Shipping Review of 2014 and What We Can Expect in 2015

A snapshot look at the highlights and lowlights of 2014, and what 2015 holds for the marine market.

Paul Hill, Chief Surveyor, Western Europe

LAST YEAR’S RECORD BREAKERS WORLD’S LARGEST CONTAINER SHIP

In November 2015 China Shipping Container Line took delivery of the largest container ship in the world. The CSCL GLOBE wi1th a capacity of 19,100 TEU is the first of five to be delivered with the others coming out of the yard in 2015/2016. This surpasses the Maersk Line 18,340 TEU Triple E’s which started coming into service in July 2013.

 

The vessel that now holds the title of the world’s largest heavy lift ship took to the seas for the first time last year. Called PIETER SCHELTE, this behemoth can lift oil rigs right out of the water and move them to new destinations having a lift capacity of a massive 48,000 tonnes. It also has pipe laying capability making it the world’s largest pipe laying vessel as well. It measures a staggering 1,253ft (382 metres) long and 407ft (124 metres) wide, making it almost as long as the Empire State Building is tall and wider than the height of Big Ben. Another even larger ship of this type is on order and will be able to lift the very largest existing platforms.

WORLD’S LARGEST CONTAINER LOAD
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On July 21, 2014, the MARY MAERSK departed Algeciras, Spain with a world record 17,603 twenty-foot equivalent units (TEU), the most TEU’s ever loaded onto a single vessel. MARY MEARSK is the third vessel in Maersk Line’s Triple-E class, which have a nominal capacity of 18,270 TEU, although to date port restrictions have prevented the vessels from reaching their full capacity.

NORTH POLE CRUISE SHIP RECORD
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The 5 star expedition ship HANSEATIC, of Hapag-Lloyd Cruises, set a new record for passenger ships in the Northeast Passage. On 26 August 2014, the 122.8-metre-long ship reached the northernmost point at 85°, 40.7’ north and 135°, 39.6’ east. At this latitude, the HANSEATIC was just 480 kilometres from the North Pole. This feat was achievable with unusually good weather and ice conditions, but at what risk I wonder?

 

 

REMOVAL OF THE COSTA CONCORDIA

We all know of the Italian cruise ship which capsized and sank after striking an underwater obstruction off the island of Giglio, Tuscany on 13 January 2012, with the loss o6f 32 lives. After almost two years in the planning, and construction of a large steel frame and the attachment of large steel tanks or caissons, the vessel was finally righted by salvors on 17 September 2013 after which further tanks where welded to the sides of the ship to stabilise it before the refloating attempt. The operation to refloat the COSTA CONCORDIA shipwreck from the shores of Giglio kicked off on the morning of 14 July 2014, two and a half years after the casualty. To remove the vessel from the island once and for all, engineers from the salvage consortium Titan-Micoperi slowly pumped air into 30 steel boxes known as caissons that were welded to either sides of the wreck, providing the necessary flotation. The photo shows the vessel prior to the refloating operation on 13 July 2014.

 

The refloating phase was completed w7hen the COSTA CONCORDIA reached its required draft of about 18 metres sometime on July 22, 2014, nine days after the operation began. The COSTA CONCORDIA was then to be towed to the port of Genoa where it will be demolished and the Island will be returned to its original state as though nothing ever happened.
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The departure of the COSTA CONCORDIA was scheduled for 0830 hrs on Wednesday 23 July 2014, after the arrival of the first ferry from Porto Santo Stefano. The tow itself was led by the tug MV BLIZZARD along with the MV RESOLVE EARL. A convoy of an additional 12 vessels also accompanied the wreck during the tow.

On the 27 July 2014 the vessel arrived at the port of Genoa where it was built nine years earlier. The vessel remains berthed in Genoa and has become an local tourist attraction. Scrapping has yet to commence.

PIRACY IN 2014
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Piracy, a topic close to the heart of the insurance market, is apparently decreasing worldwide;11

 

2014 was statistically a good year for actual and attempted piracy attacks with global figures dropping, the 178 cases in 2014 are up to September but there is no indication of a major change to the year end.

Shift in geography

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There has been a dramatic decrease in activity in Somalia, mainly due to the large international Navy presence in the area for the last three years, as well as the increased use of private armed guards on merchant vessels. Somalian pirates are still active though outside of their own waters and in smaller numbers. Although the cases on the west coast of Africa have increased slightly especially in Nigeria, there have also been reports of increased activity off Ghana, Ivory Coast & The Congo. There has also been a small increase in the Far East (Indonesia and Malaysia) mainly due to increased fuel and oil cargo theft as opposed to hostage taking and holding cargoes for ransom.

2014 – DECEMBER A DISASTROUS FINISH TO THE YEAR
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A week ago, on December 28 2014, the Italian-owned car ferry NORMAN ATLANTIC had just left a Greek port with 487 passengers and 12 crew aboard bound for Southern Italy, when a fire broke out on the car deck. The flames spread quickly, the heat and smoke chasing those aboard outside into howling winds and rain. Eventually more than 400 people were rescued, most in daring, night time helicopter sorties that persisted despite high winds and seas. At least 13 people are known to have died in the incident and there are fears the final toll could be higher amid uncertainty over how many people were actually on board. The still-smoldering vessel was towed to Brindisi harbor and authorities are now in their third day of investigations.

2015 – A DISASTROUS START TO THE NEW YEAR

New Year started with three disasters and one big-scale oil spill after collision. Bulk carrier BULK JUPITER capsized on 1st January, 1 rescued, 18 dead or missing, South China Sea. Coaster SEA MERCHANT sank on 1st January 9 dead or missing, 11 crew rescued, off the Philippines coast. General Cargo Ship BETTER TRANS sank on 2nd January, 18 crew rescued, 1 missing, in the Pacific. Afra max Oil Tanker ALYAMAROUK collided with bulk carrier SINAR KAPUAS in Singapore waters 4,500 tonnes of crude oil spilled. Cement Carrier CEMFJORD capsized on 3rd January and finally sunk the next day, 8 crew dead or missing, off Orkney Islands.

And the next day this happened…..
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Car Carrier HOEGH OSAKA was heading to Germany when it ran on to the Bramble Bank, in the entrance to Southampton Water, at about 21:30 GMT on Saturday 4 Janua16ry. The vessel, which has a cargo of 1,400 cars and 80 pieces of construction equipment, began to list as it left port forcing the captain and the pilot to take the emergency action of beaching it on the sandbank to prevent it capsizing. The vessel was finally refloated yesterday on the high tide and, after some dramatic moments with gusting wind conditions, was taken under control by attending tugs and towed to an anchorage between Cowes and Solent on Sea. Salvors are expected to carry out a full condition survey today to assess it’s suitability to berth.

WHAT TO EXPECT FROM 2015

More mega container ships
• No more single hulled tankers
• New fuel regulations prompt new hybrid fuels
• LNG fuelled ships
• Decreasing cost of oil?

WORLDS LARGEST CONTAINER SHIP

A NEW world record is about to be set by MSC Oscar, Mediterranean Shipping Co’s latest vessel, whose nominal capacity of 19,224 teu makes it the largest containership afloat. MSC Oscar, due to be handed over in January, is the first of a series to be acquired by the line through a long-term charter agreement. The ship is just slightly larger than China Shipping’s CSCL Globe, which was officially declared at 19,100 teu a few weeks ago.

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FINAL FAREWELL TO SINGLE HULL TANKERS
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01 January 2015 marks a major milestone in preventing oil spills. That date was the deadline which the landmark Oil Pollution Act of 1990 (OPA-90) specified for phasing out single-hull tankers in U.S. waters. That act, passed after the 1989 Exxon Valdez oil spill in Prince William Sound, Alaska, required that all new tankers and tank-barges be built with double hulls. Recently constructed single-hull tankers were allowed to operate, but 25 years after the Exxon Valdez, those vessels are now at the end of their operational life and will no longer be able to carry oil as cargo.

EMISSION CONTROL

The day long dreaded by ship-owners, passed on the 1st January this year. It is now a requirement that ships’ engines burn 0.1% low sulphur fuel in sulphur emission control areas.
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The map shows the Emission control area now set at 0.1 % Sulphur. This means that ships entering these areas will no loger be able to use heavy fuel oil in their engines as even the low sulphur HFO that is currently available does not meet this level of sulphur. What are the options for Ship Owners to comply?
• Low sulphur marine gas oil (MGO)
• HFO with exhaust gas scrubber
• LNG as fuel
• Other fuels, HDME 50, methanol, glycerine
This leaves ship owners with a limited number of options to comply either; switching over to more costly marine gas oil. Fitting an exhaust gas scrubber and continuing to use HFO, this is obviously a costly solution but may suite some operators. Converting the engines to burn liquid natural gas (LNG), again a costly solution with the necessary addition of storage tanks and auxiliary systems, but proving popular with some operators in the SECA areas. Last year saw the surprise arrival of a number of hybrid marine fuels which meet the standard and may be the preferred option.

New Hybrid Fuel

• Designed to meet the 0.1% sulphur limit
• Blended products of different refinery streams
• Similar characteristics to gas oil
• Still requires heating and purification
• Priced between gas oil and HFO
• Brown/green opaque colour

Since the announcement of a new type of fuel oil called HDME 50 by Exxonmobil in July last year there has been a rush for other oil majors to produce a similar product. These hybrid fuels are derived from different refinery streams than HFO and are blended products. The advantage of these fuels is that they retain certain characteristics of HFO, which should reduce the problems associated with changeover from regular fuel oil, and at a lower cost than gas oil.

If the products are made readily available at bunker ports they may provide a viable alternative to the installation of scrubbers or changing over to alternative fuels such as LNG or Methanol. Currently their availability is limited to Antwerp and, I believe, Rotterdam ports. These fuels are so new that they are not yet included in the ISO 8217 standard for marine fuels and, although approved in principle by engine makers, they may prove a challenge for crews and older tonnage. Something for us to keep an eye on this year.

New LNG fuelled ships

1 in 10 new buildings will be delivered with LNG fuelled engines.

As an alternative to conventional fuel there are now 50 LNG fuelled ships in operation worldwide, mainly in the Baltic area. The vessels are predominately car/ passenger ferries with some offshore support vessels and tugs. Experts say that more than 1 in 10 new buildings in the next eight years will be delivered with gas fuelled engines. Again time will tell what effects this will have on future insurance claims.

The decreasing cost of oil and the effect on shipping

Possibly the single most important factor for 2015 with potential significant consequences for shipping.

If, as expected, oil prices continue to drop over the year and remain low for the next two or three years, Oil majors will cut capex in new oil fields. Current oil suppliers will leave oil in the ground, to control demand/ supply in an attempt to keep prices up.

Offshore service providers will suffer, supply boats, anchor handlers etc. will lay up. Tanker owners will suffer, and there will be tonnage laid up or scrapped early. Consequential effect on Asian shipyards where orders may be cancelled and a surplus of new tonnage will exist.

On the positive side lower fuel costs means more money in the consumers pockets and thereby greater demand for goods. More cargo will need to be moved and faster, more container ships will be required and there will be less slow steaming. Low bunker prices will increase charterers and owners profits allowing more money to be budgeted for shipboard maintenance and crew costs. This will definitely affect the number and magnitude of claims that we see.


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