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Monday March 1, 2021
Daily Briefing
Leading maritime commerce since 1734
LEAD STORY:
Better box carrier service will come at
Better box carrier service will
a cost, warns Saadé
come at a cost, warns Saadé
WHAT TO WATCH:
Partnerships and redundancy critical
to surviving supply chain chaos
OPINION:
Shipping’s future requires 20/20
vision
ANALYSIS:
Leading law firm deepens maritime
commitment
MARKETS:
Maritime interest grows for
sustainability-linked bonds
Low prices feed flexible LNG trades
IN OTHER NEWS:
Terror link to blast on car carrier in
Gulf of Oman CONTAINER CARRIERS CANNOT return to regular blankings as a
means of managing capacity if they wish to maintain service levels
DFDS vessel’s engine failure linked to when the pandemic recedes, says CMA CGM chief executive Rodolphe
poor maintenance
Saadé.
Cement maker overwhelmed by
interest in green ship project “We were quick in taking decisions in the spring of 2020 when volumes
were extremely low,” Mr Saadé said.
China’s Fujian province rolls out port
consolidation blueprint
“There was no point in deploying capacity where we had no cargo to
Former Cosco Shipping executive carry. Now, for a few months it has been the exact opposite.
named as vice-mayor of Shanghai
Speaking at the Journal of Commerce’s TPM conference, he warned
Shipping can hit green targets through
that blankings were not a solution in their own right.
improved design and efficiency
Total awarded Singapore LNG bunker “We have been forced to do so during this exceptional period but this
supplier licence should not be used,” he said.
“As a shipping line we need to offer a good service. If I tell my
customers I’m not sailing, this is not possible. Our commitment to
customers is to make sure we offer a reliable service.”
He acknowledged that customers had been frustrated by service levels
during the past few months.
“I understand today that the situation is a bit difficult, especially with
container availability,” Mr Saadé said.
“But we are trying to do the best we can to supply them with
containers. We are doing our best but we would like them to be
patient.
Lloyd’s List | Daily Briefing Monday 1st March Page 1
That patience is wearing thin, however, with “I would not say it will last one, two or three months;
major delays in receiving goods, frequent I wouldn’t know. Towards the summer of 2021, the
rollovers of cargoes and difficulties in finding situation should go back to normal.”
containers.
When normal did return, it would need to be
Figures from Sea-Intelligence showed that global different, however.
schedule reliability fell to just 34.9% in January as
carriers faced delays at ports, particularly on the US “Putting aside this difficult period, I firmly believe
west coast. that service has to be the name of the game. We
need to make sure we offer a good and reliable
On average, ships were arriving 6.4 days after their service.”
due date, but there are several ships in San Pedro
Bay that have been at anchor awaiting a berth for But this would require customers to accept that
more than 10 days. service came with a price.
These delays in offloading ships mean they are “Service cannot be free of charge,” Mr Saadé said.
unable to return for their next voyage on time,
meaning they can end up being blanked if no “Today, rates are exceptional because of the Covid-19
alternative capacity is available. situation but there needs to be an understanding
that we as a shipping line cannot lose money always.
CMA CGM’s delays are around those of the industry This has been the case for many years.”
average, with only 33.9% of voyages arriving on time
in January, according to Sea-Intelligence. Following the pandemic, both sides would need to
discuss how the market would emerge, but shipping
“I understand customers’ frustration. At the same was important and a “decent price” had to be agreed
time we are going through exceptional times,” Mr if it was not to fall into trouble again.
Saadé said.
“There will always be tough discussions with
“Volumes from Asia and China are exceptionally customers,” Mr Saadé said.
high and we are doing our best to find equipment, to
go on the charter market to find additional vessels, “Some may want multi-year contracts, others will
but it is not always easy.” want to do spot negotiations. We will adapt to their
needs, but we cannot work for free.”
He would not, however, give an estimate of how
much longer the disruption would last. But there would also be an onus on carriers to
deliver.
“If I look back to February last year when we
started hearing about Covid-19, no one knew at “We can’t tell customers to pay the price but not give
the time we would still be in the middle of this them containers and blank sailings,” Mr Saadé said.
crisis,” he said. “There is a price and there is a service.”
WHAT TO WATCH:
Partnerships and redundancy critical
to surviving supply chain chaos
SHIPPERS and beneficial cargo owners should look the challenges and ambiguity of 2020 would not
to long-term relationships with their carriers and have been possible without the key strategic
forwarders if they are to avoid the pitfalls of the partners.”
current supply chain crisis happening again.
Crocs entered 2020 concerned about service levels
“The last 14 months have been really dependent and the introduction of new sulphur rules in
on the equity built with our partners across the shipping fuel, she told the Journal of Commerce’s
supply chain,” said Mary McNelly, global logistics TPM conference. Then the pandemic hit.
director at footwear brand Crocs. “Riding through
Lloyd’s List | Daily Briefing Monday 1st March Page 2
“We reacted just like everybody,” Ms McNelly said. But when the equipment shortage emerged, carriers
“The global economic outlook was confusing, and were not even able to honour historical trends.
many supply chains paused and held inventory at
origin to wait and see what happened.” “As a shipper we have to be strategic about covering
our bases,” she said. “When I go into next year, it is
Crocs’ strategy on ocean freight at the time was going to be adding diversity and adding redundancy,
based on the fact that there were too many even at the risk of eroding situations where high
unknowns at the time of last year’s contract season, volume might have optimised cost.
so they just extended the ones they had in place.
“It is a balance, but it is my belief that the next 14
“We had good partnerships that understood there months are ones where redundancy and the ability
was variability out there,” she said. to protect your network is the right place to focus
on.”
But the disruption is far from over and the question
now was how to stabilise ocean transport in the Partnership and collaboration would benefit the
midst of a very disruptive period. carrier side of the equation, too, she said.
For Ms McNelly, the key is to build in redundancy in “It is important to think for the long term,” she said.
freight arrangements. “Last year ocean freight became a commodity. I’m
paying to scramble to get loaded, not for a service.
“For me that’s always looked like having multiple Transit times are out the window, delays at
forwarding partners and multiple direct partners,” destination are predictable, so where are we going as
she said. “Gone are the days of having one global an industry?”
forwarder or even one direct carrier supporting
100% of their business. It is not a fair position to put Predictability of service didn’t just mean loading,
your carrier in but it also means you don’t have but meant loading and delivering on time and
redundancy.” having some stability behind that supply chain.
It was also important to be able to shop around. “I want to get consistency and the right cost,” Ms
McNelly said. “I don’t need to go back to a place
“Even if your forwarder or carrier wants the volume, where carriers are losing money and are not in a
they can’t commit because they don’t have the good place. I don’t need the prices we had in 2018
equipment or they are overextended to those that again. But we do need to have consistency in cost to
they have already booked,” Ms McNelly said. be able to budget and manage and have predictable
loading.
“In some scenarios, we saw that partners were
unable to go beyond what we had already loaded “In 2019 we were acknowledging that service levels
prior to the pandemic but they came back and said weren’t good enough, but right now we’re begging
this is what you moved on an average week so we’ll to get back to 2019 service levels as a short-term
support that.” goal.”
OPINION:
Shipping’s future requires 20/20 vision
FOR all the talk of digitalised efficiency and During the golden age of globalisation, perhaps that
decarbonised sustainability, shipping has a pretty didn’t matter. Commerce soared as the cost of
pedestrian record of innovation. shifting goods in ships fell.
As ideas go, the container was pretty remarkable, But the margins have been shrinking, the cost of
but since then shipping has failed to offer up much moving goods has stopped falling and globalisation
in the way of revolutionary milestones. has slowed from light speed to a snail’s pace.
Essentially, the past 50 years have seen at best We have run out of ways to cut fat out of business
incremental improvements to the way that any part models and we need to find new ways of unlocking
of the business model works. and creating value.
Lloyd’s List | Daily Briefing Monday 1st March Page 3
Lloyd’s List has argued for some time now that Upgrading the current analogue inadequacies of
transparency could be the key to achieving that goal. global maritime trade with a fully integrated supply
chain ecosystem saves money and time and
From the sweeping twin tectonic shifts of arguably makes global trade more efficient, but it
digitalisation and decarbonisation to the forensic only really creates the environment for more
concerns of sanctions compliance and financial innovation to come and that’s where the value will
governance — the opening up of shipping is the be driven from.
singular issue at the heart of the industry’s future.
Our current focus is a mere standardisation
The interconnectedness of the digital revolution exercise.
does not only look favourably on transparency — it
requires it. Getting that information into a In a series of special report articles to be published
standardised and usable format sits at the heart of by Lloyd’s List during the coming week, we argue
all digital projects. that transparency is the common thread that runs
through the most fundamental questions that the
Shipping decarbonisation revolution depends on the shipping industry is grappling with right now. But in
transparency of carbon accountability. many respects, it only creates the required building
blocks for innovation yet to come.
Charterers, financiers, governments, counterparties
and society at large are forcing through new The bigger challenge that sits beyond shipping’s
environmental, social and governance requirements current mega projects of digitalisation and
that are making sure capital doesn’t flow in the decarbonisation is a more fundamental question of
direction of those who refuse to step out of the how we spur business model innovation to change
shadows or account for their emissions. and upgrade existing value drivers.
But however seismic the twin tectonic shifts of Finding value in the challenges we are currently
digitalisation and decarbonisation are, these grappling with is entirely possible.
projects are not the end goal.
But it will require significant changes in the way we
The global call to reduce CO2 emissions is raising operate today that will inevitably lead to massive
costs, but it does not improve the value proposition consolidation, changes in ownership models and the
of shipping in itself. The ability to yield a return on way in which shipping offers value to the changing
invested capital will not suddenly improve just dynamics of global trade as it is, rather than the
because the fuel mix changes to a zero-carbon mix globalised growth period that was fuelled by
— far from it. shipping’s last revolution.
ANALYSIS:
Leading law firm deepens
maritime commitment
WATSON Farley & Williams has retained a strong Lindsey Keeble, the firm’s co-head of Global
focus on the maritime sector, which will only be Maritime Sector. “Before the crisis, 70% to 80% of
strengthened by a survey and report that address our work was for banks, but we have developed the
the dilemma of funding the arrival of new ship owning and private equity sides.”
technology in shipping.
Emphasis has been placed on building a holistic
The London-headquartered law firm claims to have approach, covering all the bases. Some of the very
the largest dedicated maritime practice of any law big firms are moving away from maritime. “You
firm in the world. There are now 70 partners focused either go global, or niche, or specialist,” she says.
on maritime, with 21 partners in London alone
focusing on shipping finance. “When you go big, shipping becomes a minor part of
what you do. We have taken a conscious decision to
“We are doing a huge amount more work for invest more deeply in maritime because we see
shipowners than before the financial crisis,” says ourselves as a sector-focused firm. Everyone goes
Lloyd’s List | Daily Briefing Monday 1st March Page 4down a different path — we are firmly down the playing field concept makes sense. But it is
sector-specialist transportation and energy route.” interesting to hear that both shipowners and
financiers said they preferred regulation.”
WFW has worked hard to win private equity,
mergers and acquisitions, and disputes work, which This enthusiasm for collaboration came out in a
remains profitable business. Ms Keeble Marine Money webinar this week, said Mr
acknowledged it is tough for a law firm choosing to Paleokrassas, who moderated the session.
stick with plain ship finance work, where pressure
on pricing is a big issue. “It was healthy to hear about the level of
collaboration participants were engaging in; not only
George Paleokrassas, a co-head based in Athens, owners with charterers, but also a need to engage
agreed that the growth in maritime has been rapid with regulators.” He said the key is with
and says this has been built on relationships with International Maritime Organization.
owners and private equity, “where you can grow that
relationship more broadly than with traditional “You have to unlock the IMO to set the rules which
banks, who pigeon-hole law firms as providers of everyone has to follow.”
specialist advice on particular financing areas”.
He believed the responses showed the shipping
He said the team started as financial lawyers but industry was more progressive than it’s given credit
have broadened out to disputes, corporate and M&A, for, especially on the environmental side of ESG.
and some regulatory work.
Another finding was that smaller shipowners would
“We believe other firms are leaving gaps in which we face intense pressure to collaborate because they
can grow. Our goal is to shift from a well-known would be unable to find fleet upgrades without
ship finance specialist to becoming known more external assistance.
broadly as a maritime specialist.”
Mr Paleokrassas agreed, although he pointed out
Offering a full service in the maritime sector will that fleet size is not the best way to measure a
enable the firm to sell more services to the client, Ms shipowner’s capability. Many smaller owners have
Keeble acknowledged. This has been helped by a good liquidity and management know-how.
push in career development.
“There is broad recognition among all Greek owners
“We have been promoting partners,” she said. “In that they cannot do this alone,” he said.
Athens alone, six of the senior associates were
promoted, some moving on to New York, Hamburg “Survey responses talk about joint ventures rather
and Hong Kong. There has been a focus on bringing than acquisitions. A third said they would be happy
senior associate talent into partnership because to team up with another owner or operator, and a
clients like to see continuity.” sizeable minority would team up with an energy
player.”
The research released this week under the title The
Sustainability Imperative was chosen because the There have already been partnerships formed
topic was “the most relevant across the industry, our between owners and charterers, and there’s a
client base, and the people we work with and speak possibility of joint ventures on a project basis — not
to”, Mr Paleokrassas said. “We wanted to understand necessarily for an owner’s entire fleet — and even
how sustainability was developing.” between owners and technology companies.
The most interesting findings were that the need for “Greek shipping has been very good at teaming up
new technology is broadly acknowledged by industry with private equity,” added Ms Keeble. “The owners
players, that ship finance banks are reluctant to fund have shipping skills; private equity has the funding.
it, but that most shipowners would be willing to The cruise industry has a big role to play here
explore collaboration to bring it to their vessels. because they are more public facing, so they are
ahead. We should hope the smaller operators would
“We thought there would be more pushback from benefit from advances in technology.”
shipowners saying they wanted it to be voluntary,
but there was a broad call for more legislation,” said “Small owners are more versatile and flexible,” said
Ms Keeble. “When you take a step back, the level Mr Paleokrassas. “Even though the number of Greek
Lloyd’s List | Daily Briefing Monday 1st March Page 5shipowners declines year on year, there are still the law firm is engaged in the issues that keep
about 700 companies. They find innovative ways to shipowners and financiers awake at night.
stay active.
“The Greek shipping community looks for
“I suspect we will see different levels of collaboration commitment to the industry,” Mr Paleokrassas
and co-operation.” underlined, adding that the report showed a high
level of commitment. “We have already started on
The project revealed that WFW needs to boost its the path to broadening our footprint within
capital markets offering, Lindsey Keeble said, shipping.”
however the larger gain has been to show clients that
MARKETS:
Maritime interest grows for
sustainability-linked bonds
WHILE green bonds have been around for some Iverson on the same panel. “If you’re serious about
time, interest is growing in other types of ESG, you will get support from the (financial)
offerings. markets.”
Given the increasing focus on environmental, social It may well be the only way to obtain funds going
and governance objectives, sustainability-linked forward.
bonds have taken off following the publication of
guidelines in June last year by the International “We can develop a competitive edge, doing the right
Capital Market Association, according to DNB thing, and in the long term it will improve
Markets head of sustainable finance Nina negotiations with customers.”
Ahlstrand.
Atlas Corp’s Seaspan, meanwhile, also had a “great
She told a Marine Money panel that unlike green response” when it was raising funds, given its
bonds, which are for a specific project that has commitment to alternative fuels.
environmental benefits, sustainable bonds are for
general corporate purposes linked to ESG targets The company has formed an ESG committee and
such as cutting emissions. will publish its first report later this year, Atlas
head of corporate development Matthew Tinari
In this scenario, the redemption price may increase said.
if targets are not met, giving incentive to meet goals.
Green bonds had reached the $1trn mark and there
Sustainability issues are becoming a greater focus was “huge appetite out there”, according to
for investors, who are also demanding increased Sustainalytics executive director of sustainable
transparency, and Ms Ahlstrand expects to see huge finance solutions Kevin Ranney.
growth in these types of bonds during the year,
potentially replacing regular bonds. But, more interest was needed from the steel,
cement, aviation and shipping industries, he said,
Oslo-based chemical tanker owner Odfjell has for and one way to bridge the gap between sustainability
example increased its ESG focus over the past couple bonds and green bonds was through transition
of years, and was involved with the first finance, which was linked to key performance
sustainability-linked bond in shipping earlier this indicators such as average efficiency measures.
year which was oversubscribed.
Transition bonds are a relatively new tool designed
“Being open and transparent is the only way to do to encourage less green-oriented companies towards
it,” said the company’s chief financial officer Terje a cleaner way of doing business.
Lloyd’s List | Daily Briefing Monday 1st March Page 6Low prices feed flexible LNG trades
LIQUEFIED natural gas is gaining liquidity amid a That may boost flexibility in the LNG trade going
low-price environment for the commodity, data forward as more contracted volumes will either be
released in Shell’s annual LNG outlook suggested. resold or floated on the spot market.
LNG prices crashed to record lows in Asia and Low LNG prices have also encouraged buyers with
Europe as the worst-ever pandemic in recent history standing term supply contracts to pick up almost
wreaked havoc worldwide. one in four cargoes traded on the spot market, the
outlook’s data showed.
This boosted interest in spot trades — around one
in three cargoes delivered last year were procured India has taken advantage of softer prices to expand
from the spot market, according to Shell’s LNG imports by 11%.
estimates.
Shell also flagged growth in LNG-fuelled shipping.
Portfolio traders have also entered the market to
contract more term cargoes. The LNG-fuelled fleet is expected to more than
double and global LNG bunkering vessels will
For the second year in a row, this group of buyers expand to 45-strong by 2023.
accounted for a larger share of contracted LNG
volume as compared to utility groups and other Overall, global LNG demand is estimated to reach
end-users. 700m tonnes by 2040, with Asia driving nearly 75%
of this growth, according to Shell’s projections.
IN OTHER NEWS:
Terror link to blast on car carrier in Finlandia Seaways (IMO: Cement maker overwhelmed by
Gulf of Oman 9198721) in April 2018, according interest in green ship project
AN investigation is underway into to a report. A CEMENT maker is looking to
an explosion on an Israeli-owned develop a green ship for short-
car carrier in the Gulf of Oman, Finlandia Seaways was 11nm haul trades within Norway.
prompting fears of another east of Lowestoft on a regular
possible Iranian limpet mine voyage from Zeebrugge to The partnership project, which is
attack. Rosyth when one of the main part of the Norwegian green
engine’s connecting rods shipping programme, will be for a
The Bahamas-flagged, 2015- broke. There was a short, 5,000 dwt vessel that will be
built, 12,900 dwt Helios Ray (IMO: intense fire that resulted in linked to a 15-year charter.
9690547) was travelling at 19 serious smoke-related lung,
knots from Dammam, Saudi kidney and eye injuries for the It is a collaboration with a local
Arabia to Singapore when the vessel’s third engineer, who agri-company, and the vessel is
incident happened at 2040 hrs on was on duty in the engine room expected to move corn from the
February 25, according to Lloyd’s at the time. Serious structural south of the country to the west
List Intelligence. damage was done to the and return with rock and stones.
engine.
The vessel was about 44nm China’s Fujian province rolls out port
northwest of Muscat, the The events were initiated by the consolidation blueprint
capital of Oman. It has turned failure of a single component, CHINA’S Fujian province has
back toward the Strait of and the standard and rolled out a blueprint to
Hormuz. management of maintenance consolidate the local port sector
carried out by the vessel led by the Port of Xiamen, aiming
DFDS vessel’s engine failure linked to operator’s maintenance support to nearly double the harbour’s
poor maintenance contractor was a significant container throughput in 2035,
DEFICIENT maintenance was a causal factor, the Marine among others targets.
significant cause of a Accident Investigation Branch
catastrophic main engine failure inquiry found. The move comes after the
sustained by DFDS ro-ro provincial government
Lloyd’s List | Daily Briefing Monday 1st March Page 7established the Fujian Port Group previously held many executive Total awarded Singapore LNG bunker
last year to incorporate state- positions, including as the deputy supplier licence
owned port and shipping assets. head of the US branch of Cosco SINGAPORE is rapidly responding
Shipping Lines. to the needs of the shipping
Xiamen, Fuzhou, Meizhouwan community as demand for
and Quanzhou were listed as the Shipping can hit green targets liquefied natural gas as a marine
four key coastal ports in the through improved design and fuel increases, with the Maritime
southeastern province, with each efficiency and Port Authority of Singapore
having its role defined in the plan. THE International Maritime awarding a third LNG bunker
Organization’s 2030 carbon supplier licence to Total Marine
Former Cosco Shipping executive intensity target can be achieved Fuels Private Limited, for a
named as vice-mayor of Shanghai by adopting both the Energy five-year term starting on
ZHANG Wei, a former vice- Efficiency Design Index and the January 1, 2022.
president of China Cosco Energy Efficiency Design Index
Shipping Corp, has moved to for existing ships amendments at Total Marine Fuels will
serve the Shanghai municipal the Marine Environment complement the existing two
government after being Protection Committee 76 in June, licensees, FueLNG and Pavilion
appointed as a vice-mayor. Wood Mackenzie reports. Energy, to drive demand and
grow LNG bunkering volumes in
The 47-year-old was a leading The Wood Mackenzie statement Singapore, the MPA said.
figure at the state conglomerate’s came as CMA CGM chief
container shipping and port executive Rodolphe Saadé said In planning ahead to meet the
business and was promoted to his firm will introduce liquefied region’s growing demand for LNG
the top management a year and natural gas-fuelled as a marine fuel, the MPA issued
half ago as the youngest member containerships on the a Request for Proposal on
of the group. transpacific trade later this year. October 28, 2020 for parties
seeking to supply LNG bunker at
Holding a master’s degree in “We can talk about projects that Singapore. The port has an LNG
management from China’s Fudan will happen in 10 or 15 years but bunker supply capacity of up to
University, Mr Zhang has more what is important is what are the 1m tonnes per annum.
than 20 years’ experience in the actions we are taking to protect
liner shipping industry. He the planet now,” he said.
Classified notices follow
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