Thursday, 26 April 2012

Rio Tinto distances itself from fleet expansions

Rio Tinto distances itself from fleet expansions
Australian miner says owned vessels will account for only 5% of its chartering business

Max Tingyao Lin, Lloyd's List, Wednesday 25 April 2012

ANGLO-Australian Rio Tinto has distanced itself from other mining giants’ huge fleet expansion plans, insisting that despite having 15 newbuildings scheduled for delivery over the next two years its own vessels will only account for a small percentage of its shipping needs.
Speaking at a BIMCO conference in Singapore, Rio Tinto Marine chief operating officer Michael Harvey played down concerns raised by the audience that Rio Tinto’s expansion could be similar to Brazilian miner Vale’s newbuilding programme of 35 very large ore carriers to add to its existing fleet of capesizes.
A fear from shipowners is that increased competition for cargo as more miners expand their fleets will drive down freight rates for large bulk carriers even further and therefore squeeze many smaller traditional shipowners out of business.
However, Mr Harvey sought to play down those worries. “We need to manage our physical risks. We are only buying the vessels we have trouble getting [from the market] or the vessels in uncompetitive markets,” he said.
“We’ll always be a big charterer. [Even after the addition] our fleet will only be able to meet 5% of our charter demand.”
Rio Tinto’s orderbook will add 15 dry bulk carriers to its fleet of five 90,338 dwt post-panamax bauxite carriers in the next three years, mostly to meet this demand, according to Mr Harvey.
The new vessels will include eight 205,000 dwt iron ore carriers, three 250,000 dwt ore carriers, two 88,000 dwt bauxite or coal carriers and two 68,000 dwt caustic soda carriers.
Although his company is operating on a “competitive commercial” basis, Rio Tinto will not charter out its vessels except for short term contracts, according to Mr Harvey.
Mr Harvey also said Rio Tinto has no plan to order more vessels aside from existing orders, citing a weak, volatile dry bulk market resulting from overcapacity.
Instead of driving down rates, and suffering from volatilities and uncertainties, “what we want to see are competitive and sustainable rates”, he added.
“Rates today are not sustainable [as they are too low]…what we really want is to use our vessels for 25 years, then recycle,” said Mr Harvey.
In comparison to Rio Tinto, rival Australian iron ore miner BHP Billiton only has a couple of vessels in its owned fleet and uses the chartering market almost exclusively.
Brazilian miner Vale has a fleet of owned bulk carriers but its fleet expansion plans for 35 owned and chartered-in 400,000 dwt VLOCs has attracted a huge amount of attention over the past year or two as they have started to deliver into service from Asian shipyards.
They were originally ordered when freight rates were sky-high for capesizes during the shipping boom of 2007-2008 and the idea was to cut costs; now that capesize rates are weak, Vale has been pushing the environmental advantages of large vessels as they produce less emissions. 

Tuesday, 24 April 2012

Lessons learned from viral piracy attack video

An anonymous video of pirates attacking a small, laden bulk carrier has gone viral on the Web, with several sites taking the video down due to its fairly brutal consequences for the skiff crew. The video opens with the Master instructing control of the ship's steering be transferred from the bridge to the steering gear room as the skiff approaches the ship, and then the private security team engaging the skiff with live fire as it tries to come alongside and board over the starboard rail.

There has been hand wringing, wailing and anguish from various sections of the maritime community. However, the role of the security team is to protect the ship and her crew - one which they fulfilled. Queensbury Rules are not a feature of the asymmetric battle between normally unarmed merchant ships and AK-47 toting Somalis.

Piracy is a misnomer, a romantic term of a bygone era attached by the press and politicians to maritime criminals. The positive outcome of this anonymous attack has been the elevation of the real life dangers that ships' crews face crossing the Gulf of Aden and Indian Ocean. That the video is likely to get viewed in Puntland can only be an added bonus.

The Antipodean Mariner

Lloyds List - Investigation launched as shooting video goes viral
PMSC’s use of force may end in legal action
Liz McMahon
Tuesday 24 April 2012
THE video of armed guards shooting at a pirate skiff that generated heated debate at the International Maritime Industries Forum last week has gone viral and may end in a criminal prosecution, writes Liz McMahon .
The video shows a private maritime security firm’s operatives firing what they called warning shots, but there was no gradual, or “onion layered”, approach to protecting the ship.
The guards continued to fire for some minutes as the vessel moved away from the pirates and the threat to the vessel became less urgent.
While some members of the IMIF felt the PMSC behaved in an acceptable fashion, the footage has generated a strong reaction from the private maritime security industry.
The authenticity of the video has not yet been verified. No security firm has come forward to accept responsibility for the incident. However, the International Association of Maritime Security Professionals has issued a statement on after conducting an initial investigation into the incident.
It said that the PMSC in the video had employed a questionable use of force and, after receiving expressions of concern regarding the video’s content, the IAMSP felt it had sufficient information to warrant an investigation.
The industry body said that after gathering information it had concluded that the nature of the events in the video warranted the attention of the appropriate flag state, understood to be the US, and not an administrative investigation.
The IAMSP is halting its investigation and will now defer to any decision that comes out of subsequent legal action from the flag state. It has urged the rest of the maritime security industry to comply with any flag state requests in this matter and not to conduct separate investigations.
However, the president of US PMSC Nexus Kevin Doherty has called on the Security Association for the Maritime Industry to conduct a thorough review of the incident.
“Security associations must ensure that firms are held accountable for their actions (and public statements) to ensure governance is not merely a paper tiger,” Mr Doherty said.
“Life is precious, and great care needs to be given by any security firm hired to provide defence. The use of force model is the cornerstone of any security firm. Threat identification, proper use of force understanding and incident de-escalation need to be paramount components of every security guard’s training.” 

Monday, 23 April 2012

Tom Price

MOL's 'Tom Price' successfully loaded her first cargo of 211,506 tonnes of iron ore and sailed on the 4th of April for Bayuquan, China where she completed discharge on April 19th. Mrs Kulkani, we hope your husband is enjoying his new ship.

Loading her first cargo at East Intercourse Island, Dampier
Lying alongside EII Terminal

The Antipodean Mariner

Wednesday, 18 April 2012

Capes of misfortune

A very succinct piece of analysis, on the parlous state of the Capesize market, which the AM came across this week;

According to online shipping database Sea-Web, Jan-2007 to Oct-2008 bore witness to an unprecedented period in Capesize contracting: 458 vessels were ordered, swelling the orderbook to beyond 100% of the then trading fleet.

During this time quoted newbuild prices for a standard 180,000-dwt vessel accelerated from $71M to $99M with the required break-even time-charter rate ranging from $27,500 per day to $35,600 per day. To date, 314 vessels have been delivered (23% of the current fleet) with many trading in a market whereby Owners are recouping 14%-18% of the required breakeven amount.

Those ordered in early to mid-2007, if traded individually on the spot market, would have briefly traded profitably over the last 12 months. The picture is far worse for those ordered as mid-2008 whereby losses were incurred every day over the last year.

For a Capesize fleet Owner using a portfolio approach for their average cost of cover, these ships would increase the required daily return beyond what is tolerable in the current market, making it particularly difficult for heavily indebted Owners to cover, or refinance their borrowing costs and remain solvent.


Sunday, 15 April 2012

The Cape Project

PN65, the first ship of the series, is three weeks away from sea trials, and the Antipodean Mariner will be back 'on the water' for a week in May while she is speed trialed, zig-zagged and crash stopped. Using a mash-up of photos taken over the past two months, PN65 and PN66 are now both afloat and fitting out. The scale of production, as the Graving Dock is filled with four ships under simultaneous construction, is spectacular.

From the bridge of PN65, the nine holds stretch out and the MacGregor hatch covers are fitted.

PN65, where the Yard has fitted a gangway to allow direct access the engine-room

Taken earlier in 2012, PN66 on the far side has her engine-room fitted out and in the foreground sister-ship PN68 rises from the dock floor

Less than two months later, PN66 floats out to join her sister at the fitting out quay.


Friday, 6 April 2012

Quality, Brand (and Piracy)

A philosophical post over the Easter holiday, on the cost but apparent zero value of quality and whether there is emerging value in brand?

Quality first entered shipping's vocabulary with in the form of SIRE - the Ship Inspection Reporting Programme. After an evolutionary process of Oil Company setting up their own oil tanker vetting programmes, the duplication of inspections and administration was recognized and a single inspection criteria for oil tankers from which all member of OCIMF would submit and use.

In the world of dry bulk, Rightship followed in 2001, founded by BHP and Rio Tinto to apply a quality standard to ships chartered to load at their terminals and carry their cargoes.

The admirable objective of both SIRE and Rightship is to establish a quality standard higher than straight statutory compliance and to encourage Ship owners to invest in quality as a commercial incentive.

Which brings us to the ugly reality today of Capesize bulk carriers and VLCC tankers earning a fraction of their daily operating costs. A modern Cape need to earn about $21,00 day to break even on financing, wages and operating costs but are currently making less than $5,000 a day in the volatile spot market. VLCC's costing over $150 million need about $30,000 as day but can earn as little as $1,000 a day in an over-tonnaged trade route.

The crux of this post is that structural separation Shippers' absolute demand for quality while at the same time demanding less than break-even cost of freight. This same scenario is being played out in the everyday lives of shoppers as large Retailers demand higher quality standards combined with driving down the cost of goods - sometimes referred to as the WalMart effect.

The inevitable question is when will quality have to be sacrificed in the interests of economic survival? In some circumstances this may have already happened and despite rules, QA systems and audits the shipping industry has undergone Darwinian adaption which provides the illusion of quality while in fact operating in 'needs must'.

The above opinion runs completely contrary to Adam Smith's theory of the invisible hand self-regulating the market. However, the Antipodean Mariner's theory is that the pursuit of quality, far from being a differentiator, has become in itself a distorter of the true state of the market.

Placed into the context of several high profile casualties featured in this blog, Rena and Costa Concordia both went aground and were lost with audited and certificated quality systems in operation.

If quality is no longer capable of differentiating market participants, and Buyers are no longer prepared to pay a premium for quality, the AM hypothesizes that brand will enter the salty vocabulary of shipping.

Brand represented by the financial resources to perform the promises made in a contract. The industry buzzword is counter-party risk, or the likelihood that the Company you signed a charter with today will collapse in a litigious heap next month or next year. The shipping world is wracked with high profile financial collapses (Korea Lin, Sanko Steamship - again), as high cost contracts struck in an environment of pre-GFC largess fail to be sustainable in the current low freight market.

There is an emerging argument that Owners have assets over which a Court can secure orders in the event of a commercial dispute. However, Charterers can collapse an under-capitalised entities and emerge the next day ready to fix under new terms.

Shipping has had a long tradition of 'low doc' contracts, based on mutual trust between Buyer (Charterer) and Seller (Owner). The rise of counter-party risk has unfortunately pervaded the freight contract market and Shippers and Owners need to develop risk tools in addition to quality tools to avoid being left holding the financial baby.

If you have got the end of this mini-essay, a bit of light entertainment can be found here (especially if you're a working Seafarer). Thanks to for posting and the AM endorses their hope that this clip makes its way to a Somali pirate's iPhone soon.

The Antipodean Mariner

Wednesday, 4 April 2012

Seagate/Timor Stream and Rena

Followers love a good maritime disaster - the page hits don't lie. This tale of woe comes from the Caribbean, where the UK registered 'Seagate' collided with the 'Timor Stream. Amazingly, no fatalities though one crewman was pickd up from the sea by a passing yacht.

The bow of the Timor Stream has penetrated right in to the engineroom of Seagate,taking what would likely be the Officers Mess and Ship's Office on the starboard A Deck.


Depth of penetration into the accommodation

Part of Seagate's lifeboat davit draped over the bow

Remarkably little damage to Timor Stream

And news closer to home, Rena's stern section has 'fallen off' Astrolabe Reef today, leaving only the bow visible. More photos of Rena at Maritime NZ's gallery.


Tuesday, 3 April 2012


Back to technical matters and the plethora of new regulations (yes, rules...) being applied to shipping. Cynically, the Antipodean Mariner doesn't view these new rules as 'greening' Planet Earth but 'browning' it at a slightly slower rate.

Ships have carried ballast since the beginning of maritime trade - up to the turn of the 20th century as rock, sand and even low value manufactured goods (such as iron lace) sold in the new colonies to make space for the valuable wool and grain cargoes back to the European motherlands.

The development of world trade on an industrial scale in the 20th century lead to some undesirable environmental consequences. As ships sizes grew they needed to carry sea water ballast to make them controllable and which in turn gave invasive species the opportunity to 'emigrate'.

Vonks Plankton

Well known examples have been the Zebra Mussels in the US/Canadian Great Lakes and Asian dinoflagellate algae into Tasmania from wood chip carriers. Interim controls have focused on either quarantining ballast water (hard on a cargo ship which has to deballast in order to load cargo) or mid-ocean ballast water exchange. Ballast water exchange is done to flush out the highly populated coastal water with lowly populated oceanic water, especially around the equator.

Ballast water exchange has its own dangers and impacts. Flushing the tanks (flow through) method requires 300% of the tanks' volume to be overflowed and can put pressure stress on the hull structure. Discharging and reloading the ballast can have intended consequence on the vessel's stability, as the crew of the PCTC 'Cougar Ace' discovered when she became unstable and took an 'angle of loll' when the double bottom tanks were being 'exchanged'. The salvage cost the life of one of the Salvors and the 'writing off' of a complete cargo of Mazda cars. The cars were undamaged but Mazda couldn't take the chance of subsequent warranty claims and so the whole cargo of 5,214 vehicles went through the crusher!

Cougar Ace adopting an angle of loll of Alaska

Recognising the limitations, risks and cost (in time and fuel) to exchange ballast, the IMO requires new vessels to treat ballast water - shorthand for kill the little wriggling zoo plankton, dinoflagellates and organisms before they are discharged into an unsuspecting environment.

The three basic treatments rely on an additive bio-cide (small ships), ultra-violet light (medium sized) or, for large scale industrial carnage, electro-chlorination.

The AM's fleet will use electro-chlorination - the reduction of chlorine gas from sea water (sodium chloride, or salt in solution) and then the re-injection of the chlorine gas back into the ballast water stream. When you need to treat ballast water at up to 6,000 tonnes an hour, bio-cide or U/V just don't cut it. A big bulkie will carry between 90,000 and 110,000 of sea water ballast on a her return leg.

In-line Electro-Chlorination Unit

One emerging problem, which appears to be getting traction with Manufacturers and Class, is that the electro-chlorination process may also be chemically liberating hydrogen, which is in turn being detected in the under-deck structure of ballast tanks. If you watched the massive explosion lifting the top off the Fukushima Nuclear Reactor on TV, that was hydrogen! The AM's site team will be testing for hydrogen gas in the upcoming sea trials for PN65, as accumulation represents an unacceptable in-service risk which if proven will require additional ballast tank ventilators.

The Antipodean Mariner

Monday, 2 April 2012


I read this post on BBC Future over the weekend - as a motorcyclist and ex-mariner really got the correlations between the two wheels and the hazards at sea. Hope readers enjoy this long but well reasoned article. Future posts are in the pipeline on the cost of quality, ballast water treatment and 'The Right Bike'...

The Antipodean Mariner

Risk of Death in the Workplace

Health and Safety. I know, I know, I can already hear your groans. But bear with me please. We all know what dismal reputations those “killjoys” and “jobsworths” have in health and safety. In the UK, the Health and Safety Executive (HSE) is often forced to dispel “myths” about rigid rules it is said to have enforced, such as banning cast members throwing sweets into the audience during pantomimes.

But if we conduct a safety analysis of the workplace using the statisticians’ trusty tool of the micromort, defined as a one-in-a-million chance of sudden death, we can begin to appreciate what various initiatives have actually achieved.

For instance, these initiatives appear to get little popular credit for the reduction in industrial accidents over the decades. In 1974, when the UK’s HSE was formed, there were 651 employees killed at work, an average risk of 29 micromorts per year for an employee.

By 2010
this figure had fallen to 120, which is 5 micromorts per year, an impressive 82% decrease in risk. (So you know, 5 micromorts is roughly equivalent to the risk of travelling 30 miles (48 kilometres) on a motorbike, or a single scuba-dive.) People who are self-employed carry more risk, and 51 were killed in 2010, which bumps up the overall UK average to 6 micromorts per year.

Britain comes out well in comparison with its European Union counterparts. The statistical office of the EU, Eurostat, reports that in 2007 British workers were on average exposed to 10 micromorts per year (excluding road transport deaths), compared with 17 in France, 19 in Germany, 26 in Spain, 35 in Poland and 84 in Romania. Of course the low UK figures could be because nobody in modern Britain does anything but stand in shops or sit behind computers.

On the other side of the Atlantic, the US Bureau for Labour Statistics provides some extraordinary statistics on the fate of 130 million workers in 2010. A total of 4,547 workers were killed, a rate of 35 micromorts per worker per year. The most common cause was highway accidents, which are excluded from the European figures: without these the rate falls to around 28 micromorts per year, around that of Spain.

But, believe it or not, the second most common cause of death, larger than falls or being hit by things, is “assault and violent acts”. This comprises 18% of all work-place fatalities, and includes 506 homicides (this was down from 860 homicides in 1997). So this means that each year US workers have on average around 4 micromorts risk of being murdered at work – not much less than the total risk to UK workers.

Comparing these figures with the wider world is tricky, as reliable statistics are hard to come by. For example, the International Labour Organisation (ILO) said that India reported 222 fatal accidents at work in 2005, while the ILO reckoned the true number was nearer 40,000.

Out of 2 billion workers worldwide in 2008, the ILO estimated that there were 317 million injuries requiring more than four days absence, and 320,000 people killed while at work, although they only heard about 22,000 of these deaths through official channels and so had to guesstimate the rest. This makes it an average of 160 micromorts per year per worker.

But it is important to bear in mind that all these figures are averages. This includes vast armies of workers toiling over computers, which although causing stress, repetitive strain and back injury, rarely actually kill you on the spot.

Some occupations, though, are a different matter.

Apart from niche jobs such as providing security in unstable regions of the world, the highest-risk occupation in the UK today is, believe it or not, commercial fishing. A recent study found 160 deaths in commercial fishing in the UK between 1996 to 2005, which works out as 1,020 micromorts per year per fisherman. This is staggeringly high – about the same as the risk British coal-miners faced in 1911. Commercial fishing is also the most dangerous job in the US, with a risk of 1,160 micromorts per worker in 2010. Perhaps surprisingly, being a police officer was only the 10th most risky job in the US, at 180 micromorts a year.

We have looked at how dangerous some occupations can be, but how risky does something have to be before an organisation such as the HSE decides that something should be done? The HSE’s philosophy is based on what is known as the Tolerability of Risk framework, and can be rather nicely related to micromorts.

Basically, potential hazards are thought of as being on a spectrum of increasing risk, divided into three fairly loosely defined regions. At the top are “Unacceptable” risks – where something must be done to protect either the workers, or the public, or both, whatever the benefits of the activity may be. At the bottom are “broadly acceptable” risks, which are not exactly zero but are considered insignificant – the sort of thing we would regard as normal in our daily lives.

In between these extremes lie the “tolerable” risks – those that we may be prepared to put up with if there is sufficient benefit, such as providing valuable employment, personal convenience, or keeping the infrastructure of society going. After all, somebody has to do the dirty work.

Acceptable or not?

But how does anyone decide what is unacceptable, broadly acceptable, or tolerable? This cannot be necessarily put into numbers, but again we can turn to the HSE because they have come up with some rough rules-of-thumb.

First, they state that an occupational risk might be considered “unacceptable” if the chance of a worker being killed were greater than one in 1,000 per year. This equates to 1,000 micromorts per year, around the current level for commercial fishing. “Exceptional groups” are excluded from this: presumably serving in a war-zone counts as exceptional, for example, when the average risk faced by 10,000 servicemen and women in Afghanistan reached 33 micromorts a day, or around 10,000 a year.

For members of the public (rather than employed workers), the HSE considers a one in 10,000 a year risk – which is 100 micromorts a year – as being generally unacceptable. At the other extreme, risks are considered broadly acceptable if they are less than one in a million per year – or 1 micromort. This, by the way, is the current estimated risk of being killed by an asteroid.

Disaster zone

But even such a minimal risk, if applied to the whole population of the UK, would mean around 50 deaths a year. So what would happen if these occurred all at once, say disasters with multiple fatalities, hazards that affect vulnerable groups such as young children, or risks imposed upon people just because of where they live?

In these circumstances, “societal concerns” can trump these cold micromort calculations. And again, the HSE has come up with some rough guidance that reflect these concerns: for any potential hazard, the risk of an accident involving 50 deaths should be less than 1 in 5,000 per annum. So let us say there is a dam, which, if it burst, would be likely to kill 50 people. In this case it needs to be designed so that this could be expected to happen only once every 5,000 years. This is a fairly stringent criterion. If 10,000 people live below the dam, that is less than 1 micromort a year each.

From an individual perspective this might be considered as being “acceptable”. But because we do not like disasters (although people clearly love reading about them in newspapers) then huge amounts of money are spent to make tiny risks even tinier.

So, perhaps it is time to unfurrow those brows and un-grit those teeth, and say hurray for health and safety!