Bulk carrier leaders give practical insights on how they are positioning themselves to withstand today’s unprecedented trading challenges
The Bulk Carrier Leaders’ webinar on 25 June looked at where the dry bulk market is today and at issues surrounding safety standards. A poll among webinar participants revealed there is an issue with safety standards in the dry bulk sector: more than 80% of webinar participants believe bulk carriers operate at lower safety standards than tankers:
The webinar explored this issue, but first, MSI dry bulk analyst Will Tooth took the panel and attendees through the fundamentals in the dry bulk market to set the scene to the current background. The dry bulk market suffered in Q1 2020 and Mr Tooth told webinar attendees that the outlook for the remainder of 2020 remains poor with bulker levels falling to their lowest levels since 2016. With regards to iron ore and coal, MSI estimates the sector will be slightly more resilient to disruptions caused by the coronavirus.
Mr Tooth noted that historically consumption has been a poor indicator of trade, and production in Brazil and Australia – the two largest exporters – has been a better indicator. “With Australia near capacity output, Brazilian exports are the swing factor,” he said. But iron ore production in Brazil has been affected by industrial disasters, disruptions caused by heavy rains and the Covid-19 coronavirus pandemic. This has led MSI to revise its projected growth in iron ore exports from 3.7% to 0.5% in 2020.
Mr Tooth noted that China imported the most coal globally in 2019 (315M tonnes) with India second (259M tonnes). Protectionist measures taken by India and China – the planet’s two largest consumers of coal – have also led to slowed demand. MSI now projects a 5.7% fall in coal production in 2020 and expects aggregate demand across commodities to fall by 1.6%.
MSI expects the impact of Covid-19 coronavirus pandemic on dry bulk carrier newbuilding deliveries to be short-lived, although this was severe with China delivering just two vessels in February (the lowest in a month since February 2007). This rebounded to 26 vessels in April 2020 and deliveries from other countries seem unaffected.
Scrapping was subdued with only two vessels sold for recycling April and only 19 vessels since the spike in February 2020. Overall, the dry bulk fleet forecast is none too comforting. Mr Tooth expects high supply growth and negative demand growth will demand a slump in fleet employment. “At 78.8% we are forecasting the lowest employment rate since the 1980s this year,” he said.
Representing the dry bulk owners and operators on the panel was Oldendorff Carriers director of business development and strategy Scott Bergeron. He has a long career in shipping and shipping administration having graduated from the US Merchant Marine Academy at Kings Point. Prior to joining Oldendorff Carriers, Mr Bergeron was chief executive of the Liberian International Ship & Corporate Registry (LISCR), and has been a marine surveyor for the US Coast Guard and DNV GL.
Speaking on the dry bulk market’s move towards self-assessment of safety standards, Mr Bergeron noted the two programmes developed by RightShip and Intercargo and said they have the potential to make the sector more resilient.
However, a snapshot poll revealed ambivalence toward introducing an assessment process with 70% of webinar attendees agreeing with the statement “We do not need more standards beyond ISM/ISO 9001/ISO 14001/ISO 45001 (replacing OHSAS 18001).”
In a snapshot poll, one third of webinar attendees felt that INTERCARGO was better placed to govern a self-assessment scheme intended to ensure best practices and continuous improvement, and half preferred RightShip with the remainder (17%) preferring unspecified organisations.
In another poll, most webinar attendees (84%) felt that RightShip had contributed to the improvement of bulk carrier standards.
RightShip’s Dry Bulk Management Standards system will focus on 30 areas of company management practices divided into four sections - performance, people, plant, and processes – ranking these on tiers of achievement from basic to excellent. RightShip is moving away from its SVIS risk rating system to a new scoring system which is set to be implemented in September.
Providing insight into INTERCARGO’s Dry Self-Assessment System was its vice chairman, Jay K Pillai. He is a Master Mariner with 44+ years’ experience in the dry cargo shipping industry. After commanding dry cargo ships for seven years of his 21 years at sea, he has settled in Hong Kong for the last 24 years in dry bulk shipping in various technical, operations, insurance and commercial roles, until he joined Pacific Basin Shipping Ltd in 2004 where he leads inhouse ship management and newbuilding teams. In his time there, Pacific Basin Shipping managed a remarkable three-fold growth of its owned fleet from 40 ships to around 120 today.
In his capacity as vice chairman of INTERCARGO he explained the rating system considers 13 fields and 30 areas of management practices. Each field will comprise of specific questions and will be scored on a risk factor system. A company’s overall score is the sum of these scores; a lower score will indicate lower risk.
Mr Pillai was scathing on all the parties involved in preventing seafarers leaving vessels in a safe manner. “International Day of Seafarers – does not mean anything. 30% of seafarers have been at sea longer than contracts. “Seafarers just want to go home,” he said. “The industry must act now”.
This was reflected in a webinar poll where more than two-thirds agreed seafarers should stop work. The ITF has called for crew on extended SEA to stop work after arrival at the first port after 16 June 2020. The results on a sliding scale from 1= Strongly Agree to 5 = Strongly Disagree were:
Maran Dry Management HSQE Manager Captain Panagiotis Nikiteas is a maritime professional with 32 years’ experience spanning various sectors of the maritime industry including management, marine, vetting, operations, crewing, safety, quality, environmental, energy, security, health, surveying, incident investigation and training. He believes the self-assessment system has several benefits: the introduction of common systems would ensure fair play, improve benchmarking throughout the sector and reduce costs related to human errors.
Capt Nikiteas added that operators have some concerns over the costs they may incur and the transparency with which the system will operate. "There is fear that self-assessment can be used as a commercial leverage, ie licence to trade,” he said.
Another factor is how well prepared the dry bulk sector is for a self-assessment scheme on a scale of 1 = well prepared to 5 = not well prepared, webinar participants replied: