Maritime News Update Week 47/2019

Drewry: Higher BAF Charges to Arrive ahead of IMO 2020

With the enforcement date of the IMO 2020 low-sulphur regulation now only 6 weeks away, shippers and forwarders are starting to get their cheque-books out to help ocean carriers cover the additional cost of the cleaner, low-sulphur fuel.

Shipping consultancy Drewry will publish the first Bunker Adjustment Factor reference price based on low-sulphur fuel and in line with an independent BAF indexing mechanism in early December. Using this mechanism, the bunker reference price will change from the previous high-sulphur IFO 380 fuel to the new low-sulphur fuel and affect the new BAFs with effect from January.

Since early October, the weighted average low-sulphur bunker price for major bunkering ports tracked by Drewry has been USD 542 per metric tonne. So, assuming prices stay at about that level in the next two weeks, the Drewry bunker reference price for the period October-November will be around USD 530-550, up about 34-38% from the USD 396 price of IFO 380 fuel at the same bunkering ports applicable to the fourth quarter of 2019 period.

Drewry recommended that shippers and forwarders use the average October-November low-sulphur price to set new BAF charges applicable from January 1, 2020.

Several carriers have announced transitional or “emergency” bunker charges applicable from December 1, 2019. These will apply, they say, only to spot rates and to contracts of less than 3 months, but Drewry cited a customer with an annual contract that has also been requested by some of his carriers to start paying an IMO BAF from December.

“It will be interesting to see whether the agreed contract BAFs go up pro rata the bunker prices, as stipulated by the Drewry BAF indexing mechanism, and whether some carriers end up reducing their base rates and charge the “full BAF” in their next contracts,” Drewry said.

Taiwan fines four foreign ships for violating low sulphur fuel regulation

Taiwan authorities have fined four foreign flagged ships over the use of high sulphur bunker fuels for violating the nation’s Emission Control Area (ECA) regulations.

The four ships were each fined TWD100,000 for not using bunker fuels with a maximum sulphur content of 0.5% when they are in the ECA zone, according to a note from Taiwan’s Ministry of Transportation and Communications.

The four ships are registered in the Marshall Islands, Panama, Hong Kong, and Singapore. Two of the ships entered Taiwan through the port of Taichung, while the other two arrived through Kaohsiung port.

The Taiwan ministry reiterated that since January this year, all ships accessing Taiwan ports are required to burn 0.5% sulphur fuel.

Taiwan’s ECA has been in placed ahead of IMO’s global 0.5% sulphur cap that will be enforced from 1 January 2020.

The Ministry cited statistics from the Environmental Protection Administration that the imposition of the ECA has led to lower concentration of sulphur dioxide in the air near Taiwan’s seven seaports.

The sulphur dioxide concentration near ports in Taichung, Keelung and Kaohsiung have dropped by 18%, 32% and 45% respectively.

The Ministry of Transportation and Communications added that other efforts to lower air pollution include requesting ships to reduce their operating speed when entering ports, expanding cold ironing facilities, and decreasing pollution produced by heavy duty machines.

JAXPORT, SSA Marine Break Ground on New Container Terminal

U.S. Department of Transportation Maritime Administrator Rear Adm. Mark Buzby and officials and leadership from Jacksonville Port Authority (JAXPORT) and terminal operator SSA Marine broke ground on a new container terminal at JAXPORT’s Blount Island Marine Terminal on November 22.

The SSA Jacksonville Container Terminal is an expansion of SSA’s current leasehold at Blount Island and includes USD 238.7 million upgrades in infrastructure and equipment. The facility will offer deepwater berthing space to accommodate larger containerships calling JAXPORT from Asia more fully loaded.

The groundbreaking follows the agreement signed between JAXPORT and SSA Marine in March this year. The agreement for the development and operation of the terminal is for 25 years with two five-year renewal options.

Operations will continue throughout the redevelopment, which is expected to be completed in 2023 — coinciding with the completion of the federal project to deepen the Jacksonville shipping channel to 47 feet.

Phased yard improvements are underway at the terminal that will allow the facility to accommodate up to 700,000 TEUs annually. Berth upgrades are expected to be completed in 2021 and will allow the terminal to simultaneously work two Post-Panamax vessels. The Jacksonville Harbor Deepening Project includes the construction of a vessel turning basin that will allow larger vessels calling on the terminal to turn at Blount Island.

The SSA Jacksonville Container Terminal offers 80 acres of terminal operating space, with the option to grow up to 120 acres as space becomes available. The facility features three post-Panamax electric container cranes and terminal plans include the addition of three more container cranes.

During the groundbreaking, Admiral Buzby formally presented JAXPORT with a previously awarded USD 20 million grant from the U.S. Department of Transportation. The grant will fund terminal enhancements that will allow the facility to accommodate more containers on an expanded footprint.

Container lines set for organic growth following consolidation wave: DNV GL

The current ecosystem in the container shipping market is favourable to shipyards and financiers with lines expected to grow organically, with no oversupply of tonnage, according to Jan Olaf Probst, director business development and executive vice president of DNV GL.

Speaking at the DNV GL Bulker & Container Forum held in Hong Kong on Thursday as part of the Hong Kong Maritime Week 2019, Probst suggested that most big liner companies will have to grow organically by ordering newbuildings which is good news for tonnage providers, financing houses and shipyards.

He explained that since eight of the top 10 global liner companies by tonnage capacity (including owned, chartered tonnage and orderbook) are already members of existing alliances plus one (HMM) expected to join soon, it is unlikely for any of them to acquire members from another alliance without breaching anti-trust regulations. He added that the top five global liner companies by tonnage capacity hold a market share of 65% and the top ten liner companies hold a market share of 82%.

Probst dismissed the idea that there is oversupply of vessels in the containership market. He explained that there has been a trend of 4% to 5% growth in global containerized trading volume except in the year of 2009 while fleet expansion has been roughly 3% to 4% over the longer period which means tonnage growth has been slower than the increase in cargo volume. According to Probst, 200m boxes were shipped in 2018.

He pointed out that global container fleet has increased by 262 ships or 5.77 million teu between the end of 2012 and the end of 2018, which translates to an average size 22,000 teu for those newbuildings. Therefore he suggested that a larger but reduced number of vessels would be the trend for major liners.

Meanwhile, number of containership newbuilding contracts stands at around 50 in 2019 YTD, compared to around 180 contracts in 2018 FY, according to Probst. He expects to see a large increase in number of ship demolition in 2020 after witnessing the lowest scrapping rate since decades in 2018 and a rather low number in 2019.

Probst expects newbuilding contracting in the next two years to be of mainly four types of vessel sizes: 22,000 teu, around 15,000 teu, around 10,000 teu and under 4,000 teu. He explained that while the Far East-Europe trade are being handled by the ultra large vessels, intra-Asia trade being dominated by 4,000 teu ships, the long transpacific routes will be for the 10,000 teu to 15,000 teu vessels which can go through the Panama Channel.

According to Probst, 90% of the tonnage going through the new locks in Panama are gas carriers and containerships. Out of the 147 containerships that used the new locks at least once in 2019YTD, 49 are 8,800 - 14,400 teu (19 rows – 48 beam), 30 are 8,200-10,100 teu (18 rows – 46 beam), and 53 are 6,700-11,100 teu (17 rows – 43 beam).

MSC Isabella becomes largest containership to call in Singapore

The 23,656 teu MSC Isabella became the largest containership to call the Port of Singapore when it berthed at the weekend.

The MSC Isabella is one of MSC’s Gülsün-Class containerships, which are currently the largest in the world, and was the first to call at the second largest container port globally. The vessel sailed from Qinqdao, China on 28 August on round voyage to Europe, which the company said it had now completed.

“Our biggest and most energy efficient ships are being deployed on the Asia-Europe trade, which demonstrates our continued commitment to this largest and busiest trade corridor. We are delighted to welcome the first port call in Singapore by MSC Isabella from our largest Gülsün-Class of ships,” said YJ Tan, regional managing director for MSC Asia Regional Office in Singapore.

Illustrating the scale of the vessel MSC said it could transport the equivalent of 384 million pairs of shoes. The vessel is equipped to carry more than 2,000 reefer containers.

Eddy Ng, managing director for PSA Singapore Terminals 2, said, “We are heartened by the arrival of MSC Isabella at MSC-PSA Asia Terminal in Singapore. It affirms the strong commitment and steadfast partnership between PSA and MSC, while also demonstrating PSA's capability to efficiently handle the world’s largest container vessels, further enhancing the status of the Port of Singapore as a premier global transhipment and logistics hub.”

CMA CGM to raise $2 billion from port terminal, ship sales to fund CEVA deal

PARIS (Reuters) - Shipping group CMA CGM said it planned to raise $2 billion (1.5 billion pounds) to help finance its takeover of CEVA Logistics, with half the cash coming from selling port assets to its joint venture with China Merchants Port Holdings Co.

France-based CMA CGM, the world’s fourth-largest container shipping company, bought CEVA this year to expand in land logistics, valuing the firm at about $1.7 billion.

CMA CGM said it was pushing back some of Switzerland-based CEVA’s financial targets by two or three years, partly because of a slowdown in some industries, such as car manufacturing.

Under an agreement with China Merchants to help finance the CEVA deal, CMA CGM would sell stakes in 10 port terminals for $968 million to Terminal Link, a joint venture between the French and Chinese company.

The Terminal Link deal, expected to be finalised in the spring, would be partly financed by a $468 million capital increase by the joint venture and by a loan from China Merchants that would be converted into another capital increase after eight years, CMA CGM said in a quarterly results statement.

The ownership of Terminal Link, in which CMA CGM holds a 51% stake and China Merchants has 49%, would not change, CMA CGM Chief Financial Officer Michel Sirat told reporters.

 China: World’s Largest Shipbuilder Established

China has officially unveiled China Shipbuilding Corporation, which was described by the country’s officials as “the world’s largest shipbuilding group”.

The inaugural meeting of the newly created company was held in Beijing on November 26, 2019, China State Shipbuilding Corporation (CSSC) said in a statement.

The new group has been created by the merger of the two largest state-owned shipbuilders by production capacity, China Shipbuilding Industry Corp (CSIC) and CSSC.

The group’s establishment follows the approval granted by the Chinese state asset regulator last month.

On the occasion, Hao Peng, Chairman of the State-owned Assets Supervision and Administration Commission (SASAC), pointed out that the creation of China Shipbuilding Corporation is a way to enhance the competitiveness of the domestic shipbuilding industry, promote the development of the national defense technology industry and reform state-owned enterprises.

As informed, the new shipbuilder has 147 research institutes, business units and listed companies, with total assets of CNY 790 billion (USD 112.2 billion) and about 310,000 employees.

HMM Becomes Member of Getting to Zero Coalition

South Korean shipping company Hyundai Merchant Marine (HMM) has joined the Getting to Zero Coalition, a new alliance that aims to accelerate international shipping’s decarbonization.

“Climate change is a defining issue of our time and the scale of the environmental regulation we are facing is unprecedented,” Jae-Hoon Bae, President & CEO of HMM, said.

“In order to ensure sustainable growth on the pathway to decarbonisation, all players need substantive reaction to the technological solution of ZEV (zero emission vessel) as well as the development of carbon neutral fuels. HMM is well prepared to cooperate with relevant authorities and institutions within the coalition,” he added.

As explained, HMM is committed to reducing carbon emission by 70% by the year 2030 compared to 2008 levels and thereby reach carbon neutrality by 2050 for its entire container fleet.

The company reorganized its R&D team to accelerate a range of research studies including the exploration of the commercial viability of hydrogen-powered systems and collaboration with DSME on smart ship development.

“HMM’s carbon emission target is ambitious but achievable. Along with Getting to Zero Coalition, HMM expects to make a better contribution to overall industry in moving towards carbon neutrality,” an official from HMM commented.

Comprising almost 100 members, Getting to Zero Coalition was launched at the UN Climate Action Summit in New York in September 2019. The coalition is committed to making the ambitious IMO Initial GHG Strategy a reality by getting commercially viable deep-sea zero-emission vessels powered by zero-emission fuels into operation by 2030.

(Source: World maritime news; Seatrade maritime; Reuter, VN Customs news; American Shipper)