CMA Live 2010 | Lloyd’s List behind the scenes at the Connecticut Maritime Association

Welcome to the Lloyd’s List website and blog from the Connecticut Maritime Association’s 25th Annual Shipping Conference and Exhibition. More than 2,250 international shipping executives from the US and around 50 other countries come together every year in Stamford, Connecticut to debate the state of the industry. Learn more

Shipping executives say boxship sector yet to hit bottom

By Michelle Wiese Bockmann | Published: March 27, 2009

OVER 75% of shipping executives polled by Lloyd’s List during the Connecticut Maritime Association conference agreed that conditions in the global containership sector had yet to hit bottom.

The survey respondents included US and European shipowners, operators, regulators, lawyers, fund managers and bankers, and revealed an overwhelmingly negative outlook for the shipping sector.

The Lloyd’s List industry survey asked five questions related to major maritime issues as the industry grapples with what US commentators are now calling “the Great Recession”.

A majority of respondents thought that safety standards would slip because of the credit crunch, and also questioned banks’ commitment to shipping.

With freight rates slightly above breakeven levels for ships purchased and financed at the height of the boom, and with bulk carriers, containerships and gas carriers going into lay-up, there was widespread acknowledgement that owners will cut safety and maintenance corners to save money.

Nearly 87% of the 30 people who responded to the question agreed that the credit crunch threatened the maritime industry’s drive to improve safety standards.

Hopes that significant cancellations would help reduce the bloated bulk carrier newbuilding orderbook in order to improve freight rates are also low.

Less than 41% of the 32 respondents believed that bulk carrier newbuilding cancellations in 2010 would not exceed 60%.

These cancellation levels are among the most optimistic scenarios currently under discussion by owners and operators.

Just under two-thirds of the respondents said that banks would not remain committed to shipping.

There was little sign indication of relief for the global containerships fleet either. Just 26 of the respondents agreed that the container sector had yet to hit bottom.

A sharp contraction in global trade has seen port throughput in key US ports fall by more than 30% in the months of January and February.

But 78% of those executives surveyed believed the worst was yet to come.

Cosco chief bullish over dry bulk recovery

By Michelle Wiese Bockmann | Published: March 26, 2009

THE head of Chinese shipping giant China Ocean Shipping (Group) says the dry bulk market will recover by the second half of 2008, but remains less confident about containership prospects, partly because of America’s protectionist trade stance.

Cosco president and chief executive Captain Wei Jiafu has urged Americans to resume buying Chinese goods again to revive global trade.

He also said he had successfully recommended last month that the Chinese government boost procurements in Europe, in a move to boost capacity on trade lanes from Asia.

“I strongly believe that bulk carriers will recover by the second half of this year,” Capt Wei told the Connecticut Maritime Association media conference today.

He cited a 1.4% rise in Chinese electricity consumption in the first half of March as proof of industrial growth. “That means customers and users are increasing, that factories and manufacturing [have] already started,” he said.

Despite Cosco’s dry bulk optimism, its executives are asking for steep discounts as they renegotiate long-term charter rates for bulk carriers in its fleet chartered from European and American owners.

The deals were signed at higher rates before the freight market collapse in the last quarter of 2008, and Cosco is taking a very tough approach, according to those familiar with the talks.

Capt Wei said Cosco’s financial status was healthy and that the company had available credit of Yuan75.4bn ($11bn) and Yuan70bn in cash.

The government-owned shipping and terminal group is one of the world’s largest, with a fleet of 800 ships exceeding 50m dwt, including 160 containerships and more than 200 bulk carriers.

Capt Wei also said he had recommended to government authorities that China banned single hull tankers to encourage scrapping in the global fleet.

But he provided few details of Cosco’s fleet expansion plans or newbuilding cancellations within the company’s dry bulk orderbook, estimated at 66 bulk carriers.

Capt Wei also said that there had been no pressure from the Chinese government to purchase new ships from Chinese yards, amid fears about half of the global fleet orderbook will struggle to gain financial backing.

In January 2008 the company decided to scrap plans to order 126 bulk carriers, as “a short term readjustment” to plans to establish the world’s largest fleet.

He said Chinese GDP growth forecasts of 8% would be reached in 2009, despite a lower World Bank forecast of 6.5%, and attributed the Baltic Dry Index recovery in February to the Chinese government’s $580bn stimulus plan.

A dark and stormy night…

By Michelle Wiese Bockmann | Published: March 26, 2009

FACED with around three by three square metres of exhibition space, it took a lot of ingenuity to stand out from the crowd at the Connecticut Maritime Association expo and conference at Stamford, Connecticut, that finished yesterday.

But Lloyd’s List’s tour of the 150 or so exhibitors revealed that a little imagination, a lot of chutzpah and some free alcohol can get you noticed.

Top marks have to go to Titan Marine for its inviting chocolate fondue, accompanied by wine poured from bottles with labels that read Miss Behaving, and Miss Chevious. It certainly seemed a crowd pleaser.

Many booths had offerings of chocolates and cookies, a popular sustenance over the three-day event. Classification society DNV had free wine and beer, while Bermuda-based Bernard Schulte Shipmanagement served up the Bermudan specialty, ‘dark and stormy’, a mixture of ginger beer and rum. (Delicious, we’re assured).

Fleetweather decided against any gimmicks at its booth and instead took the action downstairs to the hotel foyer on Tuesday night for the annual Rock ‘em and Sock ‘em tournament.

It involved a mechanical boxing ring fight, and was probably highly enjoyable after all those dark and
stormies.

Crystal ball gazing

IT TAKES a brave man in shipping to make any forecasts at the moment, but BIMCO president and director of Embiricos Shipbrokers Philip Embiricos did not hesitate when asked during the CMA conference.

Put on the spot by the conference moderator, he bravely forecast that the spot rate of a very large crude carrier in 2010 would be $18,000 per day, while capesize vessels would be at $15,000 per day.

Such low assessments prompted groans among the audience, but sadly the others presenting on the panel with Embiricos lacked his courage.

Oil Companies International Marine Forum director Phil Davies would only say he thought rates would be “more than Philip’s [forecast] in both cases”.

Embiricos may be vying for sage status. He later told the conference he gave media interviews during a China visit in early 2009 explaining the Baltic Dry Index and correctly forecast the February rates surge that saw the BDI rise to over 2,000 points.

The best and worst of China

ONE of the speakers sharing his insight into the dry bulk rollercoaster was Peter Sandler, director of ocean freight strategy and business development at Louis Dreyfus Commodities.

Sandler had this to offer about doing business with China in recent months.

“Doing any business with China is like writing a call option. If the market’s in your favour they’re your
best customer, but if the market’s against you, they are your worst,” he told the room.

Alas, he had little cheer. “The herds all think that it can’t get worse. It can get worse and it probably will get worse, especially for dry bulk,” he said.

The assessment was enough to send everyone back to the exhibition stands to drown their sorrows in some more dark and stormies.

Uniform approach

A PROMINENT sight at the CMA has been a large number of graduates and attendees of various US maritime academies, now seeking jobs in the US maritime industry. They were a familiar sight in their uniforms, diligently networking and attending seminars.

Shipping remains acutely aware that a recruitment crisis is looming, with major shortfalls in officers for merchant marine fleet an overhanging issue despite the collapse in global trade and lower demand for ships.

However, at some crewing levels, right now, things are not that positive. V.Ships president Roberto Giorgi revealed that the cost of crew wages is coming down for dry bulk vessels as market forces go to work.

But, crew pay on tankers is still rising, he said.

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Shipping firms face the risk of hostile takeovers

By Michelle Wiese Bockmann | Published: March 26, 2009

PUBLIC shipping companies have been warned they are vulnerable to hostile takeovers by shareholder activists engaging in damaging proxy fights to gain greater control, writes Michelle Wiese Bockmann .

Blank Rome attorney Keith Gottfried told the Connecticut Maritime Association that shareholder activists posed a “significant threat” to listed shipping companies and forecast they would find new targets in 2009. “Many companies are sitting ducks,” he said.

Largely driven by hedge funds, activity by shareholder activists has risen substantially in the US in 2009, with Mr Gottfried recording 64 new cases so far this year.

This nearly exceeded activity for the whole of 2008, when shareholder activists gained seats on 86 boards in New York-listed companies. “These folk decide they know better than you how to run your company,” Mr Gottfried said. “They tend to be very arrogant and very confident.

“They will not go away easily. It is possible for a company to be stolen by a shareholder activist right under their noses.”

Nasdaq-listed offshore marine company Trico Marine Services is the highest profile maritime transport company to be targeted by shareholder activists.

The company is embroiled in a row with rival Oslo-based Kistefos, which has a 22.9% stake, and is trying to gain greater board control and overthrow the incumbent chairman and chief executive. The proxy fight has focused on corporate governance issues, as the company’s shares have fallen 90% in the last 12 months.

Kistefos controls Viking Supply, which supplies offshore supply and anchor handling vessels in the North Sea.

Mr Gottfried said many other companies had been hit by proxy fights and shareholder activists. “I do believe that this will continue to be a significant threat for companies in the shipping industry,” he said. “Trico will not be the first.”

A typical shareholder activist had a 5%-10% stake in the company, had already approached major investors and lenders before making any moves and believed the company was underperforming, he said.

He advised companies to review their certificates of incorporation and bylaws, and consider adopting a shareholder rights plan as a form of defence against any hostile takeover. They should also review their shareholder profile to identify hedge funds and investors likely to target the company, and to know their voting strategies.

“Be prepared to defend the company’s board nominees,” Mr Gottfried added.

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Shipping firms at risk of hostile takeovers

By Michelle Wiese Bockmann | Published: March 25, 2009

PUBLIC shipping companies have been warned they are vulnerable to hostile takeovers by shareholder activists engaging in damaging proxy fights to gain greater control.

“Many companies are sitting ducks,” he said.

Largely driven by hedge funds, shareholder activists activity has risen substantially in the US in 2009, with Mr Gottfried recording 64 new cases so far this year. This nearly exceeded activity for the whole of 2008, when shareholder activists gained seats on 86 boards in New York-listed companies.

“These folks decide they know better than you how to run your company,” Mr Gottfried said.
“They tend to be very arrogant and very confident.

“They will not easily go away. It is possible for a company to be stolen by a shareholder activist right under their noses.”

Nasdaq-listed offshore marine company Trico Marine Services is the highest profile maritime transport company to be targeted by shareholder activists.

The company is embroiled in a row with rival Oslo-based Kistefos, which has a 22.9% stake, and is trying to gain greater board control and overthrow the incumbent chairman and chief executive.

The proxy fight has focused on corporate governance issues, as the company’s shares have fallen 90% in the last 12 months.

Kistefos controls Viking Supply, which supplies offshore supply vessel and anchor handling vessels in the North Sea.

Mr Gottfried said many other companies had been hit by proxy fights and shareholder activists.

“I do believe that this will continue to be a significant threat for companies in the shipping industry,” he said. “Trico will not be the first.”

A typical shareholder activist had a 5%-10% stake in the company, had already approached major investors and lenders before making any moves, and believed the company was under-performing, he said.

He advised companies to review their certificates of incorporation and bylaws, and consider adopting a shareholder rights plan, as a form of defence against any hostile takeover.

Companies should also review their shareholder profile to identify hedge funds and investors likely to target the company, and to know their voting strategies.

“Be prepared to defend the company’s board nominees,” he said.

Shipping companies should also anticipate who is likely to target the company and demonstrate a commitment to shareholder value.

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Treatment of Chawla and Chetan was ‘regrettable’

By Michelle Wiese Bockmann | Published: March 25, 2009

TWO seafarers stuck in South Korea over the Hebei Spirit tanker oil spill lied and manipulated voyage data recorder information, according to the head of the country’s shipping register, writes Michelle Wiese Bockmann .

Hebei Spirit master Jasprit Chawla and chief officer Syam Chetan were jailed in December but are now on bail pending an appeal in mid-2009. Korean Register chairman Kong-Gyun Oh told Lloyd’s List their treatment was “regrettable” and detention “very unusual”.

Speaking on the sidelines of the Connecticut Maritime Shipping Association, Mr Oh said: “The reason why these two seafarers were arrested was not because they created the situation but the very fact that they did not tell the truth when they were investigated by the judicial branch of the Korean court system.”

The men “hid some information that was revealed to be untrue and they manipulated some VDR information”, he said. The so-called Hebei Two were “detained on these grounds, not because they were found guilty of causing the Hebei Spirit accident”.

The treatment of Capt Chawla and Mr Chetan has sparked international outcry, widespread condemnation from global shipping groups, and renewed focus on the growing criminalisation of seafarers.

In July 2008, a South Korea court initially cleared the master and chief officer of wrongdoing. A subsequent court ruling ordering the jailing of the Hebei Two came after barge owner Samsung Heavy Industries appealed the decision.

The Hebei Spirit ’s shipmanager, V.Ships, along with independent tanker owners’ organisation Intertanko and unions, criticised inaccuracies in the Korean tribunal’s report into the accident, which was released ahead of the appeal. The two men followed standard international procedures but were jailed and fined after the first court decision was overturned.

Mr Oh said he was trying to gather support from the Korean government and industry to change laws “to make sure this kind of ill treatment of seafarers does not happen”. But he said western media were not fully appraised of all facts in the case.

• Intertanko has continued to make “forceful representation” on the fate of the two Hebei Spirit officers, managing director Peter Swift said. “We respect the legal process but anything other than an innocent verdict would be a denial of justice.”

Dr Swift added that the Hebei Spirit case illustrated the importance of conventions. Korea was reluctant to sign the supplementary fund convention at the time it was introduced and therefore did not have access to compensation for the spill.

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Brussels forces IACS to open up its membership

By Michelle Wiese Bockmann | Published: March 25, 2009

Class association is told it must comply with European Union competition law

THE International Association of Classification Societies yesterday revealed it must open up its membership to comply with European Union competition law, in the first concession since authorities launched an antitrust investigation 14 months ago.

IACS chairman Kong-Gyun Oh told Lloyd’s List that “there needs to be some adjustment to the membership criteria”, following talks with the EU competition directorate that were currently at a “very tough” stage.

The exclusive 10-member group has battled complaints of restrictive and monopoly practices since adopting its own safety-based common structural rules in 2006, which outline minimal technical standards for building bulk carriers and tankers. Access to the working groups that draw up standards is only available to IACS membership.

The industry widely views the EU move as an attack on the world’s top classification societies’ independence and quality, which could dilute safety standards.

But Mr Oh told the Connecticut Maritime Association conference yesterday of successful regulatory intervention at IACS, saying the EU had ordered membership changes.

Legal restraints meant he could not outline what they were, he told the 300 delegates during his talk.

“We are currently facing many difficulties with the regulators,” he said.

It is the first direct indication that IACS will have to change its membership rules since EU competition authorities raided offices of five IACS members in January 2008 following complaints lodged by a non member, widely reported as the Polish Register of Shipping.

The Polish register had been expelled from IACS after a high-profile bulk carrier casualty in 2001, and had since argued that EU intervention was needed to encourage the exchange of information beyond IACS membership.

“It is hoped that that the European Commission will realise the role of the IACS to promote safety,” Mr Oh said.

“The EU must ensure that the quality [of standards] classification societies will enjoy under the new membership criteria will continue and that whatever we have been doing up until now at IACS will continue.”

He said it remained to be seen whether IACS would have to re-admit the Polish registry as a member.

“We’re not focusing on any single classification society,” Mr Oh said. “What we’re trying to do is make sure that there is a balance between bringing ourselves into compliance and at the same time making sure that the quality of the work that we provide to the maritime industry is not jeopardised. There is a fine balance between the two and I’m sure the EU will realise this as well.”

He urged the shipping industry to ensure operations and maintenance standards were not comprised during the market collapse, which has devastated the dry bulk and container sectors of the industry.

Those societies raided included IACS European members, Germanischer Lloyd, Lloyd’s Register, Det Norske Veritas, Bureau Veritas and Rina.

IACS members began talks with the EU competition directorate six months ago. It has now posted information about the rules on its website and said that its work remains transparent.

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Class-hopping more prevalent as owners cut costs, warns Oh

By Rajesh Joshi | Published: March 25, 2009

THE growing trend of shipowners seeking class societies with lower safety standards threatens to defeat efforts by the International Association of Classification Societies to expand its membership, said IACS chairman Kong-Gyun Oh.

Mr Oh said class-hopping was becoming increasingly prevalent in the face of the global financial crisis as yards and owners sought to cut costs.

But IACS has responded by saying that no compromises will be made on quality as it seeks to expand its membership in the face of the European Commission’s antitrust probe, which has been under way since January.

Speaking on the sidelines of the Connecticut Maritime Association’s conference in Stamford on Monday, Mr Oh said that his own society had received inquiries from shipowners with newbuildings on order in Vietnam on the possibility of getting Korean classification.

He refused to name the classification societies originally involved in the newbuildings, citing competition issues.

“We [at the Korean register] turned these requests down because the newbuildings did not meet our internal requirements [on safety standards].”

Mr Oh was replying to concerns that the global financial crisis and the pressure on costs had caused shipowners to cut corners on newbuildings and seek to get away with the minimum safety standards required by law.

ABS president Christopher Wiernicki said last month that tanker owners and shipowners in general would be pressed to maintain cash flows on lower-priced assets that earn peppercorn freight revenues as the economic crunch took hold.

He warned that this tendency would see a reduction of safety and maintenance standards, and compromises on these aspects on future newbuildings.

It was up to class to combat this tendency, he said.

Mr Oh said there might be cases in which shipowners with newbuildings on order had been tempted to consider cutting corners.

He added the matter had been discussed at IACS level, and the association as a bloc was determined not to make any compromises on safety and quality matters.

Mr Oh said that class could not ignore quality considerations when class-hopping was becoming a trend.

“The very lifeline of class is its reputation and trust,” he said.

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The fast and the furious

By Michelle Wiese Bockmann | Published: March 23, 2009

APPARENTLY last year’s incoming commodore whispered in the ear of the outgoing commodore as he received his honour at a ceremony a year ago: “I’ve just bought 9.9% of your company”.

It was probably not the congratulatory remark that OSG’s Morten Arntzen expected to hear from Norwegian shipping tycoon John Fredriksen.

But I wonder what Cosco’s Captain Wei Jiafu will tell outgoing Mr Fredriksen when he hands over the title to him on Wednesday night? (That’s if Mr Fredriksen is coming).

But whether Mr Fredriksen attends or not, his Golden Ocean Group dry bulk company could certainly do with a cash injection. Such whisperings from the ear of a cashed-up Chinese shipping giant might be welcome.

Awarding the honorary title of Commodore is the culmination of the Connecticut Maritime Association’s three-day conference.

It brings many of the global industry’s heavyweights to Stamford for the gala dinner, although the star of the show, Cosco’s head, Capt Wei, has yet to fly in.

The administrator of the Panama Canal Authority, Alberto Aleman, isn’t here yet either. He’s only joining the conference for the gala dinner, to sit at the table with Capt Wei, who’s on the authority’s board.

But there’s still plenty of high flyers here to justify some fast and furious networking.

Among them is New York-based Angela Chao, deputy chairman of the Foremost Group, who hit gossip headlines recently when she married billionaire financier Bruce Wasserstein.

Another is the Baltic Exchange’s chairman Michael Drayton, who joined Ms Chao and other leading charterers and owners for a session dissecting the current crisis.

The verdict: things will get worse before they get better, although the tanker sector will be spared the worst of the horror. Dagfinn Lunde from DVB Bank believes 25% of the container fleet will be in lay-up within two years.

The piracy session was one of the best attended, and attracted more interest beyond shipping circles.

I chatted to one money-laundering expert from a high-profile global bank. He came to find out more about the ransom money-trail that shipowners are leaving. Piracy is clearly going to stay in the headlines for a while yet.
In line with the ‘gloom and doom’ themes was Bureau Veritas marine division head Bernard Anne, whose presentation about lay-ups was, depressingly, made to a well-attended room.

BV sponsored the lunch on Tuesday and there was some light-hearted banter about Mr Anne’s request to have Roquefort cheese on the menu that couldn’t be met.

I wondered what this sophisticated Frenchman thought of the American-style cupcakes for desert, with their bright blue icing.

Other interesting observations: Roger Holt from Intercargo made a passionate call for owners to help shipping groups like his own and the International Maritime Organisation to sort out carbon dioxide ship emissions policies before somebody else does.

That came after some Columbian university academics forecasts where shipping will be in 2030.

Over-regulated is one conclusion – especially if shipping allows countries such as the EU to fill the vacuum if the International Maritime Organisation doesn’t learn to act a little faster.

For Wednesday, the search is on for some good news.

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Off we go

By Michelle Wiese Bockmann | Published: March 22, 2009

BANISHED in the corner. It’s an inauspicious beginning to the first official event on the first day of the Connecticut Maritime Association’s three-day conference, at Stamford, Connecticut.

But the Women’s International Shipping Trade Association’s fourth annual CMA luncheon is booked out, and I’ve not pre-registered.

So it’s an awkward 30-minute wait in the back corner of the room before organisers kindly find me a spare seat at a table.

“Why are there men here?” whispers one senior female shipping executive. I’m not sure myself.

Vice Commandant Vivien Crea from the US Coast Guard speaks and accepts the inaugural “personality of the year award” before the lunch is over and it’s down to the main game.

The attendees list is interesting: plenty of US maritime lawyers (Seward & Kissel has 11 delegates alone), but they’re surpassed by German bank DVB. There are 16 delegates from three countries and different divisions attending.

There’s little of cheer in the main opening speeches when the ’state of the industry’ address begins.

Vice Commandant Crea speaks again, along with congressman Elijah Cummings. Did I really hear him talk about the “Gulf of Eden” instead of the “Gulf of Aden” when talking about piracy in his speech, I find myself asking, or was it his accent?

The chair of the House of Representatives sub-committee on coast guard and maritime transportation also says something about efforts to expand oversight of “international shipping cartels”.

But there’s no way to question him further. He dashes out with Crea less than 20 seconds after finishing his talk, and while the applause is still echoing around the room, bound on a special plane to Washington DC.

Anyway congress has important things to do. My Virgin Atlantic plane to the US was lucky to be at 20% capacity. And if US citizens don’t start spending and stop saving, shipping is going to get worse, not better.

At least that’s the message that later emerges from one of the following speakers, Philip Embiricos, president of BIMCO.

Safety is also a strong theme. With containerships, bulk carriers and gas carriers in lay-up, and tanker rates getting lower, cost-cutting is inevitable.

But it was only on the sidelines that anything concrete emerged.
International Association of Classification Societies chairman Oh Kong-Gyun revealed that class-hopping is starting as the drive to lower standards escalates, especially in newbuildings in Vietnam yards.

The biggest news of the day comes when conference moderator, class society ABS external affairs vice president Stewart Wade, asked Oh a leading question about the EU’s long-running investigation into IACS.

Oh replied diplomatically, but I’m sure there will be internal mutterings later about him raising the question.

Tuesday sees the shipping markets more closely examined. As Embiricos said during his presentation, there’s not much more to say than “it stinks”. But perhaps we’ll find out just how malodorous everyone thinks the world economy is.

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