Monday, June 19, 2017

Merchants of Death

He maintained course as he thought he was the law
& he maintained the course as he thought he was on the right side of the law.
Both maintained their course and hence the intercourse.
 
The US Navy destroyer USS Fitzgerald collided with NYK chartered boxship MV ACX Crystal during the Mid watch in the early AM hours on Saturday, 17th June, 2017 in the congested Japanese coastal waters.
 
In a full impact lateral collision the much heavier Merchant ship's bow severely damaged the starboard accommodation of the US naval ship. It was the bulbous bow of the merchant vessel which ploughed into the crew quarters & machinery space area below the waterline of the warship causing flooding, trapping and eventually death of seven US marines who may have been sleeping at that hour.
 
Prima facie, the onus rests with the watchkeepers at the pilothouse of the warship. As per the ROR, the warship was the give way vessel and the merchant ship was the stand on vessel being on her starboard side and it was the duty of the naval ship to safely manoeuvre her round ACX Crystal. But that was not to be. However, a probe has been ordered and the details of the findings will expose what transpired at the bridges of the two ill fated vessels.
 
Meantime a weird thought; the destruction of the naval destroyer by a merchant carrier has once again raised the possibility of use of commercial carriers in the modern terror/warfare. It started with 9-11, 2003 and lately commercial road vehicles have become the favourite weapon of the terrorists to execute their sinister & deadly game plans.
 
Considering the size of ships, the trend could be scary and the damage colossal when it comes to shores. MV ACX Crystal was just 30,000MT dead weight ship. Let's consider a VLCC loaded with 300,000MT of crude oil having TOE of 3 million tons of TNT ie equivalent to 150 Fatman, the Nagasaki nuclear bombs. If the vessel hits a port at full speed and with few detonators going off simultaneously, it will wreck an unprecedented havoc in a vast coastal area. It may probably do more damage then a state of the art aircraft carrier. Increasing automation and unmanned ships may increase the threat as hacking the navigation and manoeuvering software may lead to such situations at will.
 
I think the world's national defense forces should do some brain-storming and construct a contingency plan to counter and prevent induction of commercial equipment in neo warfare.

Thursday, December 29, 2016

Passing the Baton 2017

A year full of shocks and surprises is passing the baton to yet another Happy New Year 2017.

2016 was a turbulent yet interesting year for shipping. Oil prices and BDI saw record lows in a decade. It was the year when bankruptcies, mergers & acquisitions; all were happening at the same time. It was particularly a bleak year for the offshore oil n gas industry mainly due to ingress of Iranian barrels, while it was the big boys bullying at the box shipping. Dry bulk sector got up after biting dust whereas, oil tankers maintained their average earnings. The cause of poor freight show has been but not limited to mainly oversupply of tonnage, which has grown leaps and bounds in the last decade.

Its not only shipping, but our entire planet weathering winds of change. Be it environment, politics, technology or lifestyle. While climate is seeking the red corner, world politics is seeking the right-wing.  ISIS, Brexit, Modi, Duterte, Trump, Chinese territorial ambition, North Korea's nukes obsession etc, all indicate to the hostile re-alignment of world forces in the coming years.

In spite of the overhanging sword, Shipping Mario will  keep cruising through the troubled waters, so I wish.

A happy & safe New year 2017 to all.

Monday, January 25, 2016

Year of Monkey Business

New year 2016 has dawned but the world economy wears a fatigued looks and businesses are yawning...

21st Century started with boom and bust of information technology. Boom or bust, the information technology was to become the order of the day. The world was swept over by IT at the speed of light. It transformed human behaviour and life style.  In bid to survive the metamorphosis brought about by the information technology, it was imperative for each and every element and structure of the human society to undergo a rigorous evolution process. Obviously, there are some tough nuts in every walk of life. Every change is resisted by inertia or status quo.  The purpose of this inertia is to hold the continuum thru the entire animation. But this change has to be rather quick and abrupt. Hence a majority failed to accept and evolve. And this majority has now turned rebellious (ISIS). We see the war clouds hanging over the centre stage. Nature too has been increasingly hostile due to prolonging of the previous act (industrialisation).

We are going through a difficult phase of change-over before we settle down to the new dawn.
  
IT era means, 80% of the world population languishing in poverty, ignorance and destitute to fall in to the global main stream. To absorb this huge influx into the existing mainstream would mean an incredible stress on natural resources. Hence, the only logical solution would be :
1. a substantial natural resource friendly change in human lifestyle and processes 
2. a substantial shrinking of human population.

The speed of the transition would have to be faster and thus it may be a painful interlude before the paradise is regained. 

Thursday, October 29, 2015

One over-reaction leads to another

Tanker market has just witnessed a grand Q3 of year 2015. In an over-reaction to the US decision to finally lift the sanctions on Iran, crude oil prices stooped to the levels they didn't deserve thereby setting in a strong contango mood in the market. The result was obvious -  a mad rush for storage. This sudden demand in tanker market has catapulted tanker freight rates to the levels last seen in 2007/8.

Some guys born at mid day (highly optimistic) are already crying the oil will hit USD200pbbl from here. But the market indicators are suggesting otherwise. Piling inventories, growing supplies, slowing economies, and advancing technology are casting dark shadows over wishful optimism in oil market. Besides, at some point in time, global warming and oil prices will tend to have the same relationship as sugar prices in a diabetic world unless the world resigns to the consequences. Thus sooner or later the oil traders will fall on the backfoot and so would the tanker freight rates. 

Wednesday, July 15, 2015

Subject to Verification, Iran's Trade Suspension Ends

Indeed a historic day for Iran and the rest of the world as Iran trades its ambition to build nuclear weapons for its freedom to trade world-wide.

The deal, if not revoked midway, will prove good for the Iranian people. It is also a good news for oil importing nations as the deal will provide stability to the oil prices leading to energy security for the entire world. Opening of trade will make Iranians more prosperous and with prosperity their demand for goods will increase which will boost the world economy.

But the deal is not a happy news for:
  1. Oil producers, as low stable oil prices means a reduced bounty for them.
  2. Other Middle-east neighbours who were assisting Iran's trade during Sanctions era and having a windfall.
  3. Israel, a hard core opponent of Iran.
  4. Renewable clean energy sector
  5. Tanker owners. Stable oil prices are not conducive to shipping activity. Moreover, Iran has a healthy fleet of tankers, which will now be available for WW trading.

Tuesday, June 02, 2015

WHAT IS KILLING INDIAN COASTAL SHIPPING

India is blessed with ample sea resources. But it is unfortunate that like many other resources, our  coast-line is highly under utilised. While other developed countries have used the coastal sea movement of cargoes to a great extent and the share of their coastal shipping hogs a substantial pie of their total cargo movement, here in India the coastal shipping has meagre 7% share in our total cargo movement.  

The bottle-necks are well recognised and established for ages. More so,  (I will go on to add that) these bottlenecks have been deliberately created by the government to favour the rail and road transport lobby. Also, the existing major coastal shipping players have no will to fight against the system as it suits them and they are comfortable with the lesser competition status-quo.

Nevertheless, increasing volume of domestic cargo movement and pollution levels will beat the selfish interests of lobbies & syndicates in to submission and coastal shipping will evolve as the leading share-holder in India's domestic cargo movement.

The coastal shipping bottlenecks are well defined for a long time now. Just a brief revision hereunder:

Broadly:
1. Not enough volume for sea transport
2. Not enough carriers to carry sea cargoes.

The above two conditions hold causality relationship with each other. Not enough sea cargo means less demand for domestic shipping, which in turn would ensure a lean and mean fleet. On the other hand a meagre fleet i.e. less supply means higher freights, which in turn leads to less demand.  In order to rescue domestic coastal shipping, we would need to break this vicious circle causality.

Why not enough sea cargo?  
  • The lack of connectivity of non-major ports to the road and rail networks.
  • Lack of infrastructure: it is one of the biggest obstacles faced in coastal shipping industry. The government has failed to develop infrastructure that is expected to make shipment easy and efficient. Infrastructure involves electricity, road network and overall area development which supplements the use of this route.
  • Lack of separate berthing facilities for coastal & IMPEX cargo vessels at major ports and inadequate cargo handling facilities at minor ports.
  • The lack of consensus between state and centre about appropriation of funds for connectivity to non-major ports adversely affects the prospects of coastal shipping.
  • Absence of state maritime boards. Currently, only Gujarat, Maharashtra and Tamil Nadu have a maritime board. This lack of coherence inhibits focus on the development of coastal shipping across the nine coastal states.
  • Lack of lucrative government schemes: Unlike other channels of transportation, the government has not made any efforts to benefit coastal shipping users financially. Companies using coastal shipments until now had to face harsh and impartial taxes like no exemption from Income tax, customs duty on bunkers, landing fees, etc.
  • Slow and cumbersome process at Customs: The shipment process is extremely slow and laborious compared to other modes of transport which are much faster. Companies are unwilling to waste precious time in adhering to these processes.
  • Road & rail transport has an edge over water transport because most of the production and consumption centers are landlocked. Also, it provides door-to-door movement. Over the years, there has been substantial investment in its infrastructure. Coastal shipping, on the other hand, involves double-handling costs.
  • less supply of shipping fleet
Why not enough Shipping Fleet? 
  • Nonavailability of concessional finance to acquire coastal vessels
  • Absence of competitive P&I instruments
  • Absence of long term period charters to facilitate loans and financing of assets.
  • High import duties on bunker oil and spares
  • High manning scales which increase operational costs
  • Stringent specifications relating to construction of vessels, leading to higher capital costs
  • Incidence of corporate tax for coastal as against tonnage tax for ocean-going vessels and personal income tax which discourages quality officers from continuing on Indian coastal vessels
  • Lack of policy measures to promote existing and new coastal shipping players.
  • Less demand. Not enough sea cargo
The Solution!

Knowing the cause, solution is no brainer. Only thing we need is the WILL to promote coastal shipping in India. It would be prudent for the government to rise above petty politics of favouritism and appeasement and make policies for the brighter and safer future of India.

Monday, March 02, 2015

Achchhe Din (Good Days) are back

Ship-owners need not say cheese anymore.

Fall of Oil prices to USD40-50 a barrel is an unfortunate over-reaction to oil's increased supply over the past few years. More so, when the demand side has always been up and pickin.

In reaction to current oil prices we are seeing steep drop in CAPEX into upstream. At the same time there is gradual shutdown of the supplying wells.  It is nobody's guess but just a matter of time when the demand-supply equation will grossly trip over in favour of the producers and the prices will quickly sprint up to unprecedented levels once again.

Oil producers are vulnerable at present but the tanker owners are already reaping a windfall. Big owners and traders are going in for mass storage activity on VLCCs. For each dollar increase in oil price they make usd2million on a V.  Also, the Vs on storage duties means reduced availability of tonnage for the spot trading market thus a high freight for the sailing sisters. And also, a contango in oil prices leads to higher trading volumes and demand for tonnage. So all in all "Achchhe Din" (good days) for the tanker owners are here to stay until we see the oil prices stabilised to more rational levels.

Not only the tankers but, toward the later part of the upswing in oil prices, dry bulkers will also catch up with their envied sibling, as at those high levels oil prices will push up the demand for coal and iron ore too. 

No doubt, ship-owning business is not for faint-hearted. Latch on to the roller coaster without missing a heart beat.