CMA CGM Signs with Adani to Run Terminal at Mundra Port, by Marex.

CMA CGM CEO Rodolphe Saade, left, with APSEZ CEO Karan Adani (courtesy CMA CGM), By MarEx 2017-04-27 13:54:40

CMA Terminals, the ports subsidiary of number three container line CMA CGM, has signed a joint venture agreement with Adani Ports and Special Economic Zone (APSEZ) to operate a container terminal at Mundra Port. 

The partnership, which runs for an initial period of 15 years with options for two 10-year extensions, covers CMA and Adani’s recently completed Container Terminal 4 project, which adds 1.3 million TEU of annual capacity to Mundra’s existing facilities. CT4 is currently the only container terminal on India’s west coast capable of handling ultra large container vessels, with a harbor depth of 54 feet.

Mundra Port, located near the Pakistani border about 250 nm to the northwest of Mumbai, is already the nation’s busiest port by tonnage, and the addition of CT4 makes it the nation’s largest container port by capacity. It competes directly with Mumbai’s Nhava Sheva (or Jawaharlal Nehru Port), India’s busiest container facility by TEU volume, for market share in the northwest region. Mundra competes in part on the quality of its intermodal links and its quick turn times, which stand in contrast to recent labor problems and congestion at Nhava Sheva.

CMA CGM has had a presence in India for decades, but CT4 is its first port investment on the subcontinent. APSEZ is India’s biggest private port operator, with container terminals at Mundra, Kattupalli and Hazira, plus major projects in development at Ennore, Dhamra and Vizinjham.

Singapore Ranked World’s Top Maritime Capital, by Marex.

By MarEx 2017-04-27 21:06:09

Singapore has once again clinched top position in Menon’s Leading Maritime Capitals of the World Report. 

The Menon Report is produced by Norwegian consultancy firm Menon Economics, and is a widely-accepted study of the world’s leading maritime capitals, looking at 24 objective indicators and garnering survey responses from more than 250 industry experts across all continents. Singapore also ranked first in the two previous editions of the report in 2012 and 2015.

Singapore was ranked number one this year in the following three categories: Shipping, Ports and Logistics, and Attractiveness and Competitiveness. The maritime nation also scored impressive results in the remaining two categories: second place in Maritime Technology and fourth place in Finance and Law. Singapore jumped three places from fifth to second position in the Maritime Technology category.

The Menon Report noted that Singapore maintained its reputation as a world leading maritime hub because of the width of the city-state’s maritime industry. In the sectors of Shipping, and Ports and Logistics, Singapore emerged first due to its strategic geographic location, its position as an important center for commercial management and as the world’s second largest port.

Singapore’s offering as an international maritime center continues to grow. While more than 140 shipping companies are represented in Singapore, new companies continue to establish a presence, with the West of England P&I (protection and indemnity) Club as a recent example. 

Singapore ranked top in Overall Attractiveness and Competitiveness due to the ease of doing business and customs procedures. According to the report, seven in 10 experts regarded Singapore as one of the three most attractive cities in the world for relocating their headquarters and identified it as one of the maritime capitals most prepared and ready to adopt digitalization. 

In 2016, the port’s vessel arrival tonnage increased by 6.3 percent to 2.66 billion gross tons.
Andrew Tan, Chief Executive of Maritime and Port Authority of Singapore (MPA), said, “We are not just talking about containers at our port anymore. We are also talking about the banks, insurance, P&I Clubs, classification societies, legal, arbitration, the whole ecosystem that has developed through years of conscientious and constant effort, invested in the rest of the maritime cluster in last few decades.

“Why is that important? It is important because once you establish a cluster, you have shipping groups here and mind you we now more than 140 shipping groups in Singapore. Besides major shipping lines Maersk, CMA CGM, APL, COSCO, there are many other lines that have operations in Singapore. If they are like Maersk, they call Singapore their second home because their corporate functions are also here.

“We are hoping that when the Japanese lines merge, they will also choose to locate their global operations in Singapore itself. Once you have these players here, the rest of the ecosystem also builds around these players. Which is why the P&I clubs, banks, insurers, the classification societies have established their presence in Singapore. Lloyd’s Asia is an example. They have more than a dozen syndicates in Singapore. Classification societies like DNV GL, they have a research center in Singapore. Same for Lloyd’s Register and other classification societies.”

The Singapore Registry of Ships is amongst the world’s top five largest ship registries in the world, with over 4,000 Singapore-flagged ships.

Tan said that Singapore does not want to be the world’s number one flag. “We want to be a quality flag. We don’t want to be a flag of convenience. It is easy to register a ship under the national flag but can you provide the quality service. The ship flagged under SRS have one of the lowest detention rates anywhere else in the world, because it is a quality flag and we intend to keep it that way.” 

Looking five years into the future, the Menon Report predicts that Singapore will keep its position as the global leader, while Shanghai is expected to increase its importance and become the second most important maritime city. The race to be the leading city in Europe is still open, with Hamburg, Oslo, Rotterdam and London as the leading contenders. In the Middle East, India and Africa region, Dubai is the leading center. The experts predict that Dubai will continue to grow in importance and be the world’s sixth most important maritime center by 2022

Denmark, Norway and Singapore Agree on E-Certificates by Marex.

Signatories of the E-Certs MoU, from left Andreas Nordseth, Director General of the Danish Maritime Authority, Andrew Tan, Chief Executive of MPA and His Excellency Tormod C. Endresen, Norwegian Ambassador to Singapore on behalf of the Norwegian Maritime Authority. By MarEx 2017-04-24 20:53:05

Danish, Norwegian and Singapore Maritime Authorities have signed a Memorandum of Understanding on the use of E-Certificates as part of move to improve industry efficiency through digitalization. 
The areas of cooperation under the MOU include the promotion and use of E-Certificates on ships registered under the respective flags of the parties, the acceptance of E-Certificates for port entry and Port State Control inspections, as well as the sharing of information and experiences relating to issuance, use and acceptance of E-Certificates.

Hard copies of over two dozen certificates such as Certificate of Registry, Certificate of Class and Load Line Certificates among others, are kept on board ships to provide proof that the vessels are compliant with the various regulations or conventions applicable to them.

The heavy reliance on hardcopy certificates means that stakeholders such as flag administrations, class societies, seafarers and shipowners incur considerable manpower and financial commitments in their preparation, printing and delivery.

The success of E-Certificates is contingent on the acceptance by the global maritime community. The parties to the MOU are optimistic that the use of E-Certificates is a game-changer that will soon become the norm.

According to Andreas Nordseth, Director General of the Danish Maritime Authority there is still more to do before the maritime world can truly reap the benefits of digitalization. He said, “Our first target is to inspire and support more countries to implement similar solutions. The reduction of paperwork benefits all stakeholders as it makes the entire maritime sector more efficient. We hold high hopes that the Memorandum of Understanding signed today will encourage many countries to complete a similar transition.

“E-certificates are merely the tip of the iceberg. The certificates as such are only the beginning. The next step will be for the authorities to exchange and inspect certificates via the databases of one another rather than to do so on board the ships,” says Nordseth. This will drastically reduce the time spent by Port State Control officers checking documents on board ships in ports all over the world, he says.

The Danish Maritime Authority made world news when it announced in June last year that from then on Danish ships were no longer to set to sea with heaps of paper certificates. Today, the Danish Maritime Authority only issues digital certificates.

Big, Bigger, Biggest, Maersk by Marex.

By Erik Kravets 2017-03-17 15:46:10

Would you rather spend money on ships or frozen pizza? For Maersk, at least, the answer is ships. The Danish conglomerate has made a $4 billion offer – pending approval from regulators –  to acquire Dr. August Oetker KG’s famous red shipping line, Hamburg-Südamerikanische Dampfschiffahrtsgesellschaft KG (Hamburg Süd).

“We want to focus on our traditional food business,” said August Oetker, a descendant of company namesake Dr. August Oetker. For reference, Dr. Oetker-branded frozen pizza is as ubiquitous in Germany as DiGiorno and Red Baron in the U.S.  “That is where we have our origins,” he told the press. “That is where we want to grow.”

In other words, offer accepted! Pre-heat that oven to 350 degrees!

Container Giant

As reported by the Wall Street Journal, Hamburg Süd had 2015 revenues of around $6.7 billion, so Maersk’s offer is approximately $0.60 for every $1 of Hamburg Süd’s revenue – not a great price, but also not demolition value. Nor is the deal an isolated event: It reflects how Maersk is breaking and remaking European shipping in its own image.

If the acquisition of Hamburg Süd goes through, the Danish giant will have taken over the biggest and, indeed, one of the oldest family-owned brands in German shipping, a fact not lost on the company’s founding family. “Maersk will preserve and grow Hamburg Süd,” August Oetker said, articulating his vision for his former asset. All 189 vessels owned or chartered in and 6,000 employees will become part of the Maersk Group’s portfolio. At least for now, it appears the change in ownership is not intended to trickle down to the operational level, but that remains to be seen.

When the integration of Hamburg Süd and Maersk is complete, the surviving European shipping lines will need to contend with a rival who is leaner, has a broader reach and has colonized even more niches. And owners, fresh from losing Hanjin, will need to suffer through one less charterer generating demand in the spot market. In Hamburg, shipbrokers have estimated that rate levels are 15 to 20 percent lower than they ought to be based on pure tonnage demand and supply – all because of increased market concentration among charterers.

In the Europe, North America and Far East to South America trades, respectively, the combined Maersk/Hamburg Süd entity will have 40, 18 and 32 percent market shares. Even more notably, after bringing Hamburg Süd on board Maersk will control 18 percent of the global container market.

Unintended Consequences

By now even the fiercest market advocates ought to be a little anxious. Given enough mergers and acquisitions, eventually market power will concentrate in a few hands. This is the opposite of what E.U. regulators had in mind when they repealed the block exemption for shipping conferences, E.U. Regulation 4056/86, in October 2008.

For the first few years, of course, owners gritted their teeth and charterers rejoiced at more competitive rates. But now it’s not about competing, since the competitors are gone. Rather, growth in revenue and profit comes from exploiting oligopolistic pricing. Capitalism, devoid of regulation and left to its own devices, has finally snowballed and all but destroyed the force that created it, the market mechanism itself.

So who will challenge Maersk? One thing is sure: Given rock-bottom freight rates, the likelihood that an investor will enter the market as an entrepreneur and create genuinely new competition, either by building or buying ships and starting a new company, is vanishingly small.

What we are left with, then, is existing carriers consolidating – not a great recipe for a long-term healthy market. CMA CGM kept its foot in the door of the Asian market with its takeover of Neptune Orient Lines (NOL). China Cosco Shipping Corporation, the result of the merger of China Cosco and China Shipping Container Lines, is in line to be the dominant Chinese carrier. And Kawasaki Kisen Kaisha (“K” Line), Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kabushiki Kaisha (NYK) are currently orchestrating the creation of a Japanese behemoth.

Hapag-Lloyd’s merger with United Arab Shipping Company (UASC) was largely driven by the desire to gain access to UASC’s ultra-large container vessels (18,800 TEUs). Essentially, debt-encumbered Hapag-Lloyd was eager to get its hands on poorly performing UASC’s orderbook of desirable big ships but had to finance its gambit by giving up 28 percent of the equity in the combined entity to UASC shareholders. 

Subjected to only some perfunctory scrutiny by E.U. regulators, who secured the concession that UASC would give up its interests in cargo-pooling arrangements in the Atlantic trades, this act of corporate gerrymandering was also given a green light.

This behavior has a parallel in Roman history. When Attila led the Huns west, they first clashed with, defeated and then displaced the weaker tribes in their path, causing populations to flee and ask for the right to settle within the borders of the Roman Empire as allies. The displaced tribes sought to combine forces against the approaching Huns.

Seen as a desperate scramble to scale up in anticipation of ultimately having to confront market leader Maersk, the frenzied pace of mergers and acquisitions in shipping today does not reflect long-term strategic planning by careful corporate stewards but rather an attempt at self-preservation. If carriers can grab a plank first and stay afloat longer than the next guy, maybe they will eventually be carried to shore when the tide rolls in.

Beyond Containers

Maersk, however, is not only a force in containers. It is also involved in port operations (APM Terminals), towage (Svitzer) and salvage (Ardent), liquid bulk cargo (Maersk Tankers), Ro-Ro carriers (Höegh), and offshore service and supply (Maersk Supply Service). Practically no aspect of maritime business is not touched by the Danish conglomerate. An example of this catch-22 is a container line, ostensibly competing against Maersk, having to use Svitzer tugs (now conveniently in over 100 ports!) to assist its ships to berth. Even when you win, you lose.

The natural response to a broad spectrum threat like Maersk is to grab hold of whatever business is within arm’s reach. Tug and tow companies have different (and longer) histories than many container lines, but these local, family-owned, equity-heavy and smaller-scale operations are facing the same uncertain future with an even smaller margin for error.

An example is the announced takeover of another old German brand, Unterweser Reederei (URAG), which has been operating out of Bremen since 1890. In December 2016, Boluda Corporacion Maritima S.L. (Boluda), a Spanish towage and salvage company half the size of Svitzer, announced its acquisitions of URAG and Lütgens & Reimers L&R (in Hamburg) pending regulatory approval.

Boluda has 200 tugs. URAG has 20. Together, the two companies have 220 tugs – still only half the size of Svitzer. Boluda’s angle is presumably geographic as the Spanish company is chiefly active in South and Central America and Africa. However, Boluda has been expanding more into Europe lately with a growing presence in France, Portugal, Italy and now Germany. Thanks to URAG, it will hit the ground running with existing contracts that need to be serviced, approximately 20 vessels, and about 120 sailors who are ready to work. Boluda has stated that it wants to retain URAG as an independent brand, just as Maersk has claimed about Hamburg Süd.

Prior to the acquisition, URAG had been facing stiff monthly losses of roughly €500,000 per month. URAG’s parent company, Linnhoff Schiffahrt, gave up trying to backstop URAG’s losses.

URAG’s fate was foreshadowed and perhaps sealed by its aggressive price-cutting, both in its home ports and in its attempted expansion into other German ports. In an effort to take work from its German competitors like Bugsier and Fairplay in Hamburg, Hans Schramm in Brunsbüttel, as well as from its foreign competitors in German ports like Kotug and Svitzer, it began offering its services well below cost – a fact that has not gone unnoticed by German regulators.

Boluda will therefore face the fact that the relationships and contracts it is acquiring will come with potentially high and recurring long-term losses. Boluda will struggle in its endeavor to expand into the German market on the basis of the strategy it inherited from URAG and, furthermore, may be in for a significant culture shock when it comes to dealing with German competition regulators.

URAG’s pain was compounded by the loss of contracts to Svitzer for towage of Maersk ships. Svitzer had, predictably, been granted an exclusive right to tow Maersk vessels berthing in Bremerhaven. Previously, these Maersk assists had been provided by a joint venture between URAG and Bugsier. Svitzer now also has an exclusive right to assist Maersk vessels in the Free and Hanseatic City of Hamburg.

From January/February 2017 Edition BY Erik Kravets  Erik is a maritime lawyer based based in Cuxhaven, Germany and a frequent contributor to the online MarEx Newsletter.

Indian Navy Fought Off Pirate Attack in Gulf of Aden By Aiswarya Lakshmi April 10, 2017

INS Trishul. Photo: Indian Navy

 A distress call was received from a Foreign Merchant Vessel MV OS 35 (Tuvalu registered vessel), which was attacked and boarded by pirates in the Gulf of Aden late night on 08 April 2017. 

Indian Navy ships Mumbai, Tarkash, Trishul and Aditya proceeding on deployment to the Mediterranean and passing through the Gulf of Aden, responded to the call and rapidly closed the merchant vessel by the early hours of 09 April 2017. 

The Indian warships established contact with the Captain of the merchant vessel, who along with the crew had locked themselves in a strong room on board (citadel), as per standard operating procedure. 

An Indian Navy helicopter undertook aerial reconnaissance of the merchant vessel at night, and at sunrise, to sanitize the upper decks of the merchant ship and ascertain the location of pirates, if still on board. 

Emboldened by Indian Navy’s helicopter cover, and on receiving the ‘All clear signal’ that no pirates were visible on the upper decks, some crew members gradually emerged from the strong room and carried out a search of the ship and ascertained that the pirates had fled the ship at night. 

Subsequently, in a show of international maritime cooperation against piracy, a boarding party from the nearby Chinese Navy ship went on board the merchant ship, while the Indian Naval helicopter provided air cover for the operation. 

It has been established that all 19 Filipino crew members are safe. The Captain of the merchant vessel profusely thanked the Indian Naval ships for their response and for providing air cover.

US Sees Piracy Increase off Somalia Tied to Famine Posted by Eric Haun April 24, 2017

Cargo ship MV OS-35 was recently attacked by suspected armed pirates in the Gulf of Aden (Photo: EUNAVFOR)

The United States is closely watching a recent increase in piracy off the coast of Somalia, a senior U.S. military official said on Sunday as Defense Secretary Jim Mattis visited an important military base in Djibouti.

The rise in piracy attacks has at least partially been driven by famine and drought in the region, the top U.S. military commander overseeing troops in Africa said during Mattis’ visit as part of a week-long trip to the Middle East and Africa.

The United States uses the base in Djibouti, a tiny country the size of Wales at the southern entrance to the Red Sea, as a launch pad for operations in Yemen and Somalia.

The sudden string of attacks by Somali pirates comes after years without a reported incident. Attacks peaked with 237 in 2011 but then declined steeply after ship owners improved security measures and international naval forces stepped up patrols.

This month has seen a new rash of attacks, with two ships captured and a third rescued by Indian and Chinese forces after the crew radioed for help and locked themselves in a safe room.

“The bottom line is there have been a half dozen or so(incidents),” Marine General Thomas Waldhauser said at a press conference standing alongside Mattis.

“We’re not ready to say there is a trend there yet but we’ll continue to watch,” he said, adding one reason for the increase was famine and droughts in the region since some vessels targeted were carrying food and oil.

According to the U.N. World Food Programme more than 20 million people from Nigeria, Somalia, South Sudan and Yemen are at risk of dying from starvation within the next six months.

In South Sudan alone, more than 100,000 people are suffering from famine with a further million on the brink of starvation.

Mattis added that while the situation was being watched, he did not expect a U.S. military response to the surge in piracy.

A U.S. defense official, speaking on the condition of anonymity, said international shipping companies had started to become complacent about their security, which could also help explain the rise in piracy incidents.

Militancy in the Region

Djibouti is strategically important as it is on the route to the Suez Canal. The barren nation, sandwiched between Ethiopia, Eritrea and Somalia, also hosts Japanese and French bases.

The U.S. base, which has about 4,000 personnel, is located just miles from a Chinese one, still under construction, which has caused concern to some U.S. officials.

Mattis’ visit to the base comes as the United States has been increasing pressure on militant groups such as al Shabaab in the region.

The White House recently granted the U.S. military broader authority to strike al Qaeda-linked al Shabaab militants in Somalia.

Waldhauser told reporters that he had not yet used the new authorities given to him by the White House.

Al Shabaab has been able to carry out deadly bombings despite losing most of its territory to African Union peacekeepers supporting the Somali government.

On Sunday, a military vehicle hit a roadside bomb in Somalia’s semi autonomous Puntland region on Sunday, killing at least six soldiers and injuring another eight.

The United States recently sent a few dozen troops to Somalia to help train members of the Somali National Army.

It is also carrying out strikes in Yemen against al Qaeda in the Arabian Peninsula (AQAP).

AQAP boasts one of the world’s most feared bomb makers, Ibrahim Hassan al-Asiri, and it has been a persistent concern to the U.S. government ever since a 2009 attempt to blow up a Detroit-bound airliner on Christmas Day.  (Reporting by Idrees Ali; editing by Clelia Oziel)

Sewol Salvage Delayed by Dangling Loading Ramp, by Marex

By MarEx 2017-03-23 14:05:12

The top of the sunken ferry Sewol has reached a height of 27 feet above the surface, leaving only 15 feet to go before salvors can bring her back into port. But the salvage has run into an unexpected problem: a vehicle loading ramp on the ferry’s side is hanging free below the vessel. The dangling ramp would interfere with setting the wreck down onto the deck of a heavy lift ship, the next stage of the salvage process, and divers are working to cut the obstruction free so that work can continue.

Government spokesman Lee Cheoljo said on Thursday that the workers don’t have much time, as surface currents at the site will strengthen on Saturday. The area of the wreck site is well known for dangerous tidal currents, a major complication for the long-running salvage effort. 

Over 300 people died in the Sewol tragedy, and families of the victims have gathered near the scene of the salvage to mourn the loss of their loved ones and to hope for the recovery of nine missing passengers. “I shouted when I saw the ferry revealed above the water, thinking that my child can finally return home,” said Lee Keum-hui, who lost her daughter in the sinking. 

Many of the family members expressed frustration with delays in the operation; it has been almost three years since the Sewol went down, and authorities expected the vessel to be back on the surface by July 2016. “Nothing has been done for the past three years and now finally the ferry is being salvaged,” said family member Lim Won-yo in an interview with Korea Herald. “If it was this easy, why has it not been salvaged for the past years? Why only now?” 

The salvage effort, which began in 2015, could be the deepest lift of a complete vessel ever attempted. The government commissioned the complex operation due to public pressure from the victims’ families, who wanted to maximize the chance of recovering nine missing bodies. 

To bring the entire vessel to the surface at once without damage, the salvors partially lifted the wreck with a floating shearlegs and placed massive lifting beams underneath it. Despite challenging subsurface conditions, divers have also enclosed openings in the hull to make sure that human remains inside do not drift out. This week, when surface currents and weather conditions were just right, they connected the lifting beams to strand jacks on two barges and began hoisting the vessel to the surface.

Lim Writes to E.U. Criticizing Emissions System, by Marex

Kitack Lim, IMO Secretary-General.

By MarEx 2017-01-09 17:07:11

IMO Secretary-General Kitack Lim has written to senior European officials expressing his concern that including shipping in the European Union’s emission trading system could undermine efforts to reduce greenhouse gas emissions from shipping on a global basis.

In a letter to Martin Schulz (President of the European Parliament), Jean-Claude Juncker (President of the European Commission) and Donald Tusk (President of the European Council), Lim acknowledged that the E.U. had an ambitious policy for addressing emissions and recognized that Member States might wish to enhance the progress made to date. However, he cautioned against extending the E.U. emissions trading system to include ships.

 “I am concerned that a final decision to extend the E.U. emissions trading system to shipping emissions would not only be premature but would seriously impact on the work of IMO to address greenhouse gas emissions from international shipping,” said Lim. “Inclusion of emissions from ships in the E.U. emissions trading system significantly risks undermining efforts on a global level.”

The letter follows an agreement on December 16, 2016, by the European Parliament’s Environment Committee that emissions from ships should be included in the system from 2023 if the IMO does not deliver a further global measure to reduce GHG emissions for international shipping by 2021.

Lim says the IMO’s efforts to address greenhouse gas emissions from shipping have reached an advanced stage. In 2011, IMO became the first international body to adopt mandatory energy-efficiency measures for an entire industry sector with a suite of technical and operational requirements for new and existing vessels that entered into force in 2013. 

In October 2016, the IMO adopted a system for collecting data on ships’ fuel-oil consumption which will be mandatory and will apply globally. This will be the first in a three-step approach leading to an informed decision on whether any further measures are needed to enhance energy efficiency and address greenhouse gas emissions from international shipping. If so, policy options would then be considered.

IMO also approved a roadmap for developing a comprehensive strategy on reduction of greenhouse gas emissions from ships, which foresees an initial greenhouse gas strategy being adopted in 2018.

These measures were agreed, by consensus by IMO Member States, including E.U. Member States. In his letter, Lim said this not only demonstrates the IMO’s leadership and role as the global body for developing and implementing requirements for international shipping, but also reaffirms that the IMO is the only appropriate body to take this work forward and achieve the necessary political cooperation of all governments represented at the IMO, including E.U. Member States. He added, “Such political cooperation is important to ensure that all countries act together to ensure that no one is left behind.”

Lim said that, in his view, unilateral or regional action that conflicts with or undermines actions that have been carefully considered and deliberated by the global community at the IMO threatens world-wide confidence in the consistent, uniform system of regulation developed by the IMO. Regional or unilateral action, he said, would harm the goals of the wider international community to mitigate global greenhouse gas emissions from ships and be at odds with the overarching objectives of the Paris Agreement.   The 2015 Paris Agreement makes no reference to emissions from international shipping, due to the global nature of the sector and the difficulty in allocating emissions from a ship to a single state. However, Lim stresses, the IMO’s work on the control of greenhouse gas emissions shows that strong action is being taken. 

A decision by the IMO Council at the beginning of December 2016 to authorize two additional meetings of a special MEPC Working Group on reduction of greenhouse gas emissions from ships during 2017 (the first to be held 26-30 June) will enable further progress, and illustrates the importance and urgency that the IMO attaches to the issue. 

In parallel, the IMO will continue its efforts to provide related assistance to developing countries through major capacity-building projects on energy efficiency in ship operations.

USS Mahan Fires Warning Shots at Iranian Boats, by Marex

Live-fire test with a .50 caliber machine gun (file image courtesy USN)

By MarEx 2017-01-09 14:30:29

On Sunday, the U.S. Navy destroyer USS Mahan fired three warning shots with a .50 caliber machine gun to ward off a group of Iranian attack boats. The incident is the latest and most dramatic confrontation between Iranian and U.S. forces near the Strait of Hormuz, and it follows an established pattern of high-speed approaches by Iran’s patrol craft. 

U.S. Navy officials said in statements to media that the Islamic Revolutionary Guard Corps (IRGC) boats approached to within 900 yards and did not respond to the Mahan’s attempts to make radio contact. The Mahan responded with a progressive set of warnings including the ship’s siren, ship’s whistle, flares and a helicopter-launched smoke float. 

“Disregarding the warnings, the IRGCN vessels continued to directly approach Mahan at a high rate of speed. Mahan then fired three warning shots with a crew-served .50 caliber machine gun, and the IRGCN vessels arrested their high-speed approach,” a Navy official told CBS News. “Naval Forces Central Command assesses this interaction as unsafe and unprofessional.” The official also alleged that the Iranian vessels had approached with their crew-served weapons manned. 

At the time of the incident, the Mahan was escorting two other naval vessels, the Wasp-class amphibious assault ship USS Makin Island and the civilian-crewed fleet oiler USNS Walter S. Diehl. 

Iranian state media had not yet published a statement regarding the incident as of Monday morning, but Iran’s Press TV reported separately that the nation’s parliament would be boosting military acquisition programs, including the purchase of fast attack craft. 

U.S. president-elect Donald Trump said last year that the Navy’s rules of engagement should favor the use of force during confrontations with Iranian patrol craft. “And by the way, with Iran, when they circle our beautiful destroyers with their little boats and they make gestures that our people – that they shouldn’t be allowed to make, they will be shot out of the water,” he said at a rally in Pensacola last September. 

Ballast Water Treatment: What Will the IMO Do?, by Marex

By InBallast 2017-01-08 00:34:54

The IMO’s Ballast Water Management Convention, adopted in 2004, reached its criteria for ratification on September 8, 2016, and will enter into force following 12 months. Somewhat simplistically, this means that all vessels must comply with its provisions and eventually meet the Ballast Water discharge standard (as defined by Regulation D-2).

Shipowners are now approaching flag states and requesting a de-coupling of the renewal of the international oil pollution prevention certificate (IOPPC) from scheduled docking in order to achieve potentially five years extension from complying with the D-2 standard and thus postponing the costs of procuring and installing a ballast water management system likewise.

However, the IOPPC implementation reference is currently not referred to in the implementation schedule of the Ballast Water Management Convention, and it may very well be that it never will. It is assumed that MEPC 71 will decide on the final D-2 compliance phase-in mechanism and that the Convention will be changed accordingly after its ratification following the legal procedure that applies.

At MEPC 70, a majority of states argued for postponing the D-2 phase-in program by another two years and still using the IOPP certificate as reference point due to lacking docking capacity and also allowing vendors to “upgrade” their current certificates to also comply with the additional requirements of the revised G8 test-protocol. 

If this becomes the case and shipowners continue to follow the extension route made available for them by flag states accepting de-coupling of the IOPP certificate, we will potentially end up with a pile-up in 2024! This will be most unacceptable to the IMO as well as to most of its member states. More realistic outcomes of MEPC 71 are:

  1. The IOPPC remains as the implementation reference and entry into force of the D-2 standard of the Convention remains September 2017.
  2. The IOPPC remains as the implementation reference and entry into force of the D-2 standard of the Convention is delayed one or two years to September 2018 or 2019.
  3. The implementation reference is changed to first scheduled dry-docking and entry into force of the D-2 standard of the Convention remains September 2017.
  4. The implementation reference is changed to first scheduled dry-docking and entry into force of the D-2 standard of the Convention is delayed one or two years to September 2018 or 2019.

Why is postponement required, or not?

The industries arguments for postponing D-2 compliance implementation are a lack of docking capacity and a lack of availability of treatment systems approved using the revised G8 protocol.

Vessels operate subject to numerous surveys required for renewal of certificates, and these are vital for the vessel to be allowed to operate. A vast number of them take place during the scheduled docking which takes place most usually every five years. The introduction of the Convention does not in any way increase the necessity of docking. It does require time available during docking for the integration of the system to be installed. 

Most vendors will claim that this can be done in parallel with other activities without interfering with them in any way, so the number of dockings will not increase nor will the duration of the docking period. Consequently, the integration of a treatment system will not challenge the global docking capacity. 

Preparatory work can be undertaken prior to docking, reducing the associated work-scope during docking, and final commissioning of a system may take place immediately following the docking. Thus, a revision of the implementation reference if using scheduled docking as such, should take this into account.

At present, it is correct that there are no systems certified in accordance to the newly revised G8 protocol. On the other hand, the shipping industry has previously stated, without prejudice, that they will accept U.S. Coast Guard type approved systems being installed onboard their ships. They have also stated that they consider revised G8 systems as equivalent to U.S. Coast Guard. 

In early December, we saw the first treatment system being granted U.S. Coast Guard type approval. There are two more systems in the approval pipeline, and we expect these to qualify shortly. Before the end of the second quarter of 2017, another four or even five systems are expected to be qualified by the U.S. Coast Guard – leaving us with a potential of seven to eight systems available before entry into force on September 8, 2017. 

In addition, the shipping community has already been granted life-long grandfathering inclusive of compliance for vessels equipped with systems approved under the earlier G8 instrument under the “roadmap” ensuring that “early movers” should not be penalized.

There seems little substance for delaying D-2 compliance implementation. A further delay now, will no doubt hit the treatment system suppliers hard, penalizing them even further, and also penalizing those of them who were early movers. 

Our best guess as to the outcome of MEPC 71 is that the IMO will come back to its senses, reject the current arguments for delay and remove the IOPPC reference, as this is now clearly misused by a number of flag-states to allow de-coupling, and revert to docking intervals as the triggering mechanism. 

As a change to the convention itself will take time, it is likely that a postponement of the implementation date may be required. However, there should be no need to expand this for more than one year. 

Thus, all vessels might have to install a type approved ballast water management system, either an initial G8 approved or a revised G8 approved system, at the first scheduled docking after September 8, 2018. 

Realizing the timeline for assessing and preparing for treatment system integration – it’s time to get moving.   InBallast is an independent consulting/ engineering firm. 

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive or Marigons Nautical Consultant Pte LTD.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.