not clear as yet, however, but recent trends in LNG vessel size are unlikely to have gone unnoticed. Qatars QGTC has focused its newbuilding contracts on South Koreas leading ship construction companies Daewoo, Hyundai and Samsung. At the last count, the company had 24 LNG carriers on order, amongst them the largest such vessels in the world, at 265,000 cu m. QGTC is thought to have six of these so-called Q-max vessels on order, three slightly smaller units as well as seven Q-flex vessels, each of 216,000 cu m. Other Middle Eastern governments have also made clear their intentions to develop new ship repair capacity. Saudi Arabia, for example, has indicated that it plans to develop a specialist offshore and rig repair facility at Dammam, while the Islamic Republic of Iran Shipping Line (IRISL) and the Offshore Shipbuilding Company of Iran are co-operating in the development of a new repair facility about 20 miles west of Bandar Abbas. Meanwhile, it has been reported that the drydock at Basra in Iraq may also be refurbished. While it is unlikely that these facilities will be targeting the LNG sector specifically, they will certainly wish to market their services in the rapidly expanding LPG and chemicals sectors.
(Singapore), and the 111,124 grt Al Bidda from Mitsui/OSK. Also booked in is the 111,128 grt Al Rayyan for MOL. Recently in MMHE was the 94,446 grt LNG carrier Puturi Firus Satu, which is the third LNG vessel in for repair this year (2007), all coming from MISC. Another four such vessels are due, two also coming from MISC. Lisnave has already repaired Exmars Methania and Unicoms SCF Arctic the 83,068 dwt LNG carrier LNG Oyo, from Bergesen World Wide Gas. The Hoegh Gandria is currently serving the last year of a charter with Indonesias Pertamina, and it is expected that, after completing this charter, she will possibly be converted to a either a Shuttle Regasification Vessel (SRV) or a Floating Storage & Regasification Unit (FSRU). Hoegh LNG is currently talking to Brazils Petrobras for such a FSRU and the Hoegh Gandria would be an ideal candidate. Hoegh LNG is also looking at ordering two SRV for a charter with Suez LNG for the Massachusetts Bay project off Boston.
Middle East expansion

The searing pace of Middle East expansion in LNG-related business has provided a strong catalyst to the ship repair sector as various principals scramble to integrate vertically and win a slice of the lucrative future LNG repair market. Leading the dash to develop new shipyard facilities is the Doha-listed Qatar Gas Transportation Company (QGTC), known locally as Nakilat, in which Qatar Gas has a substantial stake. Barely more than two years old, QGTC is completely candid about its ambition to become the worlds leading carrier of LNG and a prominent entity in the carriage of liquefied petroleum gas and condensates too. And certainly, the eye-watering pace of its tonnage acquisition programme indicates it does not intend to waste any time already, the company either owns or has shares in 44 LNG carriers.
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NEWBUILDING
NEWBUILDCONTRACTS
KOREAN YARDS WIN IN HOMOGENEITY STAKES
By David Tinsley
Rather than follow the trend towards ultra-large containership (ULCS) tonnage in excess of 10,000teu, Hapag-Lloyd has opted for homogeneity and attendant operational cost benefits by implementing a major new stage of fleet investment based on vessels of 8,750teu capacity. The eight newbuilds entrusted to Hyundai Heavy Industries will be compatible with Hapag's most recent ships used on express services between Europe and Asia. "We have had very positive results with the five units we already deploy," explained Michael Behrendt, Chairman of the executive board. "They are efficient and incorporate state-of-the-art technology, and they can be flexibly deployed on various routes if required by the market situation," he added. The further series of 103,000dwt vessels will have main dimensions of 335m x 43m and are scheduled to be delivered within a relatively narrow timeframe, underscoring the huge capabilities of the Korean shipbuilding contractor. Two of the 8,750teu boxships are due in December 2009, and the remainder are expected to be handed over within the first half of 2010. Hapag-Lloyd has sealed its latest contract against the backcloth of an anticipated 40% rise in box traffic in the medium-term. Economic research institute Global Insight forecasts that global transport volume should surge to 138m standard containers by 2011, compared with 98m in 2006. Hyundai was also understood to be among the contenders, at the time of writing, for a series of ro-ro vessels to the account of Italian operator Atlantica di Navigazione, part of the continually-expanding Grimaldi Group Naples. The planned newbuilds would be of around 200m length and 4,000 lane-metre capacity, and are required from 2010 onwards. Earlier this year, Grimaldi awarded Hyundai Mipo a five-ship deal worth around $430m and entailing five ro-ro multipurpose car carriers embodying a design similar to that of five ships already on order at the Uljanik yard in Croatia. Each of the 25,000dwt Hyundai Mipo series will cater for about 800 containers, 2,000 linear metres of ro-ro cargo, and 2,000 cars and vans, in keeping with the Italian group's philosophy of ro-ro flexibility and requirements of the group's Atlantic services. Self-sustaining properties as regards the handling of containers, oversized freight and project cargo will be conferred by two 40 tonnes cranes, while the stern ramp will allow piece weights of 250t. As a prime mover in the intra-European trade, and champion of the 'Motorways of the Sea' concept, the Grimaldi group recently exercised the two options appended to its 2005 contract with Fincantieri for two cruise ferries and two ro-pax vessels. The latest project gives a further boost to Fincantieri's workload, and endorses the organisation's strategy and effectiveness in focusing on several core areas of higher value-added construction. Grimaldi has until late 2007 to decide whether the options will be ro-pax or cruise ferries. The initial pair of 180m ro-pax vessels are destined for Grimaldi Compagnia di Navigazione, and will each take 1,000 passengers and 2,700 lane-metres of vehicles. The two cruise ferries in the original order are to be placed with the group's Industria Armamento Meridionale. Following a change of specification, entailing an increase in size, each ship will be 225m long with provision for 2,300 passengers and 3,050 lane-metres of freight. Chinese shipbuilding's surging position in the bulker sector has reached a new milestone with the contracting of a 300,000dwt ore carrier for NYK Line of Japan. Booked at Nantong Cosco KHI Ship Engineering, the order for the mammoth vessel follows NYK's agreement with Brazilian producer Companhia Vale do Rio Doce (CVRD) for long-term transportation of iron ore exports. Under the 20-year pact, NYK is to ship 1.3m tonnes of ore per year from Brazil to China, starting from 2011, when the VLOC (very large ore carrier) is due to be delivered. It is reported that another Chinese builder, Bohai Shipyard, has contracted four VLOCs on the strength of a long-term shipment deal concluded by CVRD with BW Bulk. Meanwhile, Hudong-Zhonghua Shipbuilding (Group) has won export orders covering two bulk carrier types of 87,000dwt incorporating the IACS Common Structural Rules (CSR). One of the ships will be of double-hull configuration and the other will be of single-hull construction, and the designs are among the first from China to be CSR-compliant. Iolcos Hellenic Maritime Enterprises of Greece has booked four 87,000-tonners in double-hull format, while compatriot Gleamray Maritime has ordered four singlehull newbuilds. Both series of ships will be built to Lloyd's Register class, and the lead vessels in each quartet are due to be handed over during 2010. Part of China State Shipbuilding Corporation (CSSC), Hudong-Zhonghua is headquartered at Pudong, with production along both sides of the Huangpu river, to the east of Shanghai. It is to date China's only builder of LNG carriers, and is said to be one of the few shipyards in China with significant in-house design capability. London broker sources said in May that worldwide dry bulker orders had risen since the start of 2007 from 80m to 100m dwt, representing an increase to 34% of the existing bulk carrier fleet.
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TRADE ANALYSIS
TOWAGE & SALVAGE
Salvors on green offensive

With environmental pressures on salvors at an all time high, is it time for the industry to put its money where its mouth is?
ie dye, bell-bottoms, zippered jumpsuits and infamously flamboyant perms are all relics of the past about which most of us would rather forget. However, not everything that was introduced in the 1970s should immediately be cast off into the mists of time. Like platform shoes and other fashion disasters, the decades ideas have a knack of coming back into vogue. This is certainly true of environmental salvage awards. First proposed in 1979, the concept of an environmentally-based monetary award for salvors has been a staple of conversation at the International Salvage Union (ISU). But it only made it onto the open debating table for the first time in July 2007 when a cross industry panel sat down to discuss it. We are looking at providing some form of reward to salvors with regard to preventing environmental damage and, at the same time, perhaps providing some kind of reward mechanism for the place which is nominated or becomes a place of refuge, ISU Secretary General, Mike Lacey, explained. With environmental pressure groups a regular menace at the site of high profile marine casualties and the cost of environmental damage often exceeding the value of the ship and cargo, environmental pressure on salvors is at an all time high. As a result many believe the time is right to start rewarding salvors for their green endeavours. This would be a step change in the way salvors are paid. However, there is feeling that it is long overdue. Proper professional response can provide a material improvement and protection of the marine environment and environmental protection should be rewarded,
said Dick Fredricks, Executive Director of the American Salvage Association. While the Article 14 SCOPIC (Special Compensation P&I Clause) Clause, which first appeared in the 1989 Salvage Convention, offers salvors a means of covering their expenses, Mr Lacey argues that it is certainly not a reward mechanism and the system is in need of updating. The historical approach to salvage is to pay the salvors simply for saving property. But the current concern of governments is not so much saving property but preventing damage to the environment. That is precisely what the salvor does. If he is successful in re-floating a casualty or stopping the casualty from going ashore, then, as night follows day, he is taking action to protect the environment. We are simply saying that the time has come, in the 21st Century, to review the historical approach to salvage and still keep up with the reward for saving the property, but remove from that property reward an elemental assessment of a pollution prevention reward, Mike Lacey reasoned. The introduction of environmental salvage awards would obviously have winners and losers with property insurers gaining new benefits and the liability insurers likely to pay extra costs however, it is expected to lead to a reduction in the overall costs relating to a casualty. With tugs on station a rarity, and ever-larger ships making life increasingly difficult, salvors argue that a change in the payment system is needed if they are to maintain a high quality response capability. A drop in the number of marine accidents and an expanding web of regulations pose further difficulties for the industry. Salvors are travelling further and further to get work, said Peter Robinson, Commercial and Logistics Coordinator at the Resolve Marine Group. Consequently, when you are ready for an emergency response, yes, the people will be there, but the equipment and salvage tugs may not be as they may be off performing a deep-sea pull. As a result there may only be harbour tugs around which will not be the most suitable equipment for a salvage job. The underwriters are realising this more and more. The situation can only be addressed with remuneration. It is also suggested that a change in the award mechanism would help reduce the environmental damage caused by marine casualties, even if a 100% reduction is unrealistic. Environmental salvage would encourage salvors to do things that they are perhaps less inclined to do now and, perhaps, salvors will get called into more casualty operations earlier than they currently do. When a ship has a problem there is a tendency for the salvor to become aware of it, not quite at the point of no return, but at a point where they could have done something constructive at an earlier stage, Mike Lacey argued.
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TOWAGE & SALVAGE
TRADE ANALYSIS
The pseudo sovereign immunity epidemic

Salvors are falling victim to an ever increasing number of ship owners and insurers who are exploiting a legal loophole and claiming sovereign immunity for commercial cargos in order to avoid paying salvage awards, it is claimed. The trend, which does not involve any P&I Clubs from the International Group, has become an epidemic according to Nicolas Tsavliris, President of Hellenic Salvage & Tug Owners Association and Principal of the Tsavliris Salvage Group. There is a mentality to avoid paying the salvor. People want to benefit from his services then they lay low and dont pay, Mr Tsavliris said. In what he claims is owners and insurers laughing at the system, Mr Tsavliris explained that cargoes were being brought and shipped as commercial commodities and, after the salvage service had been rendered, interested parties were claiming that the shipment had a humanitarian purpose. In such cases owners and insurers are not liable to pay salvage awards. Such practice is a particular problem in Mesopotamian countries, Mr Tsavliris explained. However, he stressed that it is becoming increasingly common for European lawyers employed under the Lloyds Forum arbitration to drive the responder immunity defense on behalf of European reinsures even if the cargo interests and their governments hadnt originally taken the same line. I would call this a disgusting development. We have the cargo owner, the people who benefit from the salvage, and even the state wanting to pay the salvor. However, London lawyers [acting for reinsurers] want to defeat the claim. The original underwriters and cargo want to pay, but the reinsurer in London will say we want to play with this and find other arguments, Mr Tsavliris explained.
Of course, that applies particularly when it comes to pollution. Ideally, the coastal states should pay for any environmental award because they are the ones who get the immediate benefit. The coastline doesnt get polluted and they are saved the horrendous expense of a clean-up, he added.
Figures and graph courtesy of the International Salvage Union Annual Pollution Prevention Survey, 2006.
The concept of environmental salvage is not backed by everybody. The P&I Clubs have been particularly vocal in their resistance to the idea and, despite their involvement in the recent discussions, there is little sign of them changing their position. In effect we would be introducing a new head of award, explained Hugh Hurst, member of the International Group Secretariat. We dont believe it is necessary. Our view is that the concept behind the environmental award is to increase the encouragement to salvors. We certainly believe that protection of the environment, or any threat there may be from oil pollution to the environment, is more than adequately taken care of by the introduction of SCOPIC. The SCOPIC Clause is there precisely to encourage salvors to ensure that the environment is not damaged. At the last International Group Managers meeting on 6th June the SCOPIC rates for tugs, equipment and personnel were increased quite substantially. Of course, salvors also do very well out of wreck removal. So we certainly dont see environmental salvage as a means of ensuring there is less of a threat to the environment. Interestingly, while the International Group believes environmental salvage goes too far, others argue that it doesnt go far enough. Nicolas Tsavliris, President of Hellenic Salvage & Tug Owners Association and Principal of the Tsavliris Salvage Group, believes that the ISU stance is too narrow. He suggests the next generation of awards should extend beyond green issues to include the prevention of other damages. Under his scheme, which he has dubbed liability salvage, it is proposed that salvors should be paid for preventing a liability or preventing a loss. In a successful salvage operation this might include: preventing a casualty from being wrecked or causing massive pollution averting significant pollution clean-up expenses and fines averting expensive wreck removal or cargo disposal costs averting substantial pollution damages and claims averting enormous (incalculable) environmental damage This move may sound extreme. However, Mr Tsavliris believes it is a necessary step to produce much needed funds to an otherwise
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TOWAGE & SALVAGE
TRADE ANALYSIS
dwindling industry, which undoubtedly offers very valuable services to the maritime community. He proposes that as the P&I Clubs benefit the most from the salvors ability to remove risks, they should be the ones to cover the cost. He also suggests that an international purpose fund be created or changes could be made to existing applicable international conventions to enable the funds to cover all the liabilities. Liability salvage has the support of industry colleagues, Mr Tsavliris claims. And with criminalization an ever-present threat to salvors, he is
convinced there would be a greater price to pay if the system is not adopted. Does the maritime community want a healthy salvage industry, capable of dealing with large, complicated, dangerous casualty situations or not? Put another way: Do we want a competent salvage contractor to be there when calamity strikes, intervene and prevent a multibillion dollar mess? As history tells us, following fashion has its pitfalls. But refusing to follow the crowd can be a more effective in driving progress forward.
New rules to sink paper salvors

Salvage services in the US are in line for a much-needed boost following the suggestion that the US Coast Guard (USCG) is to implement the long awaited salvage and fire fighting regulations within OPA 90 by January 2008, SMI has learned. Updating the much criticised salvage portion of OPA 90 which many believe assisted the existence of less reputable salvage companies will bring lasting benefits to the environment, vessel owners and insurers, Dick Fredricks, Executive Director of the American Salvage Association (ASA) claimed. He said: It is a long time in the coming actually it is 16 years in the coming but the USCG now, to its credit, is nearing the completion of its work and it is thought the regulations will be promulgated not later than January 2008. This is an important breakthrough for salvors in the US. Until recently it was thought the close links between the Bush Administration and the oil majors, allied with the changing focus of the USCG, would prevent the legislation from seeing the light of day. The existing salvage and fire fighting element of OPA 90 has been accused of lacking teeth as there is no set standard to which a salvor must conform before being named as a qualified Individual in the OPA 90 Vessel Response Plan. However, this new development should serve to put an end to the existence of so-called paper salvors. Today, there are probably 25 legitimate American salvage and fire fighting contractors. However, there are more than 250 salvage contractors and 190 fire fighting contractors presently named in the Vessel Response Plans, Mr Fredricks explained. The regulations will set the standard for salvage and fire fighting response which has not existed, not even today, and will cause the ship owner to name a salvage and fire fighting contractor in its Vessel Response Plan after first considering 13 criteria. Salvage and fire fighting companies which will be engaged in the future will be credible, legitimate and capable contractors this has not always been the case.
SHIPMANAGEMENT
REGULATION
Brussels is so resolute in realising its goal of a single voice for European shipping that it will not refrain from pushing for Community observer status at the IMO, even if this is against the wishes of the majority of the EU member states. But to what extent is Brussels in tune with the feelings of the shipping industry and does it really care what the shipping practitioner thinks?
acques Michaux is a diplomat. He is tall, well dressed, highly educated and sophisticated with a friendly and confident demeanour. But he is an EU shipping regulator and these guys have a habit of saying what they mean. Their words can be reassuring and understanding on the one hand but beware of the sting in the tail. People are still questioning regulation because they are against regulation. You cant do anything with these people. We live in a world where there are regulations. The most advanced civilisations are built on law and order and regulations are there to improve transparency and to enable infringement procedure to be launched. Harsh words indeed. But as he also told delegates attending SMIs 1st International Ship Management Summit in Oslo, not all is doom and gloom. Oh, and watch out for the sting. Its fast coming. I am happy to hear some of your speakers say they are happy with the current regulations. The shipping industry is in a much better position than it was 10 years ago in all respects: quality wise, technology wise, efficiency wise and regulations play an important part in that process. I was pleased to hear a lot of your speakers share that view. The only complaint I can make concerns the attitudes of some people, in particular, my colleague this morning from ABS who said that people in Brussels do not understand class. This is the kind of comment I dont like because it is so arrogant for an industry to say we dont know what we are talking about in Brussels. They should not say this, they should come and explain and present their views and try to come up with sound arguments.
We are not stupid; we will listen to you. But you need to understand that you are representing one interest and as a regulator we have to look at the common interest and the shipping industry is very complex. So people who have this arrogant attitude are not welcome. We need people who are constructive and positive and who want to try to improve the relationship between the industry and the regulators, who are there to help. It was the comments of William Sember, President and COO of ABS Europe, that fired the regulators ire. But listening to Sembers views, you can sense his passion in defending the role of class and the way it should be respected by the regulator, especially at a time when the shipping industry is trying to use self-regulation as a means of minimising the participation of the unilateral or regional regulator. Over the last decade or so, ABS has been one of the more outspoken proponents of the self-regulation mechanism and our message has not changed over the years. But it is rather disheartening to think we have to keep repeating it and that the misunderstandings of the self-regulating process are as common today as they been in the recent past, Bill Sember told the conference. We believe we have a common mission with the regulators and that by working together, marine safety can only be enhanced. Yet we find ourselves in a defensive position subject to a considerable degree of criticism and this seems to continue. And why is that? Well, it can be summed up by the wording on the proposed EU draft directive which says that the existing system no longer suffices and that it must be
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REGULATION
SHIPMANAGEMENT
Over the last decade or so, ABS has been one of the more outspoken proponents of the self-regulation mechanism and our message has not changed over the years. But it is rather disheartening to think we have to keep repeating it and that the misunderstandings of the self-regulating process are as common today as they been in the recent past
William Sember, President and COO of ABS Europe
improved. It doesnt say could or should, but says that it doesnt work and must be improved. Apart from the lack of factual background to this statement, it is puzzling considering the close relationship we have with many government organisations around the world, he added. Class, he said, is judged by its very occasional failings but the consequences of such an approach can be extreme. The EU, for example, has not accepted petition by class societies that they should be accorded the same degree of limited liability enjoyed by every other sector of the shipping industry. The proposed directive continues to impose unlimited liability on class for simple negligence. They have argued that recognised organisations, when acting in a statutory capacity for a flag state, should be afforded the same protections as a direct employee of the state. However, this has not been accepted to this point and if you really look at it, it may only be a matter of time before such limited liability will have an effect and possibly cause the ruination of one of the major class societies. As Deputy Head of Unit at the European Commissions Directorate
General for Transport and Energy (DGTREN), Michaux has to be clear in what the Commissions position is in regulating a shipping industry that is international in nature yet highly complex when it comes to safeguarding maritime safety and environmental balances in regional European waters. It was no surprise, therefore, to hear him tell delegates that it is very common practice for Brussels to be open and transparent in everything it does. I dont know of any other institution which is as open as the EU. We are legally obliged to allow access to as many documents and contacts as are needed unless they are highly confidential. All stakeholders have also established relationships with the European institutions. We also have the European Court of Justice to ensure everything is conducted in a proper way. We can conclude that we are the most open and transparent institution in the world. It is up to your trade associations to come up with solid arguments and we are always ready to listen to them. But while the EU may be open and transparent, some of its political aspirations fall short of those expected of it by Community member states. Take observer status at the IMO for instance. While Michaux will argue forcefully for it to happen, organisations like Intertanko as well as the European Community Shipowners Association (ECSA), whose secretary general is Alfons Guinier, back the critical stance of some EU member states to such a move taking place.
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SHIPMANAGEMENT
REGULATION
If the EU has observer status then the EU could propose initiatives on behalf of member states. It is not evident today who would speak on the Communitys behalf or make proposals but again the main argument is we should maintain the expertise we have today and that is of the flag states operating into the IMO. That is essential
Alfons Guinier, Secretary General, European Community Shipowners Association (ECSA)
We are not asking for EU membership of the IMO. That has now been put aside, said Jacques Michaux. But I am not saying we are not looking at that for the longer-term because we think it would be a logical consequence considering the increasing legislation that is being generated by the EU and increasing responsibility that the EU now has in maritime affairs. So it would be a natural development but we understand the political questions related to that and we understand it has to be linked to other UN bodies. This being said, we are looking for observer status at the IMO for the Community because this would reinforce the visibility of the EU in the IMO. We want observer status on behalf of the community but who would speak on behalf of the Community at the IMO is an open question. Should it be the Commission or should it be the Presidency at the time? This is an open issue, he said. Alfons Guinier replied: In a way it is a problem for EU member states because you are talking about competence. I know you are talking about observer status for the EU but today the Commission has observer status which means the Commission cannot propose anything today on behalf of member states but can propose issues together with member states. If the EU has observer status then the EU could propose ini-
"We are currently debating with the European Council and Parliament that the third Maritime Safety Package should be treated as a package. The European Parliament agrees but the European Council is still reluctant about certain elements of that package. But we hope that by the end of this year, five of the seven proposals will be more or less adopted"
Jacques Michaux, Deputy Head of unit at the European Commission's DGTREN
tiatives on behalf of member states. It is not evident today who would speak on the Communitys behalf or make proposals but again the main argument is we should maintain the expertise we have today and that is of the flag states operating into the IMO. That is essential. Peter Swift, Managing Director of Intertanko, added: Many industry associations share the concerns that we do not want IMO to be politicised. It is important we allow 27 European member states to come as individual countries and enjoy open debate, where different views are taken into account to develop the best convention. The problem is if we start having block voting going on at the IMO then you start getting an agenda that is driven not by best interest but by political interest. You see it already when you attend the IMO, you find blocks of countries starting to oppose almost as a matter of principle. So there are real concerns that we may find the processes of the IMO being extremely distorted by such developments, he warned. Listening to Jacques Michaux speak, you can sense a degree of loyalty: loyalty to the European cause and not necessarily to one industry over another, or indeed the interests of one member state over those of another. According to David Wood, Partner at the Brussels law firm Gibson, Dunn & Crutcher, ex-antitrust lawyer at the Commission and SMI columnist, Commission officials are remarkably homogeneous in that they believe in Europe and in liberal economics with essentially minimal state involvement. Part of what the European Commission and the European Community has done is to remove national legislation and replace it with more minimal Community legislation. So they believe in cutting red tape and replacing it with more minimal Community legislation. They believe in defending the institutions. There is a remarkable degree of commitment to the Commission. When you talk to Commission officials you have to understand that criticism must not be generally against Europe, generally against the Commission, or generally against the institutions. One of the biggest taboos in Brussels is also to be seen to be overtly biased towards your own country, he said. More significant, is the fact that Franco-German policy is at the heart of Europe. It always was and still is and if one wanted to go against Franco-German policy, then, according to David Wood, the chances of you getting your arguments through are slim. It is still the driving force. It is important to remember that there are important power blocks within the community, he said. Taking all of this into account, how should the shipping industry interact with Brussels and more essentially, what should it do if it finds itself under investigation? According to David Wood, the Commission currently operates a joined-up policy in that directorate generals work more closely with each other to achieve their goals. Commission officials attend more trade meetings and are reluctant to offer immunity from prosecution even if the antitrust actions of an industry have the support of its government.
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REGULATION
SHIPMANAGEMENT
If you are the first one to go to the Commission and say, Sorry, I have been doing something terribly wrong but we will tell you all about it, then you can get immunity from prosecution. But to do that you have to cooperate wholly, by giving all information about your colleagues. In cases like these, there is a tendency to exaggerate how much the other guy has been doing and how little you have been doing so incentives have been added into the mix to deal with this.
A lesson for the future?

You have to communicate with the Commission on more than one level. There is no more special treatment for the maritime sector and that is clear, said David Wood. Jonathan Benner, Partner at the Washington law firm Troutman Sanders, agreed that while the mechanisms may be different, many of the regulatory issues facing the shipping industry are the same on both sides of the Atlantic. The US element of the equation is not because the US is the centre of the world or world trade; it is just that it is a significant part of the maritime structure. Even as the US has receded over recent years as a major flag state, it continues to be a major, if not the major, trade destination in the maritime world. Most debate about regulation is complaint-driven, particularly when it comes to the maritime industry. We feel under appreciated I think. We feel that the nature of our operations is not getting through to the right people. Serving as beasts of burden to the world economy, we get whipped within an inch of our lives and are dissatisfied with the results we often get, he said. From a US perspective, maritime politics are intricate given the international nature of the industry. Maritime policy is often much more affected by trade policy it is often a subset of trade policy and due to shipping's international nature, the industry is everywhere and yet it is nowhere politically. The maritime sector does not have a strong political base anywhere, he said. This lack of a political base has, in some peoples opinion, resulted in an over-regulation of the shipping industry. But how does this level of regulation affect the practitioner the owner or the manager trying to survive against an increasingly uneven playing field? We operate in a very complex industry, said Geir Sekkester, President of Barber Ship Management. It is a special industry, in that it is small and it is closed. The world is heading towards transparency and a lot of the specialities we have will disappear. New regulations are happening because we havent dealt with the issues ourselves and so they are being done for us which is not a good thing. We want to be there and jointly make decisions rather than have decisions made for us. It is important we have a voice. And why is it like that? Because we are so fragmented, there is no single voice. You cannot deal with any one organisation. If you look at the statistics, 10% of the worlds fleet is managed by third party managers and 30% of those ships are managed by 10 ship managers. So it is extremely fragmented. The time when we can
"While I believe there is a great deal of regulation, there is a definite lack in certain areas of enforcement. I believe the IMO flag state audit scheme should be made mandatory or at the very least should be made mandatory for new flag states coming into the picture. That is because we have seen repeated situations of flag hopping by vessels that were either rejected from existing flag states or have moved from other unsatisfactory flags with poor detention records. "Another area in need of regulation is the auditing of recognised organisations. At present each flag state is supposed to audit its own recognised organisations. This is impractical because if all 166 flag states all descended on Lloyd's Register I think we could probably occupy them for a full year. That won't work and we have recommended that the IMO should audit recognised organisations in the same way it audits training schools under STCW."
Angelo Mouzouropoulos Director General, International Merchant Marine Registry of Belize
have one vessel manager who solves all an owners problems has gone. There is no vessel manager around today who can pretend to know everything. The traditional hierarchical management organisation will have problems in the future in dealing with all the new requirements and dynamics we see coming, because this type of organisation is very static and works well if there are no changes. In an environment where there are a lot of changes, on focus and direction, you need a more dynamic organisation, he said. Ole Stene, Managing Director of Aboitiz Jebsens and President of InterManager, one such industry body which claims to represent the views of in-house and third party managers at political and intra-industry level, said that while the shipmanagement industry was willing to
A third party manager must be a trusted full service provider able to provide a cradle to grave service across a range of disciplines. From managing newbuilding projects to managing crews, the range of disciplines that a good ship manager can provide is huge
Ole Stene, Managing Director of Aboitiz Jebsens and President of InterManager
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SHIPMANAGEMENT
REGULATION
Most debate about regulation is complaint-driven, particularly when it comes to the maritime industry. We feel under appreciated I think. We feel that the nature of our operations is not getting through to the right people. Serving as beasts of burden to the world economy, we get whipped within an inch of our lives and are dissatisfied with the results we often get
Johnathan Benner, Partner at Washington law firm, Troutman Sanders
put its house in order, the time had come for the regulators and politicians to start treating shipping as the forward thinking, innovative and professional industry it is and listen to what it has to say. They may be pleasantly surprised. He added: A third party manager must be a trusted full service provider able to provide a cradle to grave service across a range of disciplines. From managing newbuilding projects to managing crews, the range of disciplines that a good ship manager can provide is huge. While the ship managers believe interaction with the regulator is the way forward, how do the owners feel about the threat of over-regulation? Harry Vafias, President and CEO of StealthGas, is of the opinion that seemingly everyone has a view on how the shipping industry conducts its business. By this I do not only mean the international regulators such as the IMO, but the smallest fisherman whose harvest in the Japanese Sea may be affected by vessels passing his fishing grounds. Everybody has a view and many have outlets to persons whose misguidings can push through rules, regulations or requirements that have not been fully thought through. If we look at the legislation that has been imposed on the industry in the last three decades we can see how our world is changing. While SOLAS, STCW and MARPOL have been continually amended over the years, many could be forgiven for thinking that things would settle down, but according to Harry Vafias, that was not the case. ISM came along, then ISPS, Marpol Annex VI and then a whole raft of issues including criminalisation of seafarers, class requirements and also issues such as TMSA and charterer vettings. David Sterrett. Chairman of the Australian Shipowners
Association and adviser to ASP Ship Management, added a nostalgic aspect to the debate by claiming that in the bad old days it was normal practice not to disclose problems onboard ship but wait until class or flag state discovered them. Surely today we have moved on to a world where the ship manager manages in a proactive manner to voluntary quality standards such as ISO and in recent years to mandatory IMO standards including the ISM Code. To my mind the ship manager and the regulator are sitting on the same side of the table: we should have common interests, such as sensible, workable, relevant rules and regulations that add value to the operation of the ships and provide for cost-effective, safe working. In other words we need to be in step with the regulator and, as in step infers, the regulator should be in step with the ship manager, he said. He continued: The way in which good regulation occurs is when the regulator and the industry are in harmony about what is needed and they are able to inform and convince the legislators what is needed and how it should be presented. A certain recipe for bad regulation is when the politicians decide that they know better than the industry. Why do the politicians not listen? Increasingly it is because in spite of some good regulation, incidents occur that defy logic. This is because there is a significant underbelly in our industry that still thinks in the old-fashioned way, or as the title of a paper presented at an industry conference in Melbourne a few years ago said: The economic benefits of non-compliance or how to undercut the competition by ignoring the rules. In recent times with the best markets we have seen for a long time we still have a significant number of owners who operate in that way, buying business for their ships by under-quoting and then seeking to restore the margin by squeezing the running costs, he added. However it is not only the fault of the underbelly, those fringe dwellers, in our industry. Ship owners as a genre are a competitive bunch, particularly those who have money, thats how they got the money, by being competitive. They usually invest wisely, they understand the need to preserve asset values and depending on the extent to which they are users of ships or investors in ships, they move in and out of the markets during the working life of the asset, he said. Sterrett was clear in his message that responsible operators must work with their regulators. They must be in step with their regulators to ensure that any rules are workable so as to maximise the positive effects of the rules and to minimise the unintended negative side-effects. Even if these negative side-effects are packed full of sting.
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The way in which good regulation occurs is when the regulator and the industry are in harmony about what is needed and they are able to inform and convince the legislators what is needed and how it should be presented
David Sterret, Chairman, Australian Shipowners Association
REGULATION
SHIPMANAGEMENT
FAIR PAY?
Do third party managers get paid fairly for the job they do?
Harry Vafias
President and CEO, StealthGas The question is not if they get paid fairly or not, it is purely a matter of results. I think if the results are good and the owners are happy and costs are falling then they should get a bonus and be paid well. If they are not performing well and there are problems of off-hire or bad debts, then I believe they should not be paid.
Guy Morel
General Secretary, InterManager I want to respond to Mariella. If she is giving the job of finding her crew to the ship manager then he has to find the crew. The first thing Mariella has to understand is that if owners are asking managers to find their crew for them it is because it is difficult for them to do it themselves.
Mariella Bottiglieri
Managing Director, Giuseppe Bottiglieri di Navigazione We only employ ship managers when it comes to our crew but I am not entirely satisfied. I am talking about when our vessels are vetting inspected. Each oil company has its own policy so if I do not have a crew member on my ship that has been with me for the period of time they are specifying then I fail the vetting inspection and do not get the voyage. So who do I blame? I have to blame my ship manager because it is him who is providing the crew. And while I understand it is difficult finding the crew, if I go to a manager I expect him to solve the problem for me.
Mariella Bottiglieri
I said I am aware of this. But if I am outsourcing and paying a fee for the service, then I want something back.
Guy Morel
The problem is that a number of my members have said that today they spend a lot of their time just refusing to provide services to owners because they simply do not have the crews. They are doing as well as they can and if they are unable to provide exactly the service demanded it is because they are trying to improve.
Gerald Carter
President, Canada Steamship Lines Geir Sekkester said this morning that the better managers do their jobs the less they get paid. I dispute that because the better you do a job the more efficient you become. It is more difficult to correct an error than it is to do it right first time. But are managers paid enough? We came to the conclusion last year that there should be a basic shipmanagement fee and that managers should be paid extra for their performance. If managers perform well, then owners will be paid more money and if we are paid more money then we should be prepared to share it with the manager. They are the guys getting up at 3am to look after the ship. We were the first domestic Canadian shipping company to outsource shipmanagement, but it was something we had to do and it made us a much better and stronger shipmanagement company. It allowed us to focus on growing the business and to allow V.Ships to handle the technical management of our ships and deal with the regulatory issues. Working with ship managers is about relationships. I regard them as a division of my company. We speak to them when we draw up our strategic plans because they have an input into these plans.
Ole Stene
Managing Director Aboitiz Jebsens and President, InterManager If I can talk as a manager, this comment from Canada Steamship Lines is very important. In the old days of ISMA we were recognised as an organisation for recognised ship managers. Also people started to outsource all the crewing and technical management responsibility. So in this new world we have to build this relationship between owners and managers so we can be part of their organisation. We say to our clients: Consider us as your extended personnel department when it comes to crewing. The only way we can supply competent crews is to understand each client's business, the trades they are in and types of ships they operate. I think this performance bonus system is good because if an owner earns more money because of less off-hire why shouldnt the manager receive a premium because of that.
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AdHoc
AdHoc
If today's ship owners think their lives are overregulated, they should spare a thought for their unfortunate colleagues in Italy who still have to abide by local rules that quite frankly should have been consigned to the file marked B.I.N. decades ago. Take the law number 1045 regulating hygiene and living conditions onboard ship for instance. According to Mariella Bottiglieri, Managing Director of Italian owner Giuseppe Bottiglieri, not only does it stipulate that every 'room available for crew, including corridors', must have a sufficient number of 'spittoons' available but it also warns that it is an offence if seafarers do not wear a cork helmet to protect against sunburn when in tropical areas. And when temperatures
BUSINESS OF SHIPPING AD HOC
Either spit it out or wrap up well
drop at night, an abdominal wool cover is also deemed compulsory. For those vessels trading in areas where there is mosquito infestation, metallic nets must be used to prevent diseases such as malaria and yellow fever. Other regulations concerning passenger vessel claim that a doctor present onboard ship must "have faced different medical problems, from work related injuries to assisting in giving birth". Laws used to regulate and control the role of the doctor onboard ship were drawn up in 1895 and they still apply
today, Mariella said. When it comes to more modern regulations, the terms are still as confusing. A law drawn up in 1998 stipulates there must be at least six Italians onboard an Italianflagged ship. In such cases where six such able men can't be found, there is a waiver approved by Italian trade unions, which allows EU crews to be used if evidence can be shown of the lack of Italian nationals. The peculiar thing about this, said Mariella, is that this was supposed to be a waiver but it has been used so often that it has become normal practise.
Shipbuilding gets a Carribean flavour

Japan and Korea may be in for a totally tropical taste of their own medicine after the Caribbean island of Trinidad revealed its readiness to enter the shipbuilding trade. Whether Trinidad will be able to rival the worlds largest shipbuilding centres is not clear, but with well established ship repair docks on the island, a move into shipbuilding should be seriously easy going. It would be the Caribbeans first foray into the shipbuilding field and could help improve the regions strong links with the sea. Trinidad Finance Minister Christine Sahadeo said the establishment of a shipbuilding industry would assist in creating special skills, employment and ensure the islands maritime industries remained sustainable.
Trot-on, trot-off
Italian shipping group Siba Ships has successfully carried out the largest ever cattle shipment from Australia to South East Asia. Its livestock carrier Deneb Prima loaded over Aus$11.5 million worth of cattle from Townsville, Queensland, bound for Jakarta, Pandjang and Pasir Gudan in Indonesia and Malaysia. The cargo consisted of 20,060 cattle and 2,564 sheep and goats. Siba Ships sister company Wellard Rural Exports, organised 28 road trains in Queensland to bring the cattle to the ship, and they were loaded and transported under the highest standards of care and supervision. There has only ever been one larger shipment of cattle in the world, which was 100 more than this, on the same ship from Fremantle to the Middle East in 2002.
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AD HOC
BUSINESS OF SHIPPING
Free video sets pulses racing

A free eight minute film on the internet is enough to get any teenager excited. Praise then to the International Chamber of Shipping which has produced a video to get pulse racing about the maritime industry. International Shipping: Life Blood of World Trade is designed to increase public awareness of shipping, specifically targeting youngsters and non-expert policy makers. By presenting shipping as a safe, clean and well regulated operation the film hopes to make the industry more visible and attractive by providing them with a succinct and visual introduction to the industry. A high quality DVD, with French, Spanish, Arabic, Chinese and Japanese language options, can be obtained free of charge from the ICS. In the spirit of sharing, and obviously to access a wider audience, the ICS is encouraging shipping companies from around the world to include a link to www.marisec.org/film on their corporate websites.
to new recruits. The film should also prove useful for newcomers to shipping companies
Fredriksen FC?
Battle for predominance among the major players in the oil, energy and tanker markets could be in for more of a public airing on the premiership football terraces to be precise if rumours circulating the football club websites prove to be true. Norwegian tanker billionaire and Frontline supremo John Fredriksen, is understood to be one of those interested in buying Tottenham Hotspur, a Premiership club which could easily be up for sale if the price is right. Fredriksen would join Chelsea owner and energy billionaire Roman Abramovich on the ever-growing list of very high profile, and very rich, Premiership football club owners. Both men crossed swords before when Fredriksen spectacularly turned down Abramovich's reputed 140million offer for his Old Rectory house near Stamford Bridge. Abramovich was said to be "desperate" to acquire The Old Rectory, a desirable mega-mansion complete with its own ballroom close to his football heartland. But the Blues benefactor's breathtaking bid was rebuffed by Fredriksen, apparently much to Abramovich's chagrin. The Old Rectory was sold to Fredriksen in 2001 for 40m by its previous owner Mrs Gianna Angelopoulos, the Greek diva who masterminded the Athens Olympics. She and her steelmagnate husband Theodore had bought it for a rumoured 20m in 1995.
Publish and be damned!

The shipmanagement grapevine has been on overtime following Barber boss Geir Sekkester's decision to go public over allegations of illicit practices among elements of the third party shipmanagement sector with some players welcoming the open debate while others suggesting he would better serve his time "going back to his desk and getting on with the job of running his business". The first the industry knew about these revelations was when Sekkester was quoted in the weekly Norwegian shipping newspaper TradeWinds slamming 'rogues' in the industry. However, while the rest of the shipmanagement sector was left to deal with the inevitable media onslaught his comments created, the Barber boss was reported to be relaxing, like the rest of Norway, away from his desk on a well-earned holiday.
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BUSINESS OF SHIPPING AD HOC
Managers put to the test

Blood, sweat and tears. Exam time can guarantee them all. But now ship operators can have their revenge on colleagues and job applicants following the launch of the first International Ship Manager Test, if you are not in the hot seat yourself of course. Launched by the Piraeus-based Ability & Knowledge Metrication Organisation, the test can be used to screen job applicants, check the knowledge of existing staff and resolve internal promotion to executive positions. Saving recruiters from wading through hundreds of CVs may be the number one use, but the makers have suggested it could also be used by ship owners to sort the wheat from the chaff when selecting a third party manager. Three versions of the test are available, ranging from Standard to Executive, in which the candidate must answer 100 multiple-choice questions covering 12 different levels of competence. The Greek experts have invested 18 months in creating a test which shows how good a ship manager is. If you think you are up to the challenge then good luck. If not, break out the Pro Plus and head for a darkened corner of the library.
Thought Provoking
Ole Chr. Schroeder
Director of Environmental Compliance OMI Corporation "Sometimes you dont get the feeling that the regulators are on your side when you see the type of legislation they are introducing. Take the OWS issue with the new legislation and the technology isn't there to support the legislation. It just creates more headaches. You have to solve it in a different way. We have tried to push as much as we can through the IMO on the new suggested regimes on waste free management to try and find something that works because if it works the unilateral regulator will follow."
DISPATCHES
SHIPPING BUSINES S REPORTS FROM AROUND THE WORLD
Nuclear Fallout
Shipping is targeted as UN fights Irans WMD threat
Thomas Land reports from the International Atomic Energy Agency in Vienna
ittoral states bordering the Caspian Sea are preparing to confront increased security risks posed by Irans nuclear ambitions by stopping and detaining vessels suspected of transporting weapons of mass destruction. Ships Captains engaged in trade with Iran can expect substantially intensified security surveillance at many major ports and during their voyages across the high seas following a rare confluence of interests between the US and Russia, and their allies. They are determined to prevent Iran from acquiring nuclear war-fighting capability by almost any means short of full-scale war. This policy could precipitate a shipping and oil supply crisis of global proportions, focused on the Straits of Hormuz. A search and arrest of ships on terrorism charges may take place anywhere and is especially likely in the Caspian Sea, the Persian Gulf and the Mediterranean along the principal shipping lanes serving Iran. Many believe that Iran is perilously approaching the point of no return in its development of nuclear war-fighting capability and in the deployment of proscribed technology smuggled in onboard cargo vessels. The threat of weapons of mass destruction (WMD) falling into the hands of rogue states and stateless terrorists has concentrated the minds of the major shipping powers as well as Irans neighbours. Russia has joined Britain, the US and most other members of the North Atlantic Treaty Organization (NATO) in taking powers under their Proliferation Security Initiative (PSI) to interdict ships suspected of unauthorised trade in WMD technology. The US has just launched its related global Secure Freight Initiative (FSI), an advanced port security scheme building on existing collaborative
measures to scan containers bound for America for nuclear and radiological materials. Originally proposed by Russia, the International Convention for the Suppression of Acts of Nuclear Terrorism entered into force in July this year. This is the thirteenth United Nations instrument to outlaw terrorism. One of them is the Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation, as amended under the authority of the UNs International Maritime Organisation. It bans civilian vessels from being employed in
nearly completed the construction of Irans Bushehr nuclear power plant, proposes to supply reactor fuel to all the projected plants of the region. A guaranteed supply of reactor fuel coupled with the supervised recovery of spent fuel by Russia would be carried out under the authority of the UN International Atomic Energy Agency (IAEA). The multilateral control mechanism is proposed to ensure that spent fuel is not diverted for military use. Egypt, Saudi Arabia and Turkey, Irans main regional
Iran has the right to benefit from (peaceful) nuclear power. But military nuclear programmes are a different matter
US Government Pree Office
Sergei Ivanov, First Deputy Prime Minister, Russia
the transport or launch of illicit WMDs. For the first time ever, this law makes it a criminal offence to exploit any non-military vessel or maritime facility, including oil platforms and related installations, in operations involving WMDs. The protocols cover any equipment, materials or software or related technology that significantly contributes to the design, manufacture or delivery of such weapons. Irans success in manufacturing weaponsgrade uranium on an industrial scale has dragged the rest of the Middle East into a race for nuclear reactor construction, ostensibly for electric power generation. Russia, which has
rivals, have accepted that condition. But Iran insists on enriching its own reactor fuel. Indeed it has flouted repeated demands issued by the UN Security Council to freeze its accelerating uranium enrichment programme, backed by the imposition of economic and moral sanctions. And it has called for the physical destruction of Israel, which lies well within its missile range. Russia, hitherto Irans main protector at the Security Council, has now suspended an agreement for the supply of reactor fuel for the Bushehr plant. Iran has responded by inviting tenders for the construction of two larger nuclear power reactors, to be fuelled presumably from indigenous sources. Sergei Ivanov, the first deputy prime minister in Moscow, recently declared: As a civilised nation, Russia is opposed to the acquisition of nuclear weapons by Iran. Ivanov stands a good chance of winning the top job in
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NUCLEAR SHIPMENTS
DISPATCHES
the Russian presidential election, which is due to start in December. As he put it: Iran has the right to benefit from (peaceful) nuclear power. But military nuclear programmes are a different matter. Russia has already asked its Caspian Sea partners in the Commonwealth of Independent States (CIS), an organisation grouping most republics once joined under the defunct Soviet Union, to form a security alliance to prevent maritime WMD smuggling. All the countries bordering on the enclosed Caspian Sea are CIS members except Iran. They support the PSI accords. One of them is Kazakhstan, home to 15% of the global uranium reserves. It has just signed a collaboration agreement with Russia to develop its deposits for the projected peaceful reactor fuel business serving the Middle East markets. Kazakhstan and its Caspian neighbour Turkmenistan, belong to a group of Central Asian countries which has declared itself a nuclear weapon-free zone, outlawing the deployment or transport of such devices in sea and land areas under their jurisdiction. The American-led PSI programme was launched in 2003 in response to the embarrassment caused by the high-profile arrest of
Mohamed El Baradei, Director General of the Vienna-based IAEA
So far, weve seen only the tip of the iceberg. We can now discern a very sophisticated and complex underground network of black market operators not that much different from other organised crime cartels
the So San, a vessel bound for Yemen in the Arabian Sea with a cargo of advanced North Korean Scud missiles. The ship was intercepted by the Spanish navy at an American request. But it had to be released because both North Korea and Yemen claimed its mission was legitimate under the UN law of the sea convention, which protects the right of innocent passage along the high seas and national waterways. The PSI accords had now found a way to get around that provision. States within the PSI alliance allow each other to interdict vessels sailing under their flags or through their territorial waters, which are under their undisputed national sovereignty. And all registered merchant vessels participating in international trade are involved in this arrangement since they must fly the flag of one nation-state or another. All the large shipping countries are part of the PSI group. Some 80 countries support the initiative. Boarding arrangements are made under bilateral accords. Panama, the worlds leading open registry, signed a boarding arrangement with the US in May 2004. The second largest is Liberia, signing up in February 2004. Other flag states recently joining the PSI accords include Belize,
IAEA
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Digital Globe
Iranian Nuclear facility at Bushehr on the Arabian Gulf
DISPATCHES
NUCLEAR SHIPMENTS
gling network largely relying on shipping for trade in WMD technology, embracing Iran, Pakistan and North Korea. Mohamed El Baradei, director general of the Vienna-based IAEA in charge of the subsequent investigations, commented: So far, weve seen only the tip of the iceberg... We can now discern a very sophisticated and complex underground network of black market operators not that much different from other organised crime cartels. We are investigating the key pieces of a complex picture, with assistance from a number of countries. It is essential that we make progress in our combined effort against illicit trafficking. We must upgrade our collective security to prevent sensitive nuclear materials and technology from falling into the wrong hands. He stressed that middlemen are involved in this largely seaborne trade engaged in highly lucrative operations in the United Arab Emirates as well as Germany, The Netherlands, Japan, Malaysia, South Africa and elsewhere. Funds generated by the proscribed WMD business have been recovered from accounts in Dubai and other Persian Gulf cities. Libya has admitted to have invested well
Iranian President, Mahmoud Ahmadinejad
Croatia, Cyprus and the Marshall Islands. Turkey recently hosted a PSI training exercise mounted by the navies of France, Portugal, Turkey and the US. More than 30 countries including Israel and several Arab states sent observers to watch as a fleet of warships surrounded and seized a merchant vessel. The drill in interdicting illicit weapons shipments was just one of many sharp warnings to Tehran. Another training exercise, held in the Persian Gulf last autumn, involved naval, air and ground forces from Australia, Bahrain, Britain, France and Italy. Skeptical observers describe the PSI as an excellent, though incomplete, approach to policing a cumbersome global non-proliferation regime. The PSI is particularly useful for stopping large, observable shipments, such as boatloads of centrifuges used for enriching
weapons-grade uranium, say scholars Joseph Cirinbcione and Joshua Williams of the authoritative US Carnegie Endowment for International Peace. But it does little to catch small but deadly transfers, like a suitcase of plutonium, they added. The US authorities have acknowledged staging some 25 interdictions in the high seas during the year ended in April 2006. These are believed to have yielded several still undisclosed scoops, including the seizure of dual-use technology intended for Irans heavy-water plant and its nuclear-capable missile development programme. Probably the greatest success of the PSI programme so far has been the seizure of centrifuge components onboard a ship bound for Libya, which was arrested in Italian waters. It has also led to the exposure of a global smug-
over $40m in its aborted WMD venture. Iran is understood to have invested some tens of millions of dollars in WMD technology. Irans main maritime smuggling route passes through the Straits of Hormuz, observes Richard Bond, programme associate of the British American Security Information Council (BASIC). He argues that to prevent Irans future access to sensitive nuclear and missile components and equipment from the sea, it would be vital for participating states in the PSI to conduct intensive naval patrols in the Arabian Sea, Gulf of Oman and Persian Gulf to interdict any movements of suspicious cargo. Maritime interdiction against Iran would be relatively straightforward to implement, the BASIC position paper suggests, as Western naval forces have been patrolling the area extensively in recent years.
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The American Iranian Council
NUCLEAR SHIPMENTS
DISPATCHES
Michael Chertoff, US Homeland Security Secretary
But this would inconvenience merchant shipping. And shipping and energy economists fear that Iran might also respond by disrupting maritime commerce through the straits, one of the worlds critical shipping chokepoints. Chokepoints like the Straits of Hormuz are critically important to the world oil trade because of the sheer volume of the stuff passing through them. They are susceptible to military action and terrorist attacks as well as shipping accidents. They would make attractive targets for enemies of the West because any disruption of shipborne traffic at such points could be catastrophic to the global economy. Iran has already asserted its preparedness to stop the flow of oil across the Straits of Hormuz by force. It has demonstrated its determination by staging several military exercises there. But even such retaliation would only delay its development of a nuclear weapons capacity. A related line of defence against shipborne transport of proscribed nuclear materials and technology has been mounted by the new American SFI programme to screen containers at their ports of embarkation. The scheme is supported by an extensive coalition of ocean carriers, shippers and terminal operators. It builds on the experience and collaborative counter-terror arrangements established for the earlier US Megaports, Container Security and Customs Trade Partnership Initiatives involving some 50 ports. These are the points of origin for more than 80% of the cargo shipped to the US. The initial phase of the SFI programme launched this year involves the deployment of
Our purpose is to prevent terrorists from using nuclear and other radiological materials to attack the global maritime supply chain or launch such an attack on the US
dockside nuclear and X-ray screening technology in Southampton as well as Singapore, Port Qasim in Pakistan, Puerto Cortes in Honduras, Port Salalah in Oman and the Gamman Terminal at Port Busan in Korea. These ports were chosen to determine the impact of largescale international scanning technology on big cargo volumes involving shipments and transshipments. The scheme introduces instant information sharing between the local port authorities, the US customs staff serving there and their headquarters in the US, eventually leading to the creation of a secure global data network on seaborne trade. Detecting the presence of highly enriched uranium concealed in containers is a difficult task. The natural radiation emissions of harmless materials like potassium and granite can cause false positive readings. Despite the automation of high-tech radiation sensors and data processing, recourse to manual cargo clearing will remain necessary from time to time. Improving port security worldwide helps to improve our security at home, said
Michael Chertoff, the homeland security secretary in Washington. A specialist at his department explained: Our ultimate vision is to create a globally networked array of detection equipment that will be configured to enable real-time streaming of container images and radiological detection data to other countries engaged in maritime trade. This government-to-government data sharing will mitigate the risk factor in global freight movement. Our plan is to deploy next-generation tools and integrated systems, along with other proven technologies, to scan maritime container cargo. Our purpose is to prevent terrorists from using nuclear and other radiological materials to attack the global maritime supply chain or launch such an attack on the US. The new UN convention for the suppression of nuclear terrorism prescribes a global approach to deterring WMD smuggling on the high seas. It describes nuclear terror as one of the most serious threats of our time. The convention has grown out of the summit conferences of the richest industrial nations, the socalled G8. At a meeting in Kananaskis, Canada, five years ago, these countries made a $20bn commitment to fund a collective counter-proliferation programme. The global initiative against terror was declared jointly by the presidents of Russia and the US during the G8 summit in St. Petersburg in July 2006. And at their last summit in June 2007, held at Heiligendamm, Germany, the G8 leaders condemned terrorism in the strongest terms and urged all countries to support the resulting convention. Apart from the G8, the original founders of the initiative were Australia, China, Kazakhstan, Morocco and Turkey. The convention is concerned equally with rogue states operating illicit nuclear weapons programmes and ostensibly independent terror groups trying to smuggle primitive radiological weapons into major population centres perhaps in a shipborne container. Security analysts in several countries now expect an attack delivered by means of such a radiation dispersal weapon comprising a conventional bomb mixed with radioactive material against big civilian targets as a matter of time. It would cause potentially devastating disruption and paralysis. Matthew Bunn, a senior researcher at Harvard Universitys Project on Managing the Atom, believes that transporting radioactive materials for such a purpose remains relatively easy. The reason: These things are small, he said. They are not as radioactive as people think they are. And they are quite difficult to detect at a distance.
Thomas Land is an author and foreign correspondent who writes on global affairs.
USCG
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CONSOLIDATION
DISPATCHES
Tit-for-tat is a game worth winning

In the dog-eat-dog world of third party shipmanagement, the major players are jockeying for position in an environment where only the biggest or the best will survive. But how much of a game of survival is it and will allegations of illicit practices among the less competitive players force an eventual two-tier shipmanagement sector? SMI investigates.
week they say is a long time in politics but if the intrigue and counter-intrigue that gripped the shipmanagement industry at the end of June and early July is anything to go by, you could be excused for thinking a clear policy of tit-for-tat had replaced the normally genteel and relatively private world of third party crew and technical management. First of all you had Barber President Geir Sekkester complain to the press about the prevalence of illicit trade practices by the seedier end of the third party shipmanagement sector. Then you had trade association InterManager call for a rethink on management fees as it sought to defend the need for necessary reward for the quality work todays bone fide ship managers perform. We then heard that major player AngloEastern Ship Management had sold over a quarter of its stock to its main shipowning partner CMB. Then to top it all, it was announced that Bernhard Schulte had abandoned its longheld stance of inter-company competition and autonomy in favour of a big is beautiful policy by merging Eurasia, Hanseatic, Dorchester Atlantic Marine and VBSK into one shipmanagement unit that will control a fleet of over 500 ships and employ in excess of 14,000 crew. A busy time indeed. But this shift in debate onto whether size really matters in a managers ability to manage effectively answers certain questions raised through the public discussions over alleged back-handers and illicit dealings against those ship managers who feel they can only win ship owner business if they charge lower fees but earn their crust from the savings they should pass onto the owner. Are quality owners in favour of only dealing with the upper echlon of managers, along the lines of an IACS scenario? The biggest problem we have is that the shipmanagement industry is so fragmented, said Geir Sekkester. Since some of our indus-
try has a bad reputation, this can impact badly on other issues like recruiting seafarers. They dont want to work with people with a bad reputation. For me to take Barber to the next level, the industry needs a good reputation. According to Sekkester, the good guys should be seen as the good guys and their actions should be recognised as such. He added: I would like an IACS kind of organisation that is seen as good and working within certain rules and regulations. If we want to take this industry to that level we have to do it together, I also think some of the crewing issues cannot be done by a single manager or owner and I see all of these things as being interlinked. The biggest problem we have in the industry is if you put the three biggest class societies together. You have 60-70% of the market. If you put the three biggest managers together, you have 20% of the third party management market which is only 10% of the total world fleet.
What I want to achieve is for owners to understand that to focus on the management fee alone is maybe not in the owners best interest. If we take a higher management fee, we can employ more resources to do a better job, which means the operational cost of the vessel is lower than in the opposite case, he stressed. But not everyone shares this view of an elite organisation of managers.
I would like an IACS kind of organisation that is seen as good and working within certain rules and regulations. If we want to take this industry to that level we have to do it together
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DISPATCHES
CONSOLIDATION
I dont suppose the size of companies will make a difference as far as the image of shipmanagement is concerned. The philosophy of the company is more important than the size
large resources. Owners will slowly move towards this area. But I am not saying I want to kick everyone else out, he said. Examination of the Bernhard Schulte move shows it is based around a drive to exploit group synergies and offer a better service to ship owners. The company said in a statement that the merging of the four units would allow it to make cost savings on shared systems, take a global approach to sourcing crews and end competition for clients between group companies. More importantly, it said it was a response to industry developments which require substantial investments in personnel, training, information technology and quality assurance resources. Roberto Giorgi, himself an advocate of the big is beautiful philosophy, said: The idea to have one single company makes a lot of sense, unless you have a completely different product or brand in the four companies. So people know what the key competency is, it is better to have one unit managing the business and then maximise the synergies that exist in the organisation. The challenge they will face is people, whether they will align, technical, accounting, systems, purchasing etc. So it will be very challenging for them but it is the right idea, he said. This is a business that is very competitive so everyone will try to grow through organic growth, joint venture or acquired growth. There are companies that could add value to you if you bought them, ie. by allowing you to enter new markets. There are a lot of guys who are trying to copy what we are doing. Peter Cremers lent his support: For years I knew that Schulte tried to say it had five competing companies with different names. But now big is beautiful and they have changed their stance. I have always said that AngloEastern was different in as much as we were a global group with central control. They are following us, at the end of the day, as all the offices and systems are the same and everyone reports to one office. Kishore Rajvanshy, Managing Director, Fleet Management in Hong Kong, said that given the state of the shipmanagement sector, he has always maintained that consolidation
Roberto Giorgi, President, V.Ships
No, this is completely wrong, this is not the right approach, said Roberto Giogi, President of the worlds largest third party manager, V.Ships. You can have a small shop providing fantastic service. The mark that defines you is if you are a good operator or not. Your KPI etc. will tell you apart but to have a cartel for shipmanagers is not good. Best practice is the way ahead, he stressed. According to Roberto Giorgi, employing best practice can be met by even the smallest manager, which is why he believes InterManager has taken up this initiative. It should be utilised by anyone in the management business who wants to improve their operation. Its not a question of saying I dont want to give my secrets to my competitor because it is the most effective implementer of the best practice that is what makes the difference, he stressed. Whatever the outcome, one feeling shared by the majority of third part management players is that the days of the shonky ship manager are numbered. In some respects this is because of the crew shortage in the industry. Crew can be more selective to who they work for. Why should a crew member work for someone who underpays when he can work for
You can have a small shop providing fantastic service. The mark that defines you is if you are a good operator or not. Your KPI etc will tell you apart but to have a cartel for shipmanagers is not good. Best practice is the way ahead
someone who is reputable and pays on time, said Nigel Cleave, Chief Executive Officer of Epic Ship Management. Peter Cremers, Chief Executive of AngloEastern Ship Management, agrees that ship owners are starting to look more closely at those shipmanagement concerns that can offer strength in depth. Yes of course. Its also a big world and everyone can have their own piece of air. I guess that owners will come to people like us who have the big organisations, a global presence and
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CONSOLIDATION
DISPATCHES
in the industry is the most likely scenario. This is because the economies of scale are of great importance and the smaller players will have difficulty in operating because of a lack of access to crew and resources such as shore-based support systems. Consolidation in the shipmanagement industry is something that doesnt surprise me at all, to be honest, he said. But with growth comes targets and these big companies are under pressure to meet targets and, some suggest, are trying to to force smaller players out of the market. I dont think they can do it. People can go to the other extreme and become a 600 or 700
Because of the crew shortage in the industry, crew can be more selective to who they work for. Why should a crew member work for someone who underpays when he can work for someone who is reputable and pays on time
Nigel Cleave, Chief Executive Officer, Epic Ship Management
ship company. Then you lose the focus on the service to the customer. What then starts to happen is they head back to where they started by saying they have got individual centres from where they are going to operate and they are going to have a smaller number of ships managed from each centre and each centre is a standalone unit which can provide the customer with focused service, said Mr Rajvanshy.
You have to strike a balance somewhere. You can become too big very easily and you can lose focus on the customer satisfaction. At the same time, economies play a lead role in ensuring that you have sufficient resources at your disposal in order to develop support systems and new procedures, he added. But will this consolidation help to improve the image of shipmanagement as an industry?
He struck a conciliatory note: I dont suppose the size of companies will make a difference as far as the image of shipmanagement is concerned. The philosophy of the company is more important than the size. You can be very big but have a low standard of maintenance, for example. The size does not give any comfort to anybody that the service will necessarily be good.
StrivingForPerfection
Captain John Clarence
Head of the National Maritime College of Ireland What are the main obstacles in attracting young Europeans to sea?
"I think we should be working closely within Europe to form one maritime education and training package so we can bring people in from different countries and feed them into the same programme. At the moment, every country has got its own nationallyapproved certification route which conflicts with other nations. If we have European bodies like EMSA, then we should have an international marine education package that complies with international standards. That might knock on a few doors, unfortunately, and a lot of national associations might not necessarily like the idea. However, from a training and a ship owners point of view, it would guarantee the same standard of training within Europe. And, dare I say it, you could go above STCW 95 so that you have an STCW Plus type of package.
69
WHAT IM READING
By Ugo Salerno
Chief Executive Officer, Rina
TANKER:
The History and Development of Crude Oil Tankers Author: Raymond Solly Publisher: Chatham Publishing Price: $49.95 Delighting the enthusiastic maritime child in all of us, Sollys illustrated offering tells the tale of these ocean-going giants from the last days of sail until the arrival of the modern monsters. Colour and black and white illustrations and photos accompany each stage of the tankers story, making it an ideal addition to a vicarious shipping library. But dont be fooled by the pretty pictures alone. Solly is not afraid to broach more thorny issues. He is quick to point out how environmental pressures and economic pressures have played a leading role in the tankers metamorphosis. The descriptions of oil handling and processing may be a little Janet and John for industry experts, but it could make a great present for a future Captain who is learning the ropes.
Little Green Book of Getting Your Way:

Reading is one of my favourite hobbies. I try to read books about different cultures because I am curious about the history and the lifestyle in these places. I dont read business books, absolutely not. My last book was written by a Jewish writer, Frank McCourt, called Angelas Ashes. It speaks about the life of Jewish people travelled from Ireland to the US in the middle of the 1900s. I am just completing an old book, which is very well known, called Shogun (James Clavell), which is the history of an English Captain going to Japan in the 16th Century and speaking about the life in Japan. It is a very long book and I am very happy I am completing it. It is interesting but 900 pages is too much. I must admit that this cultural reading might be helping me in my daily business. But my main purpose in reading is to help me reach my soul and relax, both on business trips and holidays. I am a lover of sailing and I have a lot of time to read and relax when I am onboard my boat. Of course, I have also read some books which are relevant to my home country of Italy. I recently read a book relevant to my native city, Naples, which speaks about the problem of corruption and criminality in the Neapolitan Mafia. It has a very large business activity and it is interesting for a Neapolitan like me to know a bit more about it. The name of the book is Gomorra (a reference to the ancient city overrun with corruption). It speaks about the terrible expansion of the underwater economies which thrive on drugs and smuggling. It is like a cancer that is taking over the city I love. It is strange to see how these criminal organisations have a system which is very close to the one used by global corporations, which is terrible. Sometimes the criminals could even teach management. They have a huge level of delegation, autonomy and management by objective. It is terrible, but it is also true. How to Speak, Write, Present, Persuade, Influence, and Sell Your Point of View to Others Author Jeffrey Gitomer Publisher FT Press Price: $13.59 If 42 is the meaning of life then 9.5 is how to get your own way, at least according to Gitomer. In his latest, and some say his best, work he explores the 9.5 elements which will see you persuade all and sundry that your way is the only way. Whether in person, on the telephone or on the page he argues that you only fail when you decide to quite. This is not a telesales pep-talk but a true business aid. Thorough in detail, but easy to empathise with, Gitomers in your face style shakes your brain into understanding. Its definitely work a look, unless you get your own way already, of course.
Getting the Goods: Ports, Labor,

and the Logistics Revolution Author Edna Bonacich & Jake Wilson Publisher Cornell University Press Price: $23.95 Centering their efforts around the US import hubs of Los Angeles and Long Beach Bonacich and Wilson examine the impact the logistics revolution has had on transport workers. Particularly concerned with the flow of containers from Asian factories to the US, the book talks to workers at each stage of the supply chain and learns how their working conditions have deteriorated over recent years. Its admission that these changes have also brought opportunity and power to the labour market is interesting. However, it is the authors willingness to defy the status quo when it comes to globalisation and containerisation that is more thought provoking. A must have for all students of political economics.
71
LAW
BUSINESS OF SHIPPING
A Volte-Face on Competition? O
By David Wood
ne of the issues causing heated debate at last months Euro-Summit on a revised Treaty was competition. The draft Constitution up for re-negotiation contained the objective that The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, and an internal market where competition is free and undistorted. Without prior warning, the German delegation at the Euro-Summit tabled a revised draft of the Treaty from which the words where competition is free and undistorted had mysteriously disappeared! This was undoubtedly the result of a prior agreement between the French and German governments to seek to downplay the role of competition in the EU and to reduce the influence of the Commission in applying the competition rules. The amendment passed despite the grave concerns of the Commission and leading politicians such as the UKs new Prime Minister, Gordon Brown. It was certainly a significant political defeat for the Commission. The immediate cause of the change can be discerned from a key speech given by Nicolas Sarkozy in June 2006, setting out his a politi-
Risk management is only possible where there is a clear set of rules. This Franco-German intervention has muddied the rules, at least for the time being
Companies operating in Europe probably value certainty above everything else in terms of the regulatory and legal environment
cal manifesto for his Presidential campaign. He made a number of key declarations concerning European competition policy which, in the abstract, were highly alarming. They received little scrutiny outside France. Sarkozy argued that, although the general principles of competition underpin the European Single market, we should not: abandon European companies to the mercy of predators from elsewhere punish the abuse of a dominant position on the basis of legal presumptions rather than legal proof (as in the US) reject the idea of Community Preference and prevent industrial policy although the rest of the world does the opposite. This seems to be a rejection of the Commissions article of faith that the ability to compete on world markets depends on maintaining competitive home markets. In other words, the enforcement of the competition rules at home ensures that our companies are leaner, fitter and more dynamic and therefore better able to take on competitors from other parts of the world which may be shielded from some of those competitive pressures. It also demonstrates a rejection of the clear demarcation between the Governments of the EU Member States and the Commission in relation to competition policy. When the two most powerful Members of the EU jointly express their dissatisfaction with one of the principal policies of the EU (and the one where the Commission has most independence) in such a public way, you can sense the rules of the game are changing. Companies operating in Europe probably value certainty above everything else in terms of the regulatory and legal environment. Risk management is only possible where there is a clear set of rules. This Franco-German intervention has muddied the rules, at least for the time being. However, to reject the legitimacy of their concerns will only serve to ensure that the rules will remain muddied, that there will be regular conflict between the Commission and some of the Member States and that companies will face unpredictability. There needs to be a public debate on how to accommodate Mr Sarkozys vision which is emphatically European, rather than nationalist within the existing set of rules. This will cause friction with the EU trading partners and there will be winners and losers but political pragmatism needs to exist with a clear legal order.
David Wood is a partner in the international law firm of Gibson Dunn & Crutcher LLP, which has offices in the US, UK, France, Germany and Belgium.
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LIVE
OBJECTS OF DESIRE
Objects of desire
Picture perfect
Projectors often give a picture akin to Pete Dohertys Saturday morning. Thankfully, Epson boffins have made one which wont give you a headache or guarantee an authentic front row of the cinema experience. The latest LCD technology, married with a 2.1x zoom lens, throws a 100-inch picture from around 10 feet away, meaning you can watch it from the same room in comfort. However, with a price tag of over two grand youll need Doherty depth of pocket to appreciate it.
Epson EMP-TW1000 projector

2,500.00 www.epson.co.uk
Fun-packed laptop
Tapping away on a computer is a sure-fire way to look busy. Hey, it even beats carrying folders around the office for mock enthusiasm. Little do your colleagues know you are blasting zombies or watching telly and not formatting a spreadsheet. Claiming to be the most powerful media laptop on the market, the Area 51 m9750 is a beast of a machine. It boasts a killer 500GB of storage space (across two hard drives) and two NVIDIA graphics cards for optimum performance. And you can be sure to hit your targets thanks to its 17-inch screen. Throw a built in webcam and DVD recorder into the mix and you need never tuck a folder under your arm again. Alienware Area 51 laptop 2,099.00 www.alienware.com
In the dock
Prepare to empty your pockets and sex-up your desktop. This new generation docking station will bring music to your ears and draw envious glances from afar. The TerraTec NOXON 2 will store all the tracks you throw at it and boasts a nifty wireless connection which allows you to pull tunes straight onto your hard-drive. Like a rocking teenager it also has an independent streak, allowing it to work away from your PC. And if all the technology sounds a little scary, you can always search through the 9,000 radio stations for a little retro FM. TerraTecs NOXON 2 docking station
150.00 www.my-noxon.com
Youre winding me up
Oh, the irony. Modern technology kept alive by medieval engineering. Plug your spaceage mobile into this little stunWind-up multi mobile charger ner and youll get 5.99 the juice back into www.iwantoneofthose.com it in no time. A three minute wind gives eight minutes of talk time, with more elbow grease bringing greater success. Its compatible with Nokia, Ericsson, Siemens and Motarola Star handsets and will fit into your pocket with ease.
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OBJECTS OF DESIRE
LIVE
Play boy phone

Even Hugh Hefner would cast an enviable glance at you for having this beauty at the end of your arm. The fetching Vertu Ascent model is made of leather and scratch-resistant sapphire crystal, making it practically indestructible. It also boasts a cool concierge button which gives you a personal assistant at your fingertips. The wow factor is there to see, but the Ascent wont come cheap or easy. As with all Vertu models you will have to look further than Carphone Warehouse to get your piece of the action. Vertu Ascent mobile
2,200.00 www.vertu.com
Anchorman
Nowdays you dont need to be Ron Bergundy to get your spot on primetime. But if your mum is the only one to read your blog, Behringer is here to help you. Its new podcast kit has a studio-grade USB interface, microphone and headset, allowing you to share your wit and wisdom with the world, every day. It comes with a complicated mass of acronyms and cables, but claims to be suitable for those 14 and over. So grab some chicken, dive into the manual and prepare to live the life of an anchorman. Behringer USB podcast kit
89.95 www.behringer.com
Timeout
Bringing you the coolest selection of clocks since Salvador Dali, Lifetimer gives you a creative countdown to the most important dates in your diary. If you need to know how long you must wait for your tea break, birthday, meeting or day off, simply press the relevant button and you will know to the nearest nanosecond. Delighting romantics and control-freaks alike, Lifetimer has a calender extending until 2050 and can issue scrolling messages across its LCD screen. Whether it wastes more time than it saves is up to you.
Beam me up
Skin-tight jumpsuits and silly ears made Trekky fashion a big no-no. Thankfully, the new EzVision Video specs have changed all that. Weighing in at 68g, these spaceage shades double as your very own 50-inch cinema screen, complete with nifty retractable headphones (built into the specs arms) to bring you high quality sound. Compatible with iPod Video or other portable video/DVD players, it will allow you to cling on to an alternative reality on planes, trains and automobiles providing youre not driving, of course. EzVision Video eyewear 149.95 www.mobilefun.co.uk
Lifetimer
14.95 www.iwantoneofthose.com
75
SHIPMANAGEMENT
ON MY MIND
ONMYMIND
Dr Alkis J. Corres
Chairman of the Hellenic Association of Maritime Economists, Director ISMT Services, Ability & Knowledge Metrication Organisation and Director Newbuildings, Naftotrade Shipping & Commercial SA.
Do you have any advice for companies wishing to become more stable and protect themselves from market fluctuations?
Thats a million dollar question. I could suggest alternative investment in other fields to spread the risk. However, Im not entirely sure thats feasible. Shipping is a full time job. Theres no place to hide when your income is falling and youre an audited company submitting quarterly results to the financial authorities. For the past 20 years the EU international commercial policy has followed what people call liberalisation. The lowering of tariffs and trade barriers has opened the door to external competitors who were previously not playing in the domestic markets of Europe and the United States. Everybodys aware now of the growth of low cost producers in the Far East. Traders and manufacturers are aware that they are engaged in an undeclared commercial war which will have winners and losers. Among the undisputed beneficiaries of globalisation is shipping of all kinds which has seen the demand for ton miles explode. I dont want to make predictions, but Im concerned about the ability of traditional manufacturing countries to face up to this change in their trading environment.
People are speculating when the shipping markets will collapse. With that in mind do you see a difference in the resilience of traditional owners and the new public entities?
Theres no question that publicly funded companies are more vulnerable than traditional firms. A shipping company has a certain flow of money going in and out. The question is what they do with the money which remains. If theyre obliged to distribute dividends, or pay the bond holders, in principle, theyre giving out money they couldve retained for a rainy day. The other thing, of course, is when the freight market is less favourable and you release your quarterly results which mirror that situation, people who have been following that share price see the downward trend. What will they do? Defensive thinking will tell them to sell in order to protect the value of their portfolio, thereby exacerbating the situation. In that way your own policy is dictated by two largely unpredictable markets, the freight market and the capital market. With so many players involved, you cant possibly know where you are going and whats going to happen. The entire opposite is the case with a private company. If they want to distribute earnings, they will. If they dont they will keep the money inside the company. Companies can decide how much to give, and the legislation of shipping allows people to keep untaxed balances. So certainly, smaller companies arent necessarily lower cost, but theyre more secure as they arent open to the additional uncertainty of players in the money market.
Im concerned about what life is going to be like here in a high cost region as a result of competition from abroad on one hand, combined with a situation where you have a long term shortage of investment on the other
Let me explain myself. When you have a huge cost advantage, which exists now in the Far East, it acts as a magnet to investors. That entails huge long term risks for the high-cost economies. If entrepreneurs invest elsewhere, because its deemed to be cheaper, theres an initial period in which domestic consumers will buy the cheaper products and you have a gain as you can buy more for less money. In the long-term, however, there are implications on national income and employment in the areas which are vacated. Youre progressively making the buyers poorer, therere fewer jobs and less income available. What youre doing is transferring a means of generating income abroad, while hoping the momentum created by the better off will continue and there will be benefit for all. Experience in Western Europe has shown that the unemployment generated by hasty governmental dealings of sunset industries coal, steel, car manufacturing, shipyards , and the like has not been absorbed by the tertiary sector for a quarter of a century.
76
ON MY MIND
SHIPMANAGEMENT
Qa
Do you have any advice for companies wishing to become more stable and protect themselves from market fluctuations?
Thats a million dollar question. I could suggest alternative investment in other fields to spread the
risk. However, Im not entirely sure thats feasible. Shipping is a full time job. Theres no place to hide when your income is falling and youre an audited company submitting quarterly results to the financial authorities
Im concerned about what life is going to be like here in a high cost region as a result of competition from abroad on one hand, combined with a situation where you have a long term shortage of investment on the other. We should not forget also that low cost economies are doing equally well in the service sector. I wish to pose a question here: Which is the economic space envisaged for Europe? You have to produce or sell something in order to be able to consume
Koreans and the Japanese were actively subsidising their own companies. Weve to stop and ponder where were heading and who were going to team up with.
It has been suggested that Greece could soon lose its status as the largest shipowning country in the world. Is this something you see happening and are you concerned about the possible consequences?
China is a typical example of what happens when capitalism takes the form of a state enterprise. I dont know how long its going to last, and I dont know how long it will remain as effective. If priority is given by the Chinese in this direction theres very little we, or anybody else, can do about it. Of course, we take great pride in being considered the largest maritime nation in terms of ship ownership. This doesnt mean weve any kind of monopoly. Its a free market where people can come in and out when they wish. If, however, in a few years time there is an enormous expansion of Chinese shipping, that is not going to be without consequences. Ill give you an example. The Jones Act in the US protects coastline shipping from outside services. I often wonder why that law has existed for so many years without change despite the huge cost to charterers and the State? As you know, under the Jones Act, ships have to be built in the US, fly the US flag and be manned 100% by US citizens. In return theyre given exclusivity around the US. On top of this cargo reservation regime theyre given an operating subsidy. A ship built in the US costs three to four times as much as a ship built in North Korea. I think considerations such as security of supply play an important part in this. If we assume access to domestic transportation were free for all, in the case of a war, foreign vessels serving the US coast were repossessed by the countries whose flag they fly; what happens then? Companies cant sell their products. Many regional depots will remain without gasoline and oil. People will freeze in the winter at home and they would not be able to use their cars as there isnt enough gas. The well thinking American institutions have not allowed this to happen. The US keeps its ports open to all traffic coming from abroad. But when it comes to this domestic traffic it doesnt play any games. Its got to know that theres a fleet under its own control. It can actually count the number of ships and guarantee the security of supply, which is very important. This kind of consideration may become more evident in case we see one huge commercial fleet dominating the world market. The fear of whats going to happen if one huge fleet starts to dominate the supply of ships and services is going to create counter forces where huge regions of the planet wont stay at the mercy of market players.
Do you think Greek companies will follow Norways lead and move away from the traditional, hands-on family makeup?
The Greeks are a long way away from becoming as corporate as the Norwegians. Greeks have made steps in this direction. There are large companies that are very similar to the Norwegian and Danes. But even in these corporate Greek companies the presence of the owner is pre-eminent. The Greek families have a protective longer term view in which the family protect the children, who are seen as the future of the company. So, the emergence of impersonal corporate structures is culturally difficult.
China is a typical example of what happens when capitalism takes the form of a state enterprise. I dont know how long its going to last, and I dont know how long it will remain as effective
Much more important is which parts of the company you keep for yourself and which ones you hive off. Thats interesting, because, in theory, the smaller you are, the more you should outsource. Theres been a lot of progress in this field. Theres a cluster of supporting professions around. Probably the most important resource on my desk is my telephone list. If I want a safety specialist or a naval architect its in there. I am networked into the cluster: we live from the cluster and the cluster lives from us. The existence of the cluster is of immense importance. The smaller you are the more important it is, because you rely on your contacts. And it has other advantages. For example, if youre not happy with a particular lawyer, accountant or crew provider, all you have to do is have a look at your contact list. Its not the same when you have people in house working for you.
How supportive is the Greek Government of the shipping industry?

In the past the Greek Government has provided subsidies for the conversion of deep sea ships into coastal ferries for example. That was a hugely successful programme. But it had to come to an end after Greece entered into the common market, because the EU has got a preconceived hostility against ship building subsidies. Its this attitude against shipbuilding subsidies, together with high salaries and social security contributions which has actually killed the shipbuilding industry in Europe. Finally after years of wrangling the EU has done it the dogs dead now and everyone can feel comfortable at home. Weve been cutting subsidies in a higher cost sector here while the
How important is it for Greece to be seen as number one?

Were very proud of our current status, but I dont think its important to be number one. Greece is number one in the EU, but what would happen if Greece was second in the EU? Would we have company failures? No. Would we have people being laid off? No. People in Greece are very pleased and proud to be where they are. But I dont think therell be many bleeding noses if we were second of third. It is much more important that we continue to provide first class services.
77
TRADE ANALYSIS
SHORTSEA SHIPPING
Shortsea investments across a broad front

By David Tinsley
olitical endorsement of European coastal and shortsea shipping has been much in evidence in recent years, spurred on by the potential environmental and economic benefits of reducing pressure on the congested highway system. However, actual financial input by the EU and member states to promote the sector and its usage, and foster a modal shift, remains minuscule by comparison to the multi-faceted investments currently being made by the shipping community itself, sometimes on the basis of medium or long-term commitments by industrial producers and shippers. Shaped by market demand and by evolving customer requirements, todays broad-fronted development of the fleet engaged in intra-regional trade includes versatile new multipurpose vessels designed for demanding coasting work, compact feederships, innovative tankers for the distributive traffic into small ports and terminals, diminutive carriers of fresh produce and fish, and ro-ro vessels geared to industrial system-type transportation and inter-factory logistics. The Dutch presence and endeavour in the tough business of managing, operating, building and equipping the smaller classes of ship which underpin the shortsea bulk and industrial cargo trades is undiminished. It has, in fact, gained added dimension through judicious shipbuilding subcontracting as well as investments in domestic production, and through the expansion abroad of shipowning and shipyard firms. A microcosm of Dutch activity is provided by the modern Bijlsma yard at Lemmer, under the auspices of owning group VeKa, a specialist in inland shipping. Recourse is made to Groningen-based Conoship International for designs while VeKa subcontracts hull construction to overseas yards, including a group-controlled facility in the Czech Republic. Completion and outfitting is undertaken at Lemmer, with its fully-covered shipbuilding dock of 138m by 18m.
At the time of writing, Bijlsmas orderbook comprised of more than 25 seagoing newbuilds, including 18 of a Conoship-developed design of around 3,200dwt, for operation within the extensive fleet managed from Delfzijl by Wagenborg Shipping. The type embodies a single hold within main hull dimensions of nearly 89m length overall by 11.8m breadth, and distinguished by a high cubic capacity, well-suited to forestry products and other goods. A Conoship-originated multipurpose cargo vessel design of 4,450dwt has provided the technical foundation for Indian shipbuilder Chowgule & Companys drive for business in the European shortsea sector. The ensuing succession of contracts will provide an injection of 20 newbuilds into the European shortsea bulk traffic. Initial orders were secured from Apollo Shipping of Germany and the Navigia Group of The Netherlands for three such vessels apiece, whereby the German company will be responsible for the freight management of all six ships and Navigia will provide the technical husbandry of the series. UK shortsea specialist Union Transport subsequently awarded Chowgule a deal embracing a further six similar ships. Apollo and Navigia converted options held on an additional six of the type into firm contracts and other northwest European interests booked two more examples of the versatile trader. Besides keen prices, early delivery positions have proved a powerful motivator for placing construction in India. The first deliveries are due in 2007. European companies behind the 20-ship production run have previously built at Conoship member yards in The Netherlands, and Chowgules Goa establishment has Conoship associated shipyard status. The chosen design is marginally under 90m overall, with a breadth of 14.4m, and embodies a single, box-like hold offering a capacity of around 205,000cu ft, incorporating movable bulkheads. A compact MaK main engine has been specified in each case, yielding a power output of some 2,000kW, to ensure a fully laden speed of about 13 knots. Another company which has joined the fold as an associated shipyard of Conoship, the Tunisian firm Mednaval, has bought the Navol yard in Romania. Activities there will be revived through Mednavals export orderbook comprising four 3,300cu m LPG carriers and six 2,600dwt multipurpose, river-sea cargo vessels. The latter deal involves German shortsea interests and a design developed in conjunction with Conoship. Mednavals plans to create a new shipbuilding facility at Bizerta, Tunisia, have been postponed for the time being. A combination of Dutch and German know-how has resulted in a competitive new class of feedership and an opening contract for two such vessels of 1,036teu. The pact between Groningen technical consultancy Vuyk Engineering and Bremerhaven shipbuilder SSW Schichau Seebeck has yielded the SSW Super 1000 eco-type, otherwise known in the Dutch companys portfolio as the VC Feeder 1000 design. A key feature of the new breed is its capability to take a very high proportion of loaded containers, to the extent of 75% on the basis of a 14 tonne homogeneous load factor (HLF).
78
SHORTSEA SHIPPING
TRADE ANALYSIS
The gearless boxship is also notable in promising a comparatively fast service speed of at least 18.5 knots. Cell guides are fitted as standard, and the two newbuilds booked by Haren-on-Ems ship owner Bernd Sibum will be reinforced to 1A ice class requirements. The SSW Super 1000eco also provides for the equivalent of some 250TEU reefer units. Within the same design family, Vuyk has also drawn up a proposal for a 1,027teu feeder offering adaptability to the 45ft container size. Within main dimensions of 147.10m length between perpendiculars, 22.70m breadth and 11.75m depth, the VC Feeder 1000-EV has been developed for full payloads based on 45ft units, or a mix of 20ft and 40ft containers. The designers specification includes a single, powerful medium-speed engine of 12,040kW, for a trial speed of 19 knots. Perpetuating the design employed in the 814teu, mould-breaking sisters Geeststroom and Geestdijk, the fleet under the operational aegis of the Icelandic group Samskip was bolstered last year by four further examples of the class, in the shape of the 803teu Samskip Pioneer, Samskip Courier, Samskip Express and Samskip Explorer. Encapsulating Damen Shipyards CF800 design, Geeststroom was the first ship conceived specifically to carry full loads of 45ft pallet-wide
Chairman, Association of Short Sea Operators in Greece and President of Naftotrade Shipping & Commercial
The problem is that the EU has allocated very little money for this and its not possible to promote short sea shipping with the limited funds available from Brussels. This money is a fraction of what is required. In Greece we see the sea as the roads of the future, but we need the funds to make this dream a reality. The EU doesnt like to give subsidies to the transport industry. I think that this is the wrong idea. The EU should understand the only way to promote short sea shipping is through the provision of financial incentives. We need to cover the European Commissions lack of action in terms of external costs. These external costs are pollution, noise, accidents and congestion on todays roads. The EU will not charge the other transport industries for these external costs as well as the cost of road maintenance. This is tantamount to subsidizing road transport. Exactly the same thing the EU wants, publicly, to restrict. What the Commission should do is penalize road transport and make it pay its own external costs. Then the EU can give us facilities and incentives so that we can at least replace our fleet.
containers, while suited to a range of other sizes. The type can take approximately 300 x 45ft boxes, although cargoes are invariably mixed, typically including 20ft tanks and 30ft bulk containers. The four ships commissioned in 2006 have been chartered by Samskip from the German owners Jan Kahrs and Bernd Becker, who each ordered five sisterships to Geeststroom and Geestdijk from Damen Shipyards, with construction entrusted to Damen Galatz in Romania. The original pair had been built for another German owner, Jorg Kopping, to criteria set by Geest, and Damens Hoogezand-based design team had tailored the class to the shortsea business, with its broad mix of units and growing demand for transportation of 45ft pallet-wide boxes. The 18-knot, CF800 breed is equipped with fittings for 20ft, 30ft, 40ft and 45ft containers in the box-shaped holds, and for 48ft and 49ft boxes on the hatch covers. Moreover, movable cell guides are incorporated in part of the holds for 40ft and 45ft containers. The design thereby marries exceptional versatility with the possibility to load 2.5m pallet-friendly containers, as well as standard ISO units of 2.438m, anywhere throughout the cargo section. The 45ft container can move seamlessly between the different transport modes and offers almost identical loading capabilities when compared to standard 13.6m road trailers. Endorsing the role and scope of shortsea transport in serving European inter-factory logistics, Airbus Industrie has backed a newbuild project for two special-purpose ro-ro vessels designed to carry aircraft parts and subassemblies. Fret-Cetam, the jointly-owned undertaking of Louis Dreyfus Armateurs of France and Hoegh Autoliners of Norway, has awarded construction of the 3,500dwt ro-ros to Singapore Technologies Marine, on the basis of long-term employment agreements with Airbus. Deliveries are expected in 2008. The company already operates the 5,200dwt ville de Bordeaux, a larger ship of similar concept, in the Airbus supply chain. As with the Chinese-built ville de Bordeaux, the two new ships will play a pivotal role in the manufacturing logistics for the Airbus 380, the 555-seat, long-haul aircraft to be produced at the Toulouse plant, using components supplied from other Airbus factories in Western Europe. Loading points on the vessels itinerary will be Hamburg, Mostyn (north Wales), Cadiz, and St Nazaire, with discharge at Pauillac, near Bordeaux, for transhipment and onward transportation to the assembly site in Toulouse. ville de Bordeaux is distinguished by flexible cargo carrying arrangements which provide the cavernous volume required for the stowage of elements of the A380, while also enabling deployment in the wider ro-ro freight ship market. At any one time, the ro-ro is able to accommodate up to three sections of fuselage, two wings, one tail plane and one underbody section. The two further ships will have a reduced draught, as well as smaller capacity, compared to ville de Bordeaux, but will be similarly suited to both aircraft components and other ro-ro cargo. A new phase of investment in the system transportation concept has seen the introduction of a series of custom-built, ro-ro equipped
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SHORTSEA SHIPPING
TRADE ANALYSIS
forestry goods carriers to the year-round Baltic traffic. Purpose-designed for the special containers used by paper producer Stora Enso, as well as being suited to general unitised cargo, the trio of 13,800dwt vessels of the TransPaper class has been built by Aker Yards. Management has been entrusted to Rederi AB TransAtlantic, which has secured a long-term charter agreement with Stora Enso for shipments of the exporters SECU container units. The trios operating remit is the trade out of the northern Finnish ports of Kemi and Oulu to Gothenburg and Lubeck. Stora Enso has 10 mills in Sweden and 15 in Finland, and Gothenburg forms the hub of the groups new logistical arrangements, the North European Transport Supply System (NETSS). TransPaper, TransPulp and TransTimber constitute an integral element of the Phase 2 development strategy for NETSS. Construction of the ships to the highest ice class, IA Super, has been a prerequisite of the technical project so as to ensure service dependability and efficiency through the challenging winter conditions in the Gulf of Bothnia. In order to guarantee the requisite schedules between the various ports, even during ice cover, the contractual parties stipulated a twinengine installation and a relatively high speed. It is understood that 16 knots can be maintained using just one engine, offering an economic service speed where schedules and voyage legs permit. While optimised for the transport of up to 155 SECU containers on cassettes, the TransPaper design offers an efficient medium for goods handled by sto-ro means, as well as for rolltrailers, road vehicles and trade cars. The new-generation ro-ro carriers are designed to be loaded and unloaded on two levels simultaneously, to expedite port turnround times. A wire-operated TTS stern ramp/door provides the cargo bridge between the ships main deck and the shore terminal, while the upper freight deck is arranged to permit the landing of a shore-based linkspan.
Dag Terje Andersen

Minister of Trade and Industry, Norway
Q. You have been vocal in your support of shortsea shipping, however, many feel the NOx Tax is harmful to short sea operators in Norway and pushes freight away from the sea and back onto the road? A. Modern ships produce a lot less NOx emissions than older vessels. We have to think about processes to renew the fleet. If I believe that transport via the sea is an environmentally-friendly alternative to transport on trucks then I must also accept the consequences and make that transport more environmentally-friendly. Our LNG driven ferries in the fjords are a very good example of the innovation and new technology to reduce both NOx and CO2 emissions. But, we had to set some goals to keep this process going.
Shaped by market demand and by evolving customer requirements, todays broad-fronted development of the fleet engaged in intra-regional trade includes versatile new multipurpose vessels designed for demanding coasting work
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Compliance alone is not enough in tanker management

By Lars Modin, Managing Director of International Tanker Management Holding
No shipping segment faces the same raft of regulations as the tanker industry but the biggest safety improvements may come from the kinds of things that arent so easily measured or documented. The tanker shipping industry has the worlds attention, and rightly so. Any accident may cause pollution; the risk of explosion and loss of life is ever-present; and, more than in any other shipping business, incidents can put the charterers name in the headlines. Few would argue that our particular niche is the most scrutinised segment of the shipping industry. In that respect, every challenge faced by the shipping industry, and the shipmanagement industry, applies to an even greater degree to us. Tanker operators face a dizzying amount of inspections, documentation, rules and in the event of an accident punitive legislation. These safety parameters mean that a regime like TMSA is only a harbinger of things to come in other ship segments. But is that the only lesson to take away from the tanker industry? Compliance, documentation, performance in pre-approval and vetting processes, strong quality systems these are simply required. You cant do business without them. At this point, however, the way further to zero incidents and flawless performance, is through improvements in areas that arent perhaps so easy to measure, but are core to safe vessel operations. What are examples of these improvements that are difficult to measure? Well, every vessel is unique. A completely new vessel leaving the shipyard is not complete. It will need a number of adjustments to make it operate optimally. It takes specific knowledge to understand what needs to be done and how to do it. In other words, on any one vessel, there may be a range of possibilities all of which ensure compliance but only one is perfectly appropriate for that vessel. This kind of knowledge is as critical to safe operations as it is practically impossible to legislate into place. Another element that cant easily be defined, reported or measured is the culture onboard the relationship between officers and ratings, the style of communication and the general attitude towards safety among crew members on the vessel. Informal interaction between the officers over a meal, for example, is key to ensuring that seafarers have an overall awareness of the state of the vessel, and to training new skilled crew members. That wont happen if the master is always in his cabin filling out check-lists. This may seem merely a question of numbers, but there are larger issues related to the state of the accommodations, a shortage of seafarers, constant pressure on the management fees and a patchwork of labour laws. Weve responded to this by establishing easy procedures and allowing people to think beyond the rules. If you are allowed to take the time and think logically, then you can improve the hardware and also the procedures. On the safety side, budgets have jumped by a factor of ten over the past ten years. A tanker manager can count on being inspected by someone practically every month. At the same time, as an industry, the constraints are getting tighter: new rules, a shortage of qualified seafarers, less experience. Our industry needs to be careful not to become one populated by professional tanker regulation compliance companies instead of tanker operating companies. There is a much-needed focus on bringing the whole industry up to a threshold for quality performance via rules and regulations. In other words, compliance. At ITM, we say 'beyond compliance', because we want flawless operations, and that means more than just following the rules.
10 keys to choosing a third party manager according to ITM

1. What's your gut feeling? How will the manager manage my asset? 2. Do I feel like I can trust the people working in this organisation? 3. What is this manager's reputation? His history? 4. What kind of references does the manager have? 5. How does the manager take care of personnel both onshore and onboard? 6. Does this manager know my type of ships? 7. Does the manager deliver value for money? 8. Will the manager run my ships like a ship owner? Has the manager been a ship owner? 9. Does the manager have all of his certifications in order? 10. Does the manager have experience in my vessels' trade?
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MARKET SECTOR
REGISTRIES
Necessity or purely Machievellian?

Europe wants compulsory audits on EU flag states but does this smack of unilateralism gone too far?
he sight of European flags flying high at the top of the Paris MOU White List will not stop the European Commission from taking unilateral action and making the Voluntary IMO Member State Audit Scheme compulsory for all member states. Philippe Burghelle-Vernet, Head of the European Commission's Maritime Safety Unit, for one, is unhappy with the overall performance of EU flags and believes a compulsory audit scheme would put an end to European registries frequenting the Black and Grey Lists. It is difficult for us to understand or accept why European Flags cant be the best in the world, Mr Burghelle-Vernet said. One of the ideas we had was to have the Voluntary IMO Member State Audit Scheme made compulsory in the EU. The underlying idea is to encourage member states to improve the quality of their flags. The proposal is included in the EU's Third Maritime Safety Package and is seen as an important element of Europe's drive for zero-tolerance on substandard shipping. The idea has yet to be debated by the European Parliament but Mr Burghelle-Vernet is not fazed by the idea of a unilateral stance on the issue.
FRANKLYSPEAKING
The IMO has asked nations to submit the names of auditors but there is still a big deficiency in this area. If you look at the rates at which audits are being done now, if it became mandatory today we would still not be able to accomplish the amount of audits to cover the amount of member states that have to do it
We propose that this code could be imposed into European legislation as compulsory, he said. For the time being several states have been audited by the IMO, including the UK and Denmark. Others have not yet volunteered and we do not want a situation where member states can avoid being audited. We have two countries still on the Grey List and, unfortunately, we have one country on the Black List, Slovakia. There is no reason why Slovakia, as a member of the European club, shouldnt conform to the high quality standards we are supposed to provide as a European country, he added. While he laments Poland and Ireland remaining on the Grey List, Mr Burghelle-Vernet points to the success of Cyprus and Malta, which have moved from the Black to the White List since joining the EU
Rear Admiral Peter Brady

Director General of the Maritime Authority of Jamaica "Unilateralism is a threat to the harmonisation of international rules and regulations. We must come to our senses and realise that if we do not have a harmonised system, we will create differentiated systems in various countries. We are supposed to be facilitating free and uninterrupted trade but such a practice will cause confusion and delays in ports through the application of varying standards. This will bring stress on the industry and affect the free movement of international trade."
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REGISTRIES
MARKET SECTOR
in 2004. This he sees as vindication of the EUs stance on the issue. This good result is due to the implementation of community rules. But these results need to be consolidated simply in applying what is only voluntary. In Europe we are the IMO's best ally in enacting a lot of IMO rules into our legislation and making them compulsory throughout Europe. It is a significant result for quality shipping in general that more than a quarter of the world's fleet flies European flags, he said. The EUs resolve on this issue will put increased pressure on the IMO to act. IMO Secretary General, Efthimios Mitropoulos, refused to comment, however, Dick Welsh, Director of the Isle of Man Ship Registry, made it clear the Commissions intervention would not be welcome. This initiative has to come from the IMO. We dont want Europe, or any other states, going off unilaterally to decide who is fit and who is not fit to run an international ship registry, he said. If Europe decided to go unilateral and say it will approve only flag states that have been audited, would create difficulties for ships looking to take cargoes into Europe. It undermines the international operation of the IMO and we have to try and focus on making the IMO the international regulator in a global industry. Anything else is just incredibly difficult.
WhatIThink
If the results of the audits were made available it will allow others to improve. At the end of the day we are trying to critique, criticise and identify the bad apples. You cant do that just be penalising people. Can you take a shipping administration out of the IMO? Im not sure. Thats a big step
While he is strongly against unilateral action, Mr Welsh believes a move towards a compulsory audit is a natural progression. He said: It should end up as a White List of registries which can fulfill all the requirements expected of a flag state and exercise jurisdiction in the way it should do. I believe it would, hopefully, level the playing field for port states and for the IMO to determine who is and who is not fit to run a register. It should be a simple fit or not fit separation. You would not get into Grey Lists or Black Lists or have different classes of registry. It should be a make or break definition. Mr Welsh admits that such a move would have casualties, with recently introduced flag states suffering most. However, he believes it is a necessary move in creating a level playing field and promoting quality shipping. There should be nowhere to hide for substandard operators these days, he said. Serghios Serghiou, Director of the Cypriot Department of Merchant Shipping, Ministry of Communication and Works, has an equally hardline on the issue. Certainly, developing flags will have to be audited. The expectations are that the shipping industry should follow a certain safety, environmental-protection and labour standards. Any states which cannot control its ships and enforce these standards should not be in business until it complies, he said. If we have this mechanism, the control is continuous. There is no possibility for somebody to lower the standards. And if a company shies away from maintenance it can be identified quickly and put under pressure, Serghios Serghiou added. Not everybody is in favour of such a ruthless system. We are not looking at naming and shaming necessarily, we are looking at holding people up by their boot straps and getting them to recognise their obligations under international conventions. Its a carrot on a stick: these are your responsibilities, these are the ways you can fulfill these responsibilities. The audit scheme is here to help and bring people up to scratch, said Don Sheetz, Executive Vice-President, Vanuatu Maritime Services.
Peter Cardy
Chief Executive UK Maritime and Coastguard Agency "The shipping industry is best regulated at the international level through the IMO, unless there is a clear case for regulating at the European level. My first task in taking over at the MCA is to check that our workforce not only has the skills for the here and now, but also has the right mix of skills for the future as the shipping world around us changes. Everyone I speak to wants to talk about the future and they are geared for change, as long as it is properly planned and the reasons are fully understood. My job is to get the reasoning and the planning right."
Making the results of completed audits available would create peer pressure and help drive standards upwards, Mr Sheetz explained. If the results of the audits were made available it will allow others to improve. At the end of the day we are trying to critique, criticise and identify the bad apples. You cant do that just be penalising people. Can you take a shipping administration out of the IMO? Im not sure. Thats a big step, he added. Finding people to voice their support for a compulsory audit scheme is easy. Transferring words into action may, however, prove a little more problematic. The difficulty is in the timescale and the numbers involved in rolling something like this out. Thats probably where the sticking point will be. At which point do we make it mandatory? You can throw your hat into the ring and say we want it now. But it may be three years down the line before we get to that stage. There needs to be a realistic timescale, Mr Welsh said. The lack of qualified auditors could add to the time pressures. The IMO has asked nations to submit the names of auditors but there is still a big deficiency in this area. If you look at the rates at which audits are being done now, if it became mandatory today we would still not be able to accomplish the amount of audits to cover the amount of
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The Isle of Man is pleased to announce the new brand for its Shipping Register:
From superyachts to supertankers A quality flag for the discerning owner or manager
Voted best in the world The Isle of Man has been top of the Annual Flag State Performance table issued by a round table of organisations comprising ISF; ICS; Intertanko; Intercargo and Bimco for the last three years. Highly-rated Port State Control Performance The Isle of Man places great emphasis on Port State Control Performance. It is highly rated on all MOU White Lists. No annual tonnage dues With no annual dues and low registry fees -The Isle of Man remains an extremely cost-effective register. Offshore AAA - rated jurisdiction The Isle of Man has a highly -rated economy, fully supported by a pro-active and stable government. Favourable tax regime The Isle of Man operates a zero rate company tax and fully supports its thriving shipping community. Incentives and grants are available for new business. Customer Focused Its registry, survey and support staff provide out of hours cover 24/7 to serve a global industry. They remain focused on customers needs and sensitive to the commercial realities of the industry. Pragmatic approach Its dedicated survey team provide survey, audit and technical support to the fleet. They are on hand for advice and support 24/7 with a pragmatic and practical approach to regulation. Centre of Excellence The Isle of Man is more than a Ship Registry. It is home to a thriving shipping industry with the support industries required to register and manage ships and commercial yachts. This centre of excellence provides a proven package for existing and potential clients.
Interested? To find out more, please contact: Isle of Man Ship Registry, Peregrine House, Peel Road, Douglas, Isle of Man, IM1 5EH, BRITISH ISLES Tel: +44 (0)1624 688500 Fax: +44 (0)1624 688501
www.iomshipregistry.com
REGISTRIES
MARKET SECTOR
member states that have to do it. One has to look at that and put it into perspective, reasoned Rear Admiral Peter Brady, Director General of the Maritime Authority of Jamaica. And the quarrels with the audit do not stop there. Audits are currently conducted by a panel of three, drawn from different flag states; a practice which not everyone is comfortable with. Fortunately, much of the competition between ship registries is on a marketing level and expertise is more openly shared in the technical environment. In the marine accident investigators international forum there are 50 to 60 countries involved. Many are open registries and many are traditional registries and we go there to discuss ways of making the seas safer. When we go there we are not afraid to show the statistics. I dont mind other operations coming in and looking around, Mr Sheetz said. Not everybody sees the audit, compulsory or otherwise, to be an allreaching solution to tackling substandard operations. I think the voluntary audit scheme is a nice tool. However, it doesnt solve the problem, explained Eric Dawicki, President and CEO, Dominica Maritime Registry. The reality is port state control and flag states need to work much better together. There are problems when vessels are detained.
You dont hear from port state control and this violates the SOLAS agreement. The critical path to successful shipping is going to be the elimination of the us-versesthem mentality and we start to take seriously the fact that open international registries still exist and they are not the bad guys. It is critical, and I mean critical, to have a fair and equal playing field for everybody that level playing field is ten years away. It is going to take a dramatic change at the secretariat level at IMO. We have a phobia at the midManagement level of the secretariat. If flag state and port state control can work together, sub-standard shipping can be eliminated within ten years, he reasoned.
The reality is port state control and flag states need to work much better together. There are problems when vessels are detained. You dont hear from port state control and this violates the SOLAS agreement. The critical path to successful shipping is going to be the elimination of the us-verses-them mentality
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You have to have staying power in shipping, strong nerves and strong reserves By Sean Moloney
he most amazing thing about my visit to Charles R. Webers offices in downtown Piraeus was that Roman Abramovichs yacht Pelorus was moored right outside the front door. In fact that was how my interviewee told me to recognise his office: Its the white marble building right opposite the Russian football club owners yacht, you cant miss it, he said. Basil G. Mavroleon, remains relatively bemused at the thought of a 155 metre, $130 million, mega yacht moored a few yards from his desk, but he seems more proud of the small flotilla of Greek shipping tycoonowned yachts moored next to the Pelorus, each of which he points out to me together with the name of its owner. Maybe it has something to do with his Greek shipowning heritage and his total unmoving passion for the shipping industry in general.
Mavroleons family traces its roots in the shipping business to the 1890s and the Greek island of Kassos, and although the family relocated over the years first to Syros, then Egypt, then London and the US Mavroleon clearly cherishes his Greek heritage. He was raised in the UK and the US but maintains dual Greek and US citizenship. My family created London Overseas Freighters in 1948 and I went to sea on ships in the summer, he said. Starting work as a young man at Mavroleon Brothers Ltd, another family business, helped him learn about tankers. I then joined Charles R. Weber in 1970 as a trainee and I am still learning, he mused. Questioning Basil Mavroleon further, it becomes clear that he has always been excited by the tanker business more than the dry sector, basically because he likes the volatile nature of the market one day
I first met Basil Mavroleon nearly two decades ago during a visit stateside and since then his reputation as a prominent member of the US east coast shipping cluster has blossomed. Indeed he is one of those shipping celebrities who seems to pop up at all the best receptions and conferences, immediately filling the room with his strong personality
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GETTING PERSONAL
BUSINESS VIEWPOINT
Broking is not just about fixing a ship from A to B, its about being an asset to the ship owner and to the oil company. You need to be able to understand how the business is evolving and you need to be able to help your client make the right decisions
feast, one day famine. What I liked about the brokerage business was that I had a globe in front of me and when I looked at it I could see what everyone was doing. I could plot Mr Bergesen in Norway fixing his ships on long-term time charter or Mr Onassis in Greece fixing his ships short-term. It gave me a broad view of what everyone was doing, something I didnt get working in a family business where all I got was the one perspective of what my family was doing. Here I saw everybodys view. It was interesting to see how different owners approached the market, he added. He told me that working for a broker like Charles Weber gave him independence from his family but showed that he could also be an asset to his family businesses when they needed his tanker broking knowledge. I first met Basil Mavroleon nearly two decades ago during a visit stateside and since then his reputation as a prominent member of the US east coast shipping cluster has blossomed. Indeed, he is one of those shipping celebrities who seems to pop up at all the best receptions and conferences, immediately filling the room with his strong personality. Closely associated with the New York broking and Greek shipping community, he now happily embraces the marine consultant epithet his peers now prefer to call themselves. The broking market has changed dramatically. We have survived all the stones that have been thrown at us over the years such as the major effort to replace the broker electronically which was a massive failure. The difference today is the added value aspect, and its true, you have to know your business. Broking is not just about fixing a ship from A to B, its about being an asset to the ship owner and to the oil company. You need to be able to understand how the business is evolving and you need to be able to help your client make the right decisions. But of course today we are not brokers we are marine consultants. In a sense, when you get to my age, hopefully you have more to offer, you are a broker but you are also a consultant, helping your clients with all aspects of their business. Sitting in his cosy but plush Piraeus offices, with the sun streaming in and lunchtime approaching, it is hard to imagine being anywhere less idyllic. As Basil admits, the importance that London and New York occupied in the 1980s and 1990s as centres for the Greek shipping communities has now waned and the Greeks are returning in their droves, not that they really left in the first place, he smiled. Greece is in the European Union; it is a pleasure to live here and to be able to go back to your roots in a beautiful country that now has the technology and the right levels of efficiency necessary to do business. Plus you have fewer tax concerns and shipping is important and promoted here as a major industry. So many more major and minor Greeks are deciding to place their business focus here in Greece. Yes, they can have an office in the Baltic for chartering purposes or a little office in New York. But more and more are choosing not to. The trend is changing. Just over a year ago Compass Maritime Services and Charles R Weber teamed up to set up WeberCompass (Hellas) in Piraeus, where Basil says the aim is to expand from two to at least four brokers on the tanker side. Mavroleon now plans to spend at least one week a month in Piraeus working with his colleague Bobby Mitropoulos. According to Basil Mavroleon, the family shipowning tradition that
has dominated Greek shipping for so long is still going strong despite the strengthening presence of the younger publicly-facing Greek ship owners who are actively courting the stock markets for public money to fund their growing fleets. While many companies may have withdrawn from shipping in the 1980s and 1990s to focus on the financial markets and other investment opportunities, they have returned to shipping with a vengeance. The number of ship owners here in Greece is staggering, but it is a very fragmented market with many companies owning one, two or three ships each. But they have a very independent spirit and they are people who want to do things their way and that is fantastic. Its in their blood, he said. But their predominance nowadays boils down to their astute business acumen, he contends. According to Basil, for whatever reason, the Greek owning community had the guts to reinvest in the business after the 1990s when shipping was a 5% business huge risks with no returns. Yet many new names and many old names invested heavily in the late 1990s and early 2000s and it paid off because they were first in and the ships were cheap. In retrospect, it was not obvious at the time but it made perfect sense. Never was money cheaper and never were ships cheaper. Their move into the newbuilding sector was very well timed, especially if you consider the fact that the markets are always cyclical and the ageing overbuilt fleet of the 1970s needed replacing. As he explained, in 1977 there were around 450 VLCCs in the world as well as an additional 100 ULCCs. Now there are only 460 VLCCs and no ULCCs apart from the four that survived the Papachristidis ships that are with the TI pool. At that time we were consuming 58m barrels of oil a day. Now we are consuming 85m barrels. We were so oversupplied in those days that ships had no choice but to go into layup. Then when there was demand they would start trading again and kill the market. So for 20 years nothing happened. Today in tankers you can change the balance easily and change the market very quickly. We are not over-tonnaged at the moment but the likelihood is that supply will become an issue, he warned. Tonnage oversupply remains the one major concern on Basils mind, along with the ability to man the ships competently and effectively.
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GETTING PERSONAL
BUSINESS VIEWPOINT
I see 2009 as being a problem year for tankers in terms of supply: but the dry industry is creating a huge expense for itself with all these forward charters at big rates and that is a little bit worrying. If there is a crack in the dam, will people continue to pay $50K per day for Capes for five years? I dont think so. Some names are good but that doesnt matter as they will all renegotiate. So depending on what you paid for your ship, this will put pressure on people. Right now it is all smooth sailing, it just gets a little scary unless of course this is the paradigm shift that everyone talks about where the industry is regularly paid the price it deserves for the services it provides instead of the market being feast or famine. Its remarkable what is happening in dry and if you look at the fundamentals it will continue. But then again, we are ordering a tremendous amount of newbuildings and that will tell the tale in 2010, 11 and 12, he opined. But is the problem more acute for the younger companies which have used the US stock markets to raise their capital? Yes, because they have to have a strategy where they are constantly growing and bringing new ships into the fleet. That does put pressure on public companies to transact which has caused the second hand prices of ships to be ridiculously high. You have a lot of interest out there and people almost have to buy ships. In this office alone we have a list of people as long as your arm who want to buy ships, but where are the ships? There are ships out there but they are very expensive and half the time you reach the owners sale price, they change their minds because they didnt realise they would get it in the first place, he explained. A cursory glance at the growing list of successful US stock market IPOs among the Greek community shows that the financial markets have embraced shipping more that they have ever done in the past. Shipping is a popular investment on Wall Street at the moment but when the market goes the other way, things will get tough. Look at OMI. For 20 years it did nothing and look at it now. Today it is still undervalued, but there is tremendous interest in the stock because it pays great dividends. But the question is how will it weather a storm? It will have lousy earnings and will have problems but it will have more access to capital than anyone else and so will survive. Its just a question that some of these companies may become unattractive for a while and some may become private again, he said. Of course, purists will say that it may not be the financial performance of the company that affects stock performance but how well the financial markets perform in general. According to Basil Mavroleon, if you talk to any number of company chairmen they will tell you if that happened, then a lot of them would take their companies private again. For the first time in many years, there is a clear and huge return on investment and its not just tankers, its dry cargo, reefers and even cruise. There has been huge growth in all sectors chemicals and containers. Never before has there been almost an era where all shipping has been high at the same time. But freight rates will go down and may be forced by something we havent anticipated economic most likely where this insatiable
Basil G. Mavroleon, remains relatively bemused at the thought of a 155 metre, $130 million, mega yacht moored a few yards from his desk, but he seems more proud of the small flotilla of Greek shipping tycoon-owned yachts moored next to the Pelorus, each of which he points out to me together with the name of its owner
appetite for crude and commodities wont be there. History will repeat itself and we will just have too many ships. Its as simple as that supply will kill us. The newbuilding orderbook is pretty frightening going forward: 2009 for tankers is a dubious year with a tremendous amount of ships coming in and phase out is not mandatory for these ships to go anywhere. But in this time of excessive ordering and high newbuild prices, how leveraged are ship owners and how exposed will they become if the markets drop as many predict? Well, we dont have a lot of debt. There is a lot of debt aligned to what has happened over the last 12 months, in terms of prices. Most of what we have seen up to now has involved cheap ships except if they were resales. But ships ordered with delivery even for 2007 did not cost a lot of money relative to todays prices. Its this last year where you have seen VLCCs go up to $138m. Now its beginning to show that ships have become very expensive. There is no relation in tankers between the price of the ship and the market. In the dry trades, there is still a relationship. You would have to have been asleep not to have written down a lot of your debt over the last five to six years. I mean the money has been staggering and the earnings have been so huge that anyone with any reasonable business sense would have put themselves in a strong position. Having pockets as deep as Abramovich is one way of surviving a downturn in the market but having the resolve and the nerve to make things happen will tell if Basil Mavroleons predictions are to be believed. But after all, thats what the Greeks are good at.
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LIFESTYLE
PORSCHE 9FF
German tuners have created the worlds fastest soft-top from the skin of a Porsche 911. The 9ff TRC 91 is a symphony in motion and can even tame the Autobahn. Andy Pierce takes a drive on the dark side
ith the sun on its back the Porsche 9ff TRC 91 has a majestic quality. Its flowing features will turn heads on the high street and send enthusiasts silly with excitement. At a glance it looks very similar to the standard 911 Turbo, but appearances can be deceptive. Nail the detonator, sorry the accelerator, and in the blink of an eye you are dealing with an entirely different beast. A superbike would struggle to stick with you as you scream past 60mph in 3.5 seconds and waves goodbye to 100mph in less than five. At this point those who have started to breathe again snatch second gear in a heartbeat, marvelling at the short-shift box sporting cables from the Ford FIA GT racer, and head off beyond the 150 mark. The 9ff TRC 91 claims to be the fastest soft-top in the world, but all we know for sure is that it is too fast for the Autobahn, the derestricted German racetrack which masquerades as a public highway. Jan Fatthaurs Dortmund-based tuning company, 9ff, makers of the TRC 91 and holders of the existing soft-top speed record (236mph, set earlier this year in a sister-vehicle despite the untimely arrival of officers of the law), believes its latest prodigy will touch 245mph, if it were let out of the cage. That level of performance is so otherworldly it would stretch the imagination of George Lucus. OK, the 9ff TRC 91 is not quite as fast as the Millennium Falcon,
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PORSCHE 9FF
LIFESTYLE
but it turns all but the fabled hard-top Bugatti Veyron, the worlds fastest street car, into an insignificant speck in its rear view mirror. This lightening performance comes from the Standard 911 Turbos flat-six cylinder engine, and its beautiful assistants. Fatthaur added two newly up-rated turbochargers and a modified air filter to boost performance, and that was just for starters. He also mixed in larger injectors, modified cylinder heads and a stainless steel exhaust system. His reward was an increase in capacity from 3.6 litres to 4.0 litres and a manic 910bhp output. That is double the standard 910 Turbo and not far shy of the veyrons 1,001bhp, spawned by twice as many cylinders. All this speed needed to be harnessed. The suspension has been updated, presumably to prevent the monster from tearing itself apart. High-performance brakes were a necessity with such anger beneath the bonnet, while Fatthaur also fitted 20-inch wheels all round to help it stick to the road, and because he could. Driving the TRC 91 has been compared to `twirling a hand grenade by the pin. But, if it is shown respect, drivers are in for a treat. A world-leading four-wheel drive system and the Porsche chassis give phenomenal performance on winding roads, and provide inch
perfect manoeuvrability if mere mortals dare to cross your path. External modifications are more subtle, but are equally dedicated to the pursuit of speed. A racy front grille has been added to keep oxygen flowing freely to the thirsty engine, with extra air intakes a necessity to keep the massive and overworked brakes form overheating when you need them most. And, as nobody likes a fast lady carrying extra weight, the standard boot lid and wings have been jettisoned and replaced with styled lightweight carbon fibre versions. Additional make-up includes extra sideskirts and aerodynamically enhanced wing mirrors for performance and sex-appeal. Of course, not all of the best things in life are free. The Dortmund Devil will cost on the dark side of 212,000. That is a jawdropping 100% increase on the much-loved 911 Turbo, but a snip of the price of the TRC 91s hard-top speed cousin, the Bugatti Veyron: which is five times the price for a roof and a similar amount of fun. The only ones not screaming with satisfaction at the TRC 91s performance are the green brigade. A fuel consumption of less than 10mpg and emissions to match a garbage truck will give Swampy plenty of ammunition. But, then again, he would have to catch you first.
The 9ff TRC 91 is not quite as fast as the Millennium Falcon, but it turns all but the fabled hard-top Bugatti Veyron, the worlds fastest street car, into an insignificant speck in its rear view mirror
93
LIFESTYLE
PROMS
Globalvoices
The BBC Proms is evolving but its global feel is nothing new
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PROMS
LIFESTYLE
he sight of waving Union Flags and the unmistakable chorus of Land of Hope and Glory shaking the Royal Albert Hall give the BBC Proms an unmistakably British feel. But, if you listen closely, amidst the pomp and empirical ceremony there is a distinctly global symphony. And if you thought the Proms would struggle in the modern world where kids sit in and download Iron Maiden and Marilyn Manson onto their desktop you are playing from the wrong song sheet. The fabled Red Button and the opportunity to text and email an opinion from afar allows the Proms to achieve exactly what it sets out to do in an era before the telephone became a regular household item. I am going to run nightly concerts to train the public in easy stages. Popular at first, gradually raising the standard until I have created a public for classical and modern music, explained the Proms creator, Robert Newman when proposing the idea at Londons Queens Hall in 1894. He was true to his word and early revelers could eat, drink and smoke their way through a three-hour long session of Beethoven for a mere 5 pence. Tickets for the entire first season were only just over I. By 1920 the masses standing in the Promenade, the front terrace from which the event takes its name, were swinging to the sounds of Richard Straus, Debussy, Rakhmaninov, Ravel and Vaughan Williams. Not even the outbreak of war and the power of nationalist sentiment could dilute the international flavour of the Proms. Newman, and his partner and legendary Proms conductor, Henry Wood, defied the overriding opinion of the cultural establishment. They insisted that the greatest examples of Music and Art are world possessions and unassailable even prejudices of the hour. Newman and Woods vision got a timely boost with the creation of the BBC in 1927. Its mandate to to inform, educate and entertain was clearly a match for the Proms dream of music for all and the two brands
Not even the outbreak of war and the power of nationalist sentiment could dilute the international flavour of the Proms
quickly came together. And despite fears that the broadcasting of the event would reduce the attendance figures, even the staunchest critics realised the ability to access a much wider audience was a positive move. Wood was certainly pleased and felt he was close to realising his aim of truly democratising the message of music, and making its beneficent effect universal. The bombing of the Queens Hall during WWII took the Proms down the road to a new home at the Royal Albert Hall. But it would not be moved from its eclectic stance. Viennese nights became very much the vogue and by the early 1960s international figures were flooding in to grace the occasion. Georg Solti, Leopold Stokowski and Carlo Maria Giulini raised the curtain for overseas conductors, before the Moscow Radio Orchestra became the first foreign ensemble to appear. A threshold had been crossed and the Russians were soon followed by the Amsterdam Concertgebouw Orchestra, the Polish Radio Symphony Orchestra and the Czech Philharmonic. This influx of foreign talent in the 1960s changed the Proms irrevocably. All trace of a conservative attitude had been blasted into the dome atop the Royal Albert Hall and the Proms was firmly established as an international festival of music. And it was not just European acts that were attracted to the Proms. Complete concerts by ensembles from India, Thailand, Indonesia and Japan all performed to bring a distinctly global feel at a time when the world was opening up and Britain was becoming more multi-cultural by the day. From 1961 new works were commissioned every season allowing it to adapt to evolving musical trends and creating a platform for contemporary composers from around the world. In order to accommodate the ever-increasing number of international acts the proms has
If you thought the Proms would struggle in the modern world where kids sit in and download Iron Maiden and Marilyn Manson onto their desktop you are playing from the wrong song sheet
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LIFESTYLE
PROMS
For sheer joy and flag waving fun the Last Night of the Proms is still the place to be seen. A traditional celebration of British tradition it may be, but parochial it certainly is not
Proms Time Line
1885 The first Prom is performed at Queens Hall, London 1927 BBC takes over the running of the Proms 1930 BBC Symphony Orchestra formed and becomes the Proms main orchestra 1942 The Proms moves to its current home at the Royal Albert Hall 1963 Leopold Stokowski, Georg Solti and Carlo Maria Giulini become first major international conductors to perform at the Proms 1970 Soft Machine first pop band to appear at the Proms 1996 Launch of Proms in the Park with live broadcasts in Manchester, Birmingham, Liverpool, Hull, Leeds, Rotherham, Bradford and Derby 2002 The Proms is broadcast online for the first time 2005 The Proms is truly global as the WAP mobile facility is launched
Events on the horizon

Edinburgh International Music Festival
August 10 to September 2, 2007
The Edinburgh International Festival presents a rich programme of classical music, theatre, opera and dance in six major theatres and concert halls and a number of smaller venues, over a three-week period in late summer each year. In addition to mounting the annual three week programme of events, the Festival has a year-round programme of education and outreach work, aimed at all ages from primary school pupils to adults.
Bermuda Music Festival

October 3 to 6, 2007 undergone a massive growth. By the Centenary event in 1994, the festival included over 70 concerts per year. The 2007 proms promises to be the freshest ever. A group of young musicians from Soweto in South Africa is set to take centre stage to celebrate its own 10 year anniversary. Formed by violinist Rosemary Nalden, the Buskaid Soweto String Ensemble will join Sir John Eliot Gardiner and perform excerpts from stage works by Rameau. The mix of dance styles and historic choreography from Paris will be complimented by the South African youngsters' own creations. Rameaus 17th-century French genius may appear a strange choice but Gardiner has said he and the Soweto Strings are a perfect match and believes the spontaneous and uninhibited nature of the music will offer a dynamic spectacle. The global goodwill does not stop there. The Simon Bolivar National Youth Orchestra of Venezuela is there to celebrate the success of the El Sistema project, which for 30 years has taught music to disadvantaged children with the belief that it would help them out of poverty. But for sheer joy and flag waving fun the Last Night of the Proms is still the place to be seen. A traditional celebration of British tradition it may be, but parochial it certainly is not. It still encapsulates the spirit of the Proms with leading international artists and an all-embracing programme, introducing new works alongside much-loved classics and bringing together the different themes of the season.
The Bermuda Music Festival, formerly the Bermuda Jazz Festival, features an impressive array of vocal and instrumental talent on a stage built over the water at the Royal Navy Dockyard. The festival allows guests to enjoy both the sounds of international performers and local culture, with Al Green, Joss Stone and Regina Carter all having performed here in the past.
Glebe Music Festival

November 9 to December 2, 2007
Australias Glebe Music Festival grew out of the many informal musical soirees held at the early 19th century Margaretta Cottage since the late 1960s. The underlying philosophy of the Glebe Music Festival is to bring together musicians at different stages of their careers in the intimate atmosphere of Margaretta Cottage. With large choirs this has expanded to the performance of major choral works at St Scholastica's Chapel in Glebe.
Dresden Classical Music Festival

May 9 to May 25, 2008
The Dresden Music Festival is the largest classic festival in Germany. It has an abundance of international influence and an outstanding position among the famous European music festivals. Attracting 150,000 guests in 2003, the first season under the directorship of the well-known conductor Hartmut Haenchen, the Dresden Music Festival has expanded every years since then. The unmistakable image of the festival and its structure arises from its annually changing themes and combines it with a new fundamental musical term: series. With the combination of theme and series, Haenchen made the festival a well-recognisable event within the German festival scenery.
The 2007 proms promises to be the freshest ever

96

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THE MAGAZINE OF THE WORLDS SHIPMANAGEMENT COMMUNITY

ISSUE 8 JULY/AUGUST 2007

SHIPMANAGEMENT FEATURES 22 How I Work

52 Regulation Once stung, twice as determined

16 Cutting the heart out of the tanker market

plus 20 Vetting - hurdle or opportunity? 6 STRAIGHT TALK NOTEBOOK

28 Bagging the riches is more than a waiting game

Off the cuff

14 Harry steps on the gas

11 Worlds largest simulator is installed Schulte claims business as usual

JULY/AUGUST 2007 ISSUE 8 SHIP MANAGEMENT INTERNATIONAL

TRADE ANALYSIS 26 Dun & Bradstreet

BOOK REVIEW 71 What Im reading

48 Towage & Salvage

SHIP REPAIR 44 LNG - The dash for gas

BUSINESS VIEWPOINT 88 Getting Personal

DISPATCHES 62 Nuclear fallout

LIFESTYLE 92 Dortmund Devil

67 Tit-for-tat is a game worth playing

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

Andreas Droussiotis (Bernhard Schulte Shipmanagement)

Knife courtesy of Donaldson's Gunsmiths, Milton Keynes

Additional Photography: Cyprus Department of Merchant

Approved and Supported by

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

Shareholders profit on the back of AESM sale

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

Fleet chief slams sale rumour

OnTheRecord with Tor Svensen,

Schulte claims business as usual

Worlds largest simulator is installed

JULY/AUGUST 2007 ISSUE 8

SHIP MANAGEMENT INTERNATIONAL

Interorient now an owner

Sveinung Sthle. President & CEO, Hegh LNG

Harry steps on the gas

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

Cutting the heart out of the tanker market

JULY/AUGUST 2007 ISSUE 8

SHIP MANAGEMENT INTERNATIONAL

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

JULY/AUGUST 2007 ISSUE 8

SHIP MANAGEMENT INTERNATIONAL

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

JULY/AUGUST 2007 ISSUE 8

SHIP MANAGEMENT INTERNATIONAL

DUN & BRADSTREET

SHIP MANAGEMENT INTERNATIONAL

ISSUE 8 JULY/AUGUST 2007

DUN & BRADSTREET

This DB Rating Indicates: Low risk

THE DB RISK INDICATOR

4.7 3.0 -7.9 10.5 -6.2

3.7 3.5 -5.5 9.8 -7.7

4.3 3.3 -2.6 8.9 -12.1

3.9 3.1 -2.4 8.7 -10.8