Ship operators must adapt and react fast and consider whether to opt for hot or cold lay-up
Planning re-entry to market and being able to adapt quickly must be key strategies for ship operators when they lay-up their fleet due to the Covid-19 pandemic.
These were some of the main conclusions of Riviera Maritime Media’s ‘Understanding vessel lay-up options in the age of Covid-19’ webinar, part of its ongoing series of webinars.
LISCR senior vice president marine operations Thomas Klenum, Shipowners’ P&I Club head of loss prevention - London Carri Woodburn, Lloyd’s Register Marine & Offshore vice president Middle East & Africa Tony Field and V.Ships Leisure managing director Per Bjornsen highlighted how planning for fleet re-activation and being able to react quickly to market events were crucial, as well as homing in on considerations related to the type of lay-up chosen.
Mr Bjornsen highlighted the huge impact on the cruise ship industry. “We are now in the surreal situation where the whole cruise industry is in a zero-revenue environment. No one could really imagine the whole cruise fleet would be laid up or in the process of being laid up.”
He added “There is still no clarity as to when cruise operations start and they are likely to be phased, so when planning lay-up with customers we need to keep assumptions quite flexible.”
Warm, hot and cold lay-ups
V.Ships Leisure has been involved in discussions about whether go for hot or cold lay-up and the shipmanagement company has carried out several calculations when choosing between a hot or cold lay-up. Mr Bjornsen pointed out an example for a medium-sized cruise vessel over a nine-month period.
“The cash flow is better for a cold lay-up, but total costs are higher on a cold lay-up due to an increased re-activation period and re-activation cost, not to mention the risk.” He says V.Ships Leisure is not yet contemplating cold lay-up but adds “That might be different for different cruise lines depending on when they want ships coming back to service or in some cases, ships might be sold. We are working on different scenarios.”
Mr Bjornsen highlighted how keeping a focus on market re-entry was crucial. “The most important part of lay-up is planned re-activation. We are coming back to a new normal and ships, in addition to being re-activated, have to be prepared for re-adjustments for Covid-19, including air conditioning, temperature taking and arranging for fewer passengers or modifications for medical facilities.”
He adds that due to the experience, a quick shutdown combined with the challenge of sending crew and passengers home, “the focus going forward will be on resilience”.
Ms Woodburn also highlighted the major challenges facing ship operators. “The industry has had to adapt. We have seen increased restrictions to access vessels and challenges include how to maintain security when laid up.”
Ms Woodburn singled out “If your vessel is entered into international P&I, it is subject to a lay-up reactivation survey normally when its lay-up has exceeded six months in length.”
She said a pragmatic approach with surveys where lay-up has happened because of Covid-19 is needed, and P&I must approach ships on a case-by-case basis.
She emphasised “Record keeping is one of the strongest tools at your disposal as claims do still happen in lay-up, so ensure you have a robust system in place and crew committed to keeping detailed records.”
She also highlighted the importance of crew welfare during Covid-19 lay-ups. Ms Woodburn said “Crew welfare is now as important as it has ever been. Some seafarers are experiencing more extreme isolation than they would normally; connectivity to family and friends can be vital for wellbeing.”
She also said there were challenges facilitating crew change and a knock-on impact on morale.
Ms Woodburn summed up “Be prepared to adapt and respond as quickly as you can.”
Elsewhere, Mr Klenum focused on the key regulatory areas that need to be considered for lay-up options in Covid-19 times. “There are some considerations for long term and short term. I think short-term lay-up is the most predominant type.”
He said items to be addressed for a vessel to be placed in short-term lay-up include: procedures for entering short-term lay-up, proposed manning levels, emergency response (fire, collisions, pollution, hurricanes, floods, etc), navigation watches (if at anchor), security plan if other than the approved SSP, maintenance plan if other than that described in the safety management system, completing class surveys and audits and procedures for re-entry into service including training, ASI, and audits to return to normal service.
Lloyd’s Register’s Mr Field looked at lay-up considerations in his presentation and emphasised that shipowners must understand all the risks over the full process.
He says “Shipping companies are very good at looking at risks, but they need to analyse options and plan to gain maximum benefit. To do this they should consider why they are laying up. Obviously Covid-19 is one of the reasons but there are other financial issues, such as what is happening with fuel – is there no business, is there floating storage or what is it?”
He also underlined the importance of reacting to a changing market. “If you are laying up because there is no business, you really need to be able to react fairly quickly if opportunities arise.”
On the topic of warm, hot, or cold lay-up, he says “Guidelines are available from class, flag and insurance and you need to avail yourself of checklists for external, internal, equipment and accommodation.” He said the main thing was to keep records.
He adds “In my opinion if the lay-up is only for a month or a bit longer, don’t just anchor if you think you are going to re-activate that quick. Paramount to that is can you react to flag opportunities or a new charter?”
Other considerations, if laying up for any length of time, are is the anchorage safe? Will the ship be anchoring alone or tied up to other vessels?
Mr Field summed up “Understand exactly what the scenarios and risks are, mitigate all risks and challenges and make full use of lay-up guidelines.
“Keep all stakeholders fully informed and ensure you can react promptly to a market upturn, this could make the difference to the future of your company and ensure all stakeholders are part of the solutions.”
In their conclusions, being able to plan and to adapt quickly were at the forefront.
Mr Bjornsen says, “My key takeaway is a focus on planning and keeping sight of re-entry to service.”
Ms Woodburn adds “I think there is a massive importance on preparation and being prepared to adapt and to do that quickly but also safely.”
While Mr Klenum highlighted “The key one for me is the planning with all the parameters – whether you go short term or long term, so evaluate all parameters before making the best estimate and make the decision before lay-up.”
Watch the ‘Understanding vessel lay-up options in the age of Covid-19’ webinar in our webinar library