A visit to a jetty at the little port of Harwich on England’s east coast, facing the North Sea, is a good place to get a glimpse of the modern global shipping industry’s enormous scale. From this vantage point the much bigger Felixstowe port on the opposite bank of the River Orwell can be seen in panoramic view in all its glory: bustling activity along the waterfront with a long line of huge container ships loading and discharging.
Even for maritime professionals well-acquainted with this shipping sector, it is an impressive sight, underlining the vastness of international seaborne trade in containerised goods of all sorts and varieties. But only a small part of the population sees this vital maritime activity at Felixstowe or elsewhere in ports around the world and, among those who do, many will be blissfully unaware of its true significance. Mostly these ships, and indeed other vessel types, and the ports which serve them, are well hidden from public view in remote locations.
That is why a new book by Rose George published last year, entitled ‘Deep Sea and Foreign Going’, provides a valuable contribution to understanding the importance of this obscured-from-view industry. The author’s voyage on a container ship from the UK to Asia is the setting. In particular, the narrative offers a fascinating insight into the working lives of the people who make it happen, the seafarers.
Clearly described is the difficult and, at times, potentially very dangerous environment in which seafarers not only work but totally exist for periods of many months while employed on long-distance voyages. There is no escape from the working environment while a ship is at sea (virtually all the time). These circumstances are not comprehended by most users of the goods which the ships transport. Many consumers have no idea how electrical or electronic devices, for instance, get to the shops from the manufacturers in China, Korea or other origins. Some think it all arrives by air freight. There is even less understanding of what seafarers have to encounter, and their separation indeed isolation from the civilised world, living in a small and sometimes not very sociable closed community, while serving at sea for extended periods.
Despite these features, Rose George acknowledges on page 9 that “seafaring can be a good life”. Another acknowledgement is that “most ship owners operate decent ships that are safe, and pay their crews properly” (page 86). On the other hand, some owners hide behind a flag of the open registry variety and cut corners, which can lead to disasters for both ship and crew. And, disturbingly, in concluding comments on page 265, the author quotes the master of the container ship on which she travelled as saying that the crew are “mere chattels, a human resource, dispensible non-entities”. This opinion is not exactly a ringing endorsement of comfortable relationships between managements and seafarers.
It is a highly readable book, quite gripping in parts, written in an easy-going style. Ignoring some lengthy deviation about a ship rescue in the second world war, and whale preservation in the northeastern USA, it serves a useful purpose. But as an educational exercise, for the general public, presumably the author’s aim as a piece of ‘investigative journalism’, much more could have been said about the global container shipping industry. A few short paragraphs of miscellaneous and not especially helpful industry statistics, as background, are insufficient to provide meaningful context.
One essential fact, which could have been included as contextual information for the aspects identified during the voyage, is that container ships now comprise 13 percent of the world fleet of all cargo vessels, a fleet including many other important ship types. Another is that container ships numbered 5,106 at the end of 2012, with a capacity of 16.2 million teu (twenty foot equivalent units, the standard measurement), based on data from Clarksons Research. Container ship fleet growth over the preceding decade was 168 percent and capacity continues to rise. And increasing ship sizes – 18,000 teu leviathans are joining the fleet, compared with vessels only half that size which were the norm only a few years ago – are a feature of progress, ensuring more economical transportation.
Another storyline emphasis might have been the services these ships provide for global manufacturing industry, how container services are organised and why they are so effective and efficient. World seaborne containerised goods shipments are estimated to total over 1.5 billion tonnes per year currently, after almost doubling during the past decade. Ocean freight cost is generally a low proportion of most products’ value. The impact on, and advantages for, the globalisation process are apparent. Many countries have been integrated into the global trading system when previously they were on the fringes, if participating at all.
None of the foregoing maritime achievements are satisfactorily set out in ‘Deep Sea and Foreign Going’. Arguably, such a preliminary discussion is required for a balanced view to be offered. Nevertheless, the book certainly has great merit in opening eyes to the stark realities of seafarers’ lifestyles and, frequently, the lack of attention paid to this noble profession. Many spectators standing on the remote Essex jetty watching the impressive ships coming and going could gain a useful perspective by reading it.
Richard Scott, Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis
In a characteristically thorough and perceptive analysis the ‘Review of Maritime Transport 2013’, just published by UNCTAD (United Nations Conference on Trade and Development), throws light on most of the main issues currently faced by maritime activities around the world. This annual publication, which started life in 1968, has achieved a solid reputation as a first point of reference for many people about industry trends and possible future events. Its utility is greatly enhanced by ready availability free of charge on the organisation’s website.
Among topics selected for special attention in the latest edition, the Review focuses on how the global shipping industry will be financed in future years. Where will new money come from? The partial withdrawal of the banking sector as a traditional source of finance has left a large gap needing to be filled. Private equity funds have stepped into this void, and are making an increasingly noticeable impact. Although shipowning previously had not been the most obvious private equity target (because the volatility and downside risks of the shipping sector were unpalatable for them), involvement recently seemed a much more attractive proposition.
The Review’s authors conclude that “the role of private equity funds appears fundamental for the growth of the sector and could affect its development in several ways, including through the consolidation and vertical integration of transport services.” But the authors draw attention to a notable feature: many private equity investors are not long term players. Investments are made by private equity at what they consider to be at or near the bottom of the market. Involvement is often for a temporary period (which may be several years) until the market rebounds, enabling the selling or flotation of investments at a sizeable profit.
In another section focusing on selected emerging trends affecting international shipping, the UNCTAD Review highlights fuel costs and slow steaming, lower-sulphur fuels and air emissions, and innovative ship designs and eco-ships. These separate topics are, of course, linked and feature in much discussion within the maritime industries. They emerge against a background of climate change and its implications. As noted in the report “of all the prevailing challenges…the interconnected issues of energy security and costs, climate change and environmental sustainability are perhaps the most unsettling.” Nevertheless, despite these problems and difficulties, on a more positive note opportunities for the shipping industry are arising from a number of trends which could strengthen or enhance shipping services.
What will be of especial value to many readers of the Review is its comprehensive regular analysis of the fundamental influences affecting the maritime industry, contained in three chapters – developments in international seaborne trade; structure, ownership and registration of the world fleet; and freight rates and maritime transport costs. This analysis is accompanied by detailed statistical tables. There is also a chapter about port developments and another about legal issues and regulatory developments. A discussion about access to maritime transport for landlocked countries is included as well.
One event emphasised, which occurred in 2012, is the turn of the largest shipbuilding cycle in recorded history. Given the chronic overcapacity which has been a feature of many shipping sectors for some time, and the consequent low freight rates prevailing, this is highly significant. For the first time since the beginning of the new millennium, the tonnage of new vessels of all types delivered from world shipyards in 2012 was lower than seen in the preceding twelve months. Every previous year had seen an increased volume.
The resulting capacity expansion over the decade, sometimes very rapid, has seen the world fleet of commercial sea-going ships more than double since 2001, reaching 1.63 billion deadweight tonnes in January 2013. But, reflecting newbuilding deliveries greatly outpacing additional orders placed, the world orderbook for new vessels at shipyards has declined dramatically during the past few years. After an interval, newbuilding deliveries, as highlighted in the Review, are now falling as well. This changing picture, along with other influences including ship recycling and of course further trade growth, can be expected to assist in correcting the excess transport capacity still existing.
Meanwhile global seaborne trade has been growing at a healthy, or what might be described even as a remarkable pace (amid economic setbacks in various countries), in the past few years. The UNCTAD Review emphasises how trade performed better than the world economy in 2012, expanding by an estimated 4.3 percent, nearly the same rate as in the previous year. A volume of 9.2 billion tonnes of goods was loaded in ports worldwide last year, resulting from growth driven in particular by more domestic demand from China, as well as increased intra-Asian and South-South trade.
China’s contribution to all this trade growth has been immense. Calculations based on figures which are not contained in the Review underline the point. These figures compiled by Bulk Shipping Analysis suggest that in the period of ten years between 2002 and 2012, expansion of China’s imports of all cargo types contributed around 46 percent of the entire world increase. For dry bulk commodities, comprising the largest part (over two-fifths) of all world cargo movements, the proportion of growth contributed by China is higher at 63 percent. The Review highlights as a cautionary note the great dependence of dry bulk trade expansion on Asian (and particularly Chinese) demand, and on only two commodities, iron ore and coal.
Looking at aspects of the global merchant shipping fleet, a table showing the world’s 35 largest national fleets by ownership always makes fascinating reading. As in previous years the top four remain the same: Greece, Japan, Germany and China. Country of ownership of a vessel is defined as the place where true controlling interest (the parent company) is located. Significantly, among the top four, China rose from fourth to third position during 2012 so that, at the beginning of this year its fleet of 190.1m deadweight tonnes formed 12 percent of the world total. One year earlier, the Chinese fleet had been 9 percent of the global total, rising from 5-6 percent in the early 2000s. Consequently China is rapidly approaching Greece’s 15 percent and Japan’s 14 percent. Just over two-thirds of China-owned tonnage is registered under foreign flags. When will China’s fleet become the world’s largest? Probably quite soon, although the Review does not say so.
The UNCTAD Review of Maritime Transport is keenly awaited by many who benefit from its extensive coverage of the maritime scene. The updated statistics are very valuable. And its discussion of specific currently prominent aspects (‘hot topics’) justifies anticipation. The latest 2013 edition does not disappoint.
Richard Scott
Visiting Lecturer,Greenwich Maritime Institute and MD, Bulk Shipping Analysis
Shipbuilding in China has become increasingly a struggle for survival. Shipowners around the world have been much less eager in the past few years to order new vessels, both in China and elsewhere, and consequently shipyards’ orderbooks and production have shrunk. Excess shipbuilding capacity in Chinese yards has become a major problem. Although 2013 has seen a welcome improvement in the order inflow compared with last year’s depressed volume, there seems little chance of a return to the extraordinarily high levels recorded earlier. Even a moderately healthy volume is proving elusive.
The recent history of the Chinese shipbuilding industry has been a fascinating and impressive story. Nothing as spectacular in the country had happened since the fifteenth century building boom. At that time, the massive imperial fleet was being constructed for Admiral Zheng He and his treasure-ship expeditions to south east Asia, Hormuz, the Red Sea and East African coast.
Zheng He’s merchant fleets, built for the seven voyages of up to two years in duration which occurred between 1405 and 1433, consisted of many ships, some of which were very large in comparison with other countries’ vessels of that era. The huge scale of activity required vast shipbuilding capacity and timber supplies. The 1405 expedition was comprised of 62 large treasure ships, 190 smaller vessels, and transported 27,800 men. Other expeditions were of similar size. The biggest ships were much bigger than any produced elsewhere, in fact the largest wooden ships ever built, incorporating advanced designs and technology.
In the modern era, within a very short period since the early 2000s, a massive shipbuilding industry emerged from relatively small beginnings, pushing China quickly to top position globally. Ships are built for Chinese owners, but this industry is heavily focused on the international market. During the first three years of the new millennium, deliveries of all types of vessel from Chinese yards averaged 6% of the world total (based on deadweight tonnes), far below the principal competitors, South Korea and Japan. From this modest contribution China’s global market share rose to a sizeable 23% in 2008 and then almost doubled to an astonishing 43% in 2012. Two years earlier, in 2010, China had overtaken South Korea to become the world’s largest shipbuilding country, measured by deadweight tonnage. In that year and the next, Korea’s output was still higher when measured by dollar value, because Korea produced a larger proportion of more sophisticated, and therefore more expensive, ships. Last year, China’s production became the highest by value as well as deadweight tonnage.
Looking at actual shipbuilding volumes emphasises the dramatic expansion. China’s yards delivered only 3-4 million deadweight tonnes of newbuilding vessels annually in the early 2000s. Growth was then very rapid. The annual total reached 21m dwt in 2008, and two years later the volume had tripled to 63m dwt. This highly impressive performance was achieved partly by expanding existing yards, but mostly by opening new ‘greenfield’ sites, with many new Chinese shipbuilders entering the market for the first time. Over the next two years, 2011 and 2012, output was sustained at slightly greater levels, 68m dwt and 66m dwt respectively.
The orderbook for new ships at Chinese shipbuilding yards reached a phenomenal 221m dwt peak at the end of 2008, according to data compiled by shipping information providers Clarksons. This volume comprised over one-third of the entire worldwide 619m dwt orderbook. In the next three years, as orders were delivered, the China orderbook held up remarkably well, supported by a resurgence of optimism among shipowners, many of whom returned to the newbuilding market to order additional ships. Subsequently, new ordering receded greatly and the Chinese shipyard orderbook was almost halved within two years, falling to 113m dwt at the end of 2012. Since then it has diminished further, although only slightly.
Following the 2008 global financial crisis and economic downturn, and the resulting chronic over-capacity in shipping markets, orders for new ships have been much harder to obtain, both for Chinese builders and their competitors. However, the vast orderbook for new ships already accumulated in China, and therefore huge backlog of work, ensured that output did not immediately plunge downwards after 2008. Over several years that backlog has been drastically reduced and now, newbuilding deliveries are falling sharply.
Shipbuilding output at Chinese yards was dominated by tankers and container ships for a number of years. Then from 2009 onwards a dramatic change in the production profile occurred. As a result of many orders placed by foreign and domestic shipowners during the freight market boom, and afterwards, bulk carriers were built in greatly increasing numbers, becoming by far the largest output category. In 2008 about 22% of China’s newbuilding deliveries of all vessel types consisted of bulk carriers (measured by compensated gross tonnes or CGT, indicating the work content of ship construction). A few years later in 2011 and 2012, bulk carriers comprised well over 60% of vastly higher totals. Building other ship types was still an important activity, since actual production volumes were sizeable.
What factors were instrumental in enabling China’s shipbuilders to achieve such a powerful performance? Low labour costs, and low land costs for many new production sites, buttressed by support from local and national governments, accompanied by abundant availability of finance, were reflected in competitive pricing. Improving management skills, assisting greater efficiency and productivity, also contributed while technological advances and enhanced product quality further boosted competitiveness. The extended period of extremely strong global demand for new ships between 2003 and 2008, followed by a brief resurgence in 2010 before a collapse ensued, provided a strong background for progress.
This year, a contrasting downwards step change in the pace of Chinese shipbuilding activity has been unfolding. Currently, the rapidly shrinking (although still large) orderbook is being reflected in noticeably diminishing output, indicating an annual 2013 newbuilding deliveries total possibly below 45m dwt. Many of China’s shipyards are in an increasingly precarious position, despite an upturn during this year in the inflow of new orders for future delivery. In some cases production has completely ceased, following completion of all contracts, and yards have closed. Numerous other shipbuilders are likely to be facing the same problem sometime in the next twelve or eighteen months, when their work schedule is completed.
The recent ordering upturn has provided a partial respite. After taking only 21m dwt of contracts in 2012, less than one-third of the volume seen as recently as two years earlier, Chinese shipbuilders secured an estimated 37m dwt of new orders in the January to September 2013 period, according to Clarksons. That achievement reflected increased optimism among shipowners around the world about an approaching shipping market recovery, coupled with low and therefore attractively priced deals available from yards for new vessel construction. The improvement suggests that China’s annual total for new orders received this year may be more than double last year’s figure. But a massive surplus of shipbuilding capacity remains an existential problem urgently requiring a solution.
How can these difficulties be alleviated? Earlier this year consolidation of shipyards was being encouraged by the Chinese government, designed to enlarge individual shipbuilding business units as a means of improving efficiency and profitability. Then in early August the government stepped in with additional support. The State Council published a plan entitled ‘Accelerating Structural Adjustment and Promoting Reform and Upgrading of the Shipbuilding Industry’. A radical restructuring is envisaged over the next three years, emphasising reduction of excessive production capacity, and promoting enhanced competitiveness in the world market, partly through more innovation. Specific proposals include reducing reliance on production of less sophisticated vessels (such as bulk carriers) and increasing output of high-tech ships (including gas carriers and container ships) and offshore units (service vessels and drilling rigs).
Clearly also a strong upturn in global demand for new ships would benefit Chinese shipbuilders. As mentioned, there have been signs this year that some owners are expecting a shipping market revival within the next two or three years and are moving to have new and more economical tonnage available at the outset. But, even if a market recovery does occur within that timescale (and many market players remain sceptical about both timing and magnitude), it seems unlikely that all existing Chinese shipyard capacity could be quickly redeployed profitably. So pressure seems set to continue for a major overhaul of the industry.
Richard Scott
GMI visiting lecturer and MD, Bulk Shipping Analysis
The defeat of Napoleon Bonaparte by Britain is a far greater achievement than has ever been acknowledged, according to a new book by a Greenwich academic.
In Britain against Napoleon: the organization of victory, Professor Roger Knight points out that a British victory was by no means certain. With France a greater power, and the whole of Europe conquered by Bonaparte, Britain had to use army, navy, politics and all its financial strength to turn the tide until the final battle at Waterloo in 1815.
Controversially, he also downplays the role of Lord Nelson and the Battle of Trafalgar in 1805. “We have been blinded by the myth of Nelson,” he says. “In fact, the war continued for another decade, and Napoleon looked unbeatable until 1812. People don’t understand what a struggle Great Britain faced, and just how great an achievement victory was.”
Professor Knight, visiting professor at the university’s Greenwich Maritime Institute, has a background in maritime history and is the author of the prize-winning biography of Nelson, The Pursuit of Victory. However, in his latest book he examines the war from a ‘360 degree’ perspective for the first time, looking beyond the familiar exploits to show how the whole British population worked for victory, from farmers and manufacturers to an early Home Guard.
“Contrary to the British myth, it was never inevitable that Napoleon would lose,” he says. “Britain’s success was the most extraordinary story.”
Britain against Napoleon has its launch at Somerset House today (Monday 21 October) and is published by Penguin.
Professor Knight’s career as museum curator and historian has spanned more than forty years comprising curatorial and research roles at the National Maritime Museum and subsequently at the university, where he combines teaching with writing about naval history.
Story by Public Relations, University of Greenwich
We are pleased to announce that Michael Everard CBE, a senior figure in the UK and international shipping communities, received an Honorary Doctor of Business Administration from the University of Greenwich on Wednesday 24 July 2013.
Within his career Michael served as Chairman of F.T.Everard & Sons between 1988 and 2006, a family firm which during the twentieth century became leading owners of coastal vessels and small short-sea tankers. It was unique in remaining in private ownership and management for over a century. At the time of the company’s sale to James Fisher plc, in 2006, it owned eleven tankers.
Michael has also served as President of the Institute of Chartered Shipbrokers; as Chairman of the UK Chamber of Shipping; as Vice-Chairman of the International Chamber of Shipping; and as Vice-Chairman of Council and Chairman of the Executive Committee of the Mission to Seafarers.
Michael has been actively involved with the University of Greenwich through his membership of the Greenwich Maritime Institute Advisory Committee, where he acts as a ‘critical friend’, providing advice and assistance and facilitating industry contacts. He also sits on the Greenwich Forum an independent body established in 1973 formed to promote Britain’s awareness of the sea which is administered by the Greenwich Maritime Institute.
Alev Adil, the University’s Orator, says: “Michael Everard has always set the highest industry standards in terms of safety, quality and innovation in the shipping business. Today we’re celebrating his long and distinguished career and his involvement with the Greenwich Maritime Institute, where he regularly shares his extensive knowledge of shipping policy issues with our postgraduate students.”
Honorary degrees are awarded to individuals of distinction who have made a major contribution to the work of the university, or who have earned prominence for activities associated more widely with education, business, culture, creative work and public service and the Greenwich Maritime Institute are delighted that Michael was able to accept this prestigious award last week.
They emerged as a popular breed in the 1950s, but then lost prominence in the seventies and eighties when the ubiquitous bulk carrier took over world seaborne dry bulk commodity trade. Since then they have adopted a low profile. Now they are making a dramatic rush for renewed fame, on an impressive scale. The ore carrier, actually a much bigger version designated as a VLOC or very large ore carrier, is reshaping the global shipping market.
The group of ultra-large ships currently being introduced, since 2011, are the leviathans of the shipping world. Their carrying capacity is over twice that of a large 180,000 deadweight tonnes ‘capesize’ bulk carrier, typically used in the iron ore and some other trades (although a number of bigger ships also exist). This new generation of mega capacity 400,000 dwt VLOCs have a length of 360 metres, a beam of 65 metres and a draft of 23 metres, an immense size.
Only a small number of ports around the world, plus a few more under development, have big enough dimensions and facilities to accommodate these vessels. Such ports, in both the iron ore exporting and importing countries, mostly handle vast quantities of iron ore annually in continuous flows, enabling large ships to remain fully employed. Currently, loading ports in Brazil, and discharging ports in Europe, China, Japan, Philippines plus a new terminal in Sohar, Oman, are able to accept the biggest ships. The new ‘Valemax’, originally known as ‘Chinamax’ 400,000 dwt ore carriers were designed with full awareness of employment limitations.
Their lineage goes back to the middle of the last century. At that time, tweendeck tramp steamers used in the dry cargo trades, the market workhorses, were proving unsuitable for burgeoning iron ore transport business. The concept of a specialised vessel, with a size and characteristics making it ideal for carrying this commodity, evolved. When ore carriers were introduced, many were very large in comparison with other existing dry cargo ships and were able to achieve economies of scale (a lower transport cost per tonne of cargo carried).
Starting with a small number of ships in the early 1950s (a very few had been introduced previously), from 1954 onwards the world fleet of ore carriers grew rapidly. In 1960 there were 119, with an average size of just under 24,000 dwt, based on figures compiled by shipbrokers Fearnleys. By 1975 the total had risen to 298 and the average size had increased to almost 54,000 dwt. Subsequent fleet growth was slower and their popularity faded.
An example of the new breed making an impact was the Orelia, delivered in 1954, first of a class of six sisterships. Owned by a subsidiary of the famous old British shipping company Furness Withy, these ore carriers were built specifically for long-term charter to the British Iron & Steel Corporation, carrying ore to UK ports. With a lifting capacity of just 9,000 dwt, the vessels were minnows compared with today’s giants, but they greatly improved efficiency in the trade. Progressively larger ships designed for carrying ore to European and Japanese ports followed.
Fast forward to the current era, and the phenomenal long boom in the dry bulk freight market between late 2003 and mid 2008. During this period Brazilian mining company Vale, one of the world’s largest iron ore suppliers, experienced difficulties competing with other suppliers – especially Australian – in the Asian regional market. China’s extremely rapidly growing import demand was a particular focus. Freight rates for ore cargoes to China from Brazil were far higher than freight rates from Australia, reflecting the much greater voyage distance from Brazil (about 3.5 times the Australian distance). Higher freights raised the delivered cost of Brazilian ore to China way above the comparable cost of Australian ore.
How could Vale improve its competitive position? There was an obvious answer involving massive capital investment in shipping capacity, not always a palatable option for a mining company. Much bigger ships to achieve scale economies, many of them, and all under the control of the commodity supplier, could reduce exposure to volatile freight market rates, sharply reduce freight costs, and greatly improve competitiveness. Vale decided to take this course of action, and in mid-2008 ordered a series of twelve 400,000 dwt vessels from Chinese shipbuilders Jiangsu Rongsheng. Further newbuilding orders followed. Additionally, long term transportation contracts were concluded by Vale with several other shipowners who, in turn, placed orders for similar-sized tonnage.
Altogether a remarkably large number of VLOCs, 35 in total, were ordered by Vale and its shipowner partners from shipbuilding yards, mostly in China and also in South Korea. The first ship, Vale Brasil, was delivered by Daewoo Shipbuilding, South Korea in April 2011. More were completed later in that year, followed by an acceleration of the delivery programme over the next twelve months, continuing into 2013. In June this year Lloyd’s List reported that 27 Valemax ships were operating, leaving 8 still under construction.
When all the giant ships are fully operational in Brazil’s iron ore export trade, they could be carrying over 50 million tonnes of cargo annually, assuming four round trips per year. This volume represents 15 per cent of annual Brazilian iron ore exports to all destinations (which totalled a colossal 326m tonnes last year). The exact quantity carried will depend on where they are employed (mostly to Asian destinations) and on the precise characteristics of the voyages.
Has this strategy – one of the biggest industrial shipping strategies ever seen in the dry bulk sector – proved successful? Two factors have dramatically altered the economics since the original plan was introduced. Firstly, the global dry bulk freight market collapsed in late 2008 and has remained low, even depressed at times, greatly reducing all open market freight rates. As a consequence the additional cost of transporting Brazil’s long distance exports to Asian destinations, compared with shorter distance costs from competitor Australia, diminished as well. Secondly, China refused to allow the new leviathans to discharge in Chinese ports (resulting in the generic name change in May 2011 from Chinamax to Valemax), a severe disadvantage. This ban actually adds more costs, incurred by transshipping iron ore into smaller vessels permitted to use ports in China.
So a large part of the strategy’s original justification has been undermined. Low freight rates on the spot market have the effect of reducing the advantages of employing Valemaxes. Moreover, adding transhipment costs resulting from the China discharge port ban is an unattractive feature. Vale has installed a floating transfer station in Subic Bay, Philippines, to offload cargoes into conventional capesize ships for the final leg of the journey to China. Also, a permanent transshipment hub is under construction on land at Teluk Rubiah, Malaysia.
But exclusion from Chinese iron ore discharging ports may not continue much longer. Several have the physical capacity to accept 400,000 dwt vessels, and others are being developed. In late 2011 Dalian received one mega shipment. More recently in April this year a part-loaded Valemax was received at Lianyungang. Granting wider permission would potentially benefit steel mills by lowering their transport costs on ore imports from Brazil, an even more valuable advantage when (eventually) freight market rates recover.
Chinese government policy banning these ships, officially announced in January last year, apparently reflects, mainly, opposition to their use from the China Shipowners Association, which has declared the ships to be monopolistic and unfair competition. However, recently there have been some tentative signs that this stance may not be maintained permanently. One expedient may be Chinese shipping companies becoming owners of some vessels, a possibility which has been under discussion previously.
(* aka = also known as)
Richard Scott
GMI visiting lecturer and MD, Bulk Shipping Analysis
(e-mail: bulkshipan@aol.com)
On Friday 10 June HMS Illustrious, the second of the Royal Navy’s three Invincible class light aircraft/helicopter carriers, was moored just upriver from GMI. At 22,000 tons, and at 209 metres long, she is a big ship – but just half the size of the Prince of Wales and Queen Elizabeth that will replace her – eventually. Initially conceived as a Harrier-carrier, and able to carry 22 of the Short-Take-Off-Vertical-Landing (STOVL) planes, she has been both a light aircraft carrier, in that role, and a helicopter carrier, able to carry 22 helicopters. There could be no more appropriate place to hold a conference to mark the 70th anniversary of the turning point in the Battle of the Atlantic, which took place in May 1943.
The Battle of the Atlantic, which lasted from 1939-1945 was probably the most crucial part of the Second World War for the UK’s survival and the subsequent liberation of western Europe. It lasted, from 1939-1945, when the last German submarines surrendered at (London) Derry, in Northern Ireland. The ‘Battle of the Atlantic Anniversary Seminar’, organised by the Royal Institute of International affairs, Chatham House, took as its theme, appropriately enough, ‘The Navy’s Role in resilience and Prosperity’. Unusually, the famous ‘Chatham House rule’ – that information gleaned might be used but not attributed to Chatham House, the speaker or the occasion, was waived. This one was on the record. So you can cite this blog!
When Royal Navy ships put it in to port for supplies, the purser and his or her team scour the hinterland for the best provisions, and London had been no exception. The Navy cooks – always superb – had produced the most impressive lunch, including truly spectacular dressed crab. With the new Billingsgate fish market just two kilometres away, at Trafalgar Way, West India Docks, Isle of Dogs, that would have been a no-brainer!
HMS Illustrious at Greenwich, 9-13 May 2013
After a welcome by Commodore Neil Brown of the Naval Staff, and Commander Keri Harris, the Second-in-Command, Professor Andrew Lambert from King’s College London opened proceedings with an account of the momentous conflict, and some interesting comparisons with now. The United Kingdom had not been self-sufficient in food production – never mind luxuries like tea and wine – since the 1780s. By 1939 the United Kingdom needed one million tons of provisions a month imported by sea. In contrast, the United States was – and still is – self sufficient. But, Professor Lambert noted, even at the worst moment of the Battle of the Atlantic there were more reserves of food and fuel in the UK than there are now, with our ‘just-in-time’ economy!
A key point, reinforced in the questioning, was that the Royal Navy had responded well to the experience of World War I and the battle with the U-boats, including, for example, the development of sonar. But the plan was to contain German U-boats in the North Sea – which the Navy succeeded in doing until the fall of France in May 1940. As Professor Lambert laconically observed ‘you don’t plan for your Allies to collapse’. Good point. After May 1940 the U-boats could operate out of French ports and far into the Atlantic (including off the coast of the United States). With U-boats loose in the Atlantic convoys bringing Lend-Lease and other supplies from North America became targets. The stakes were suddenly raised.
However, another crucial and countervailing development in 1940 was the German invasion of Norway. Again, it is not widely known, but as a result most of the Norwegian merchant fleet headed for the UK, and became available as part of its merchant navy. It took two years for the Germans to sink an equivalent number of ships.
By May 1941, however, the Germans believed the convoy system was cracking under the strain and sent the powerful surface raider the battleship (BB) Bismarck out to finish the convoys off. The sinking of the Bismarck was one crucial point in the battle. The entry of the United States into the war in December 1941 further changed the dynamic. The United States and Canada were no longer just supplying the UK. From then on, in operation Bolero, they were turning the UK into the jumping-off point for the invasion of north-west Europe.
Professor Lambert identified the Russian arctic convoys as the Royal Navy’s greatest ever success. Those supplies got through in the face of a surface, submarine and air threat and the appalling weather.
During the Battle of the Atlantic 783 U-boats were destroyed. Laconically, again, Professor Lambert concluded, ’75 percent fatal casualties was the German U-boat breaking point’. It was a tough business.
Another Lambert, Dr Nicholas, from the Royal United Services Institute picked up the theme of the UK’s dependence on the sea. In 1914 the world economy was as ‘globalised’ as now, as a result of several revolutions. In addition to the introduction of steam ships, there had been the introduction of undersea and trans-oceanic cables, permitting instant communication, and a revolution in financial services with credit easy to obtain and manage. The UK’s national debt in 1914 was £650 million, a huge sum for the time. This global, interconnected system was rudely shocked by the First World War. Between 1914 and 1939, with the financial crises of 1929 and 1931, the world economy actually shrank. As a result it was easier to keep it working in 1939. By 1940-41, some 55 percent of the UK’s GDP was devoted to war production, a figure never exceeded anywhere else, apart from the Soviet Union later in the war. There was a draconian system of price controls, labour controls and rationing. By 1941 the UK had exhausted its overseas credit. Everything was sacrificed to win the war, without thought for the future. The Atlantic became a pipeline along which war materiel was pumped from the US and Canada to the UK. Yet, paradoxically, the UK’s vulnerability to disruption of its imports and supplies is greater now than it was in 1914.
After an excellent presentation by Dr Douglas Guilfoyle of University College, London, on modern challenges and the Law of the Sea, the seminar then addressed they key modern issues of the role of navies in resilience and the role of navies in prosperity. Rob Bailey from Chatham Hose explained the role of the oceans in food security, explaining that although we tend to think of the key chokepoints in terms of energy security – the Bosphorus, Suez Canal, Bab-el-Mandeb and Strait of Hormuz – they are just as vital for shipments of grain, which does not grow well in the Middle East. As a historical not, we might also recall that some 400,000 people died of malnutrition in Germany in 1914-18 as a result of the Allied blockade. In 2008-09 30-40 percent of Somali food requirements were met by UN food aid, so Somali piracy, which forced cessation of these shipments hit Somalia very badly.
Adjoa Anyimadu of the Africa Programme at Chatham House addressed the naval response to piracy and the lessons to be learned from the Indian Ocean. She began by summarising the international presence, with three forces: the EUNAVFOR and Operation Atalanta; the US-led Combined Task Force (CTF) 151 and Nato’s Operation Ocean Shield. To this we should add the one-nation contributions of China, Russia and Japan. She cited Oceans Beyond Piracy’s estimate that in 2012 Naval operations in the Indian Ocean cost more than £1 billion. Given that Somalia is a failed state, international naval action is legitimate. The situation in west Africa and the Gulf of Guinea, where, in contrast to the Indian Ocean, piracy is on the increase, is quite different. Here, there are Governments with authority over their territories and some rule of law. Therefore, a similar type and scale of Naval operations is unlikely. However, there are still lessons to be drawn from the Indian Ocean. These are:
Capacity building – helping the local authorities to help themselves – is crucial. This not only applies to building coastguard and marine policy forces but the helping the shore authorities as well;
Intelligence gathering and information sharing is vital, including the use of new technology such as Unmanned Air Vehicles (UAVs), helicopter cameras and so on. This is not only useful for providing advance warning but also to assist prosecution later on;
Conducting multinational operations helps develop relationships between navies and nations;
Navies must engage with the coastal communities whence piracy and armed robbery at sea emanate. In Somalia this has taken time but encouraging the coastal communities to see themselves as stakeholders who will benefit from seeing an end to piracy has worked. In one case, international forces have intervened to provide medical treatment for sick Somalis on board ships. Although this was regarded as possibly too dangerous, it worked.
Bob Dewar, also of the Chatham House Africa programme, then addressed the key issue of IUU (Illegal, Unreported and Unregulated)(the Us in that order, OK?) fishing . He began by citing Kofi Annan, that ‘human security’ was ‘not purely military’, in terms of political violence, but also embraced health, food, the environment, human rights and the rule of law.
IUU fishing is the worst maritime threat that west Africa faces, costing that part of the world an estimated $1 billion (as against between $9 bn and $22 bn worldwide). In West Africa, however, fish resources are really important. The UK MoD has set up a centre in Nigeria to support the ECOWAS (Economic Community of West African States) Maritime Strategy, and countering IUU fishing plays an important part of this. It is not just the value of the fish, but also the lost revenue from licence fees and landing fees.
Alex Vines OBE, the Head of the Africa Programme at Chatham House added to the unwelcoming picture of the Gulf of Guinea, pointing out that in addition to IUU fishing, other maritime crime accounted for another $1 billion. Nigeria, Benin and the surrounding area are in the same insurance category as Somalia.
Douglas McWilliams, Chief Executive and Professor of Commerce at Gresham College, gave the final keynote speech. His World Economic League Table forecasts were fascinating. In 2012, the US was still the world’s largest economy, with China second, Japan third, Germany fourth, France fifth and UK sixth. In 2022 the top three will remain the same, with India fourth and Brazil fifth, Germany sixth, Russia seventh, UK eighth and France ninth. But China will overtake the US in about 2025, as many have predicted. The prospect for the UK was surprisingly optimistic. Consumer spending currently accounts for 70 percent of the UK economy and exports 30 percent. By 2022, his group’s forecast indicates, consumer spending will have dropped to 50 percent and exports risen correspondingly. Eric Grove, from Salford University, a well-known maritime historian, was sceptical.’And what’, he said, ‘are we going to export?’ But Professor McWilliams stuck by his figures, guessing that ingenuity and high-tech I inventiveness would create the products. Seaborne trade was down from its 2007 peak but was now growing again. There will be plenty of imports and exports for the Royal Navy to protect.
The seminar concluded at 17.00. The following days – Saturday and Sunday – Illustrious was open to the public. If you want to see what the public saw, click on the links, below.
With apologies to super-heroes, one might ask ‘ Is it a boat? Is it a plane?’ The Hydroptère is a bit of both. The French-built craft, which appears to have been inspired by windsurfers, has just broken the speed record for a sailing yacht, by skimming across the top of the water.
It can do this because of the wings with floats on the end which keep it aloft once it reaches ten knots. When it reaches that speed, the foils under the floats are rotated to 45 degrees, lifting the wing off the water. Then, only 2.5 square metres of boat are in contact with the water – the size of a dining table.
Source: Metro
Then, she ‘flies’ with the main wings five metres above the water, and can accelerate from 20 knots to 45 knots in just ten seconds.
She has just broken the record for a nautical mile, covering it at 50.17 knots. On a shorter 500-metre spurt, she made 52.86 knots.
So much for stately wind-jammers. Now the Hydroptère’s makers are hoping she will sail to a world record as the fastest boat ever to cross the Pacific. Next month’s record attempt from Los Angeles to Honolulu will be led by Hydroptère’s designer, Alain Thébault. Alain began work on the carbon fibre and titanium hydrofoil more than 20 years ago. It’s all in a name, obviously – Alain The boat…
When the hydroptere completed its hair-raising nautical mile sprint, the crew were understandably excited. But had they broken the record? ‘Combien?’ – how fast? And then ‘cinquante et un quart’ – ‘fifty and a quarter…’ Well, almost. High fives all round. You can see the record-breaking run on Metro’s website: http://metro.co.uk/2013/04/30/is-it-a-boat-is-it-a-plane-actually-it-is-a-bit-of-both-3708552/
More than fifty knots. No engine required.
The team are confident they will win the record for crossing the Pacific. With a sailing boat. But one thing has not changed since people first put a boat to sea.
Before deciding exactly when to set off in June, they will wait for the best weather…
If you have a good academic background in any relevant aspect of British eighteenth or nineteenth century history and have an interest in social advancement, professionalism and expertise, have a look a this advertisement for a doctoral studentship.
UCL and the National Maritime Museum are working collaboratively to offer this studentship which is supported by the AHRC and is great opportunity!
Using the Royal Navy as a case study, the successful candidate will utilise a wide variety of sources to examine the nature and broader meaning of patronage in late-eighteenth and early nineteenth century Britain. Using the collections in the NMM the candidate will make a detailed examination of the workings of patronage within the naval establishment. He or she will consult the papers of politicians, administrators and serving officers, and delve into the various applications, references and testimonials submitted. They will also asses how naval patronage conformed to wider social norms, perhaps comparing it to other professions such as the army, the church and the law.
For information and details of how to apply have a look at the following website: jobs.ac.uk
For ship spotters and maritime historians, it was an event of great significance. Back in 2005 the world fleet of cargo-carrying ships reached the symbolic 50,000 number. Today there are many more, and their capacity has risen enormously. For shipowners and market analysts, this enlargement is also significant, but has worrying overtones: expansion in many categories has greatly exceeded the growth of seaborne trade and demand for these vessels. The result has been varying degrees of depressed shipping markets over much of the past few years.
The world merchant ship fleet is very large, probably larger than most people would guess. But just how many vessels are there? What is their cargo carrying capacity? How did this fleet develop in recent years and why? And what is the outlook for the future? The answers to these questions are of interest not only to those participating in, or merely observing, this remarkable industry; they are scrutinised intensely within academic maritime studies at GMI.
Fleet statistics weave a fascinating pattern. By mid-2011 the world’s entire fleet of all types of commercial ships over one hundred tons had increased its gross tonnage to 1 billion. At the end of last year the total reached 1.09 billion GT, numbering 86,300 ships. This gigantic armada includes not only the vast fleets of bulk carriers, tankers and container ships, but also a wide range of other types. General cargo vessels, multi-purpose ships, car carriers, roll on-roll off vessels, gas carriers, reefer tonnage, cruise ships, offshore service vessels and others (such as tugs and dredgers) are represented. Many perform services which do not involve carrying cargo, of course.
According to figures compiled by shipping information providers Clarksons, another (nautical) milestone was attained recently. The world’s fleet of vessels actually carrying cargo – which had numbered 50,000 over seven years ago – reached 1 billion GT in September last year, and since then has grown to 1.01 billion, comprising 57,400 ships, today. It is especially significant that this achievement resulted from cumulative growth of an astounding 43 percent over the past five years, averaging 7.5 percent annually.
Looking at the fleet statistics in more detail reveals some impressive performances over the past few years. Expansion rates in the largest sectors have been rapid. Measured by deadweight volume, the tonnage measurement normally used in the bulk markets, the world fleet of bulk carriers has grown by 73 percent in the past five years. At the end of 2012 there were 9,500 bulk carriers totalling 679 million dwt. The tanker fleet’s growth was 29 percent during the same period, to a total of 515 million dwt (13,500 ships, including 7,700 small tankers below 10,000 dwt). In the container ship sector, where the standard measurement is TEUs (twenty-foot-equivalent units), the world fleet reached 5,100 ships totalling 16.2 million TEU at the end of 2012, after growing by 50 percent over a five-year period.
Why is all this a problem? Unfortunately (for shipowners and their bankers), expansion of transportation capacity in the main fleet sectors has outpaced the growth of global seaborne trade and demand for shipping services. The market’s two sides are often out of balance, to some extent, but in the present cycle the imbalance (oversupply) is particularly large and persistent and is having a brutal impact on freight earnings and profitability.
Contrary to many perceptions, international cargo movements have been growing quite vigorously in recent years. There has been a good recovery from the damaging setback experienced in late 2008 and 2009, when the global financial crisis caused the ‘Great Recession’, which severely but temporarily reduced world economic activity and trade volumes. The upwards trend in seaborne trade resumed and continues, with most forecasts suggesting further strengthening through 2013. A positive trade scene is therefore evolving; some other factors which affect shipping demand have been beneficial as well. On the other side of the balance sheet, enormous amounts of new shipping capacity coming in to the marketplace (partly offset by higher scrapping) has greatly swelled the fleet, as discussed. Much of this new tonnage, or ‘newbuildings’, was ordered at shipbuilding yards in better times when the shipping markets were booming. The result – more rapid fleet expansion than needed – is still unfolding and signs suggest it will continue.
Where do we go from here? Forecasters in this notoriously hard-to-predict industry are frequently wrong-footed by unanticipated events. If the world economy soon takes off again and stays there, boosting trade, surplus shipping capacity could be quickly eliminated, but few expect that to happen. Although China’s economic growth appears to be reviving, the USA is picking up, and Japan could start regaining momentum, Europe’s economy is still in the doldrums and probably will remain there for a while. Political events could disrupt trading patterns and potentially add to demand for ships, but these circumstances are essentially unpredictable. There are other factors, of course, but no indications at present of a quick solution to the fleet over-capacity problem. The scale of the problem, although diminishing, is still so large that adjustment towards a better balance may yet take some time to complete.
Richard Scott
GMI visiting lecturer and MD, Bulk Shipping Analysis
