Bureau Veritas completes first Energy Management Systems audit for Northern Marine Management

Leading international classification society Bureau Veritas has completed the first certification audit of any shipping company in the world to the new standard ISO 50001- 2011 - Energy Management Systems.

Stena’s ship management division, Northern Marine Management Ltd including Northern Marine Management (USA) LLC, has achieved certification to BS ISO 50001, which ensures systematic monitoring and control of energy usage, helping to optimise efficiency, reduce fuel consumption, reduce the company’s environmental footprint and provide a cost saving for the vessels owners.

Only four other organisations in the UK have this certification, one being the Royal Mint, and no other shipping company has yet achieved this.

Northern Marine Management technically manages fifty-seven vessels, including the Stena tanker and gas carrier fleet as well as vessels for various other blue chip ship owners.

Says Philip Fullerton, Technical Director, Northern Marine Management, “Achieving this new and high standard for energy management across the whole company is a key step for us in demonstrating that shipping is at the forefront of environmental responsibility.”
BS ISO 50001 Energy Management Systems is intended to assist organizations in making better use of their existing energy consuming assets, create transparency and facilitate communication on the management of energy resources and promote energy management best practices and reinforce good energy management behaviours.

ISO 50001 accreditation demonstrates Northern Marine’s commitment to energy management and conservation. Northern Marine implemented its first Shipboard Energy Management Plans on board its Stena AB vessels during 2005. Last year an environmental and energy efficiency rating scheme was implemented on five of the company’s ro-ro vessels. That meant the monitoring and measurement processes were largely in place for the new fleet and company-wide standard. These were codified and documented with clear statements of intent in the form of the Company’s two new policies: the “Safety, Environmental, Energy & Quality Policy” and the “Energy management and Efficiency Policy”.

Says Claude Maillot, ships in service director, Bureau Veritas, “This is an important step for Northern Marine and for shipping as a whole. It shows how shipping can be a leader in responsible energy use. And it demonstrates the strength and range of Bureau Veritas’ range of environmental services, as we were able to combine energy use assessment ashore and at sea into this one new and high standard.”

Bureau Veritas is a world leader in conformity assessment and certification services. Created in 1828, the Group has close to 50,000 employees in 930 offices and 330 laboratories located in 140 countries. Bureau Veritas helps its clients to improve their performances by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility.

www.bureauveritas.com for corporate information www.veristar.com for marine information


For more information:
Claude Maillot
Bureau Veritas
+33 (1) 55 24 72 21
claude.maillot@bureauveritas.com

Nothing succeeds like excess

Ever wondered what the difference is between an excess and a deductible under your insurance policy? Me neither. But the insurance team at Moore Stephens can tell you, anyway.

In its latest Insured Interest newsletter Moore Stephens explains that a deductible is the American way of describing what the rest of the world calls an excess. American underwriters start with a total sum insured. Then they deduct the deductible, leaving you with the amount you are allowed to claim. In the rest of the world, however, you start with nothing. Then you stipulate an excess. Anything over and above the excess can be claimed for under the policy, up to the insured value. Any excess will do, although gluttony is particularly unattractive.

The deductible and the excess may sound like the same thing, but they are. In both cases, they are an alternative to putting up rates. But there the similarities begin.

If you insure your house for £1m and there is a £1m excess under the policy, you will start with nothing and end with nothing. If you are American, however, you start with £1m and end up with nothing, plus you lose your house. This is bad luck, and means that you will have to live the rest of your life as a tramp.

In England a tramp is a king of the road, while in America it is a lady of the night. In both cases you start out with something and end up with nothing. This is invariably the result of the worst kind of excess.

Don’t go to card games with barons and earls.

www.moorestephens.co.uk

Handysize explained

Although there is no official definition in terms of exact tonnage, the term ‘handysize’ most usually refers to a dry bulk vessel (or, less commonly, to a product tanker) with a deadweight of about 15,000 - 35,000 tons.

But the shipping team at Moore Stephens has come up with a much more plausible definition of the term in in its latest newsletter. It explains that the evolution of the handysize is closely related to the development of the railways. It is not named after W C Handy, who got so fed up waiting for a train at Tutwiler in the Mississippi Delta in 1903 that he wrote St Louis Blues instead. Neither does it have anything to do with The Handy Shipping Guide. This was published every Saturday for 101 years starting in April 1887 and included details of shipping movements under such headings as Homeward Bound and Long Overdue. Homeward Bound was written by Paul Simon while he was waiting for a train at Widnes station, which today houses a shop and Debbie’s Beauty. There are still no toilets.

Handysize ships are so named because they are handy. They can get into small ports. They can get into big ports. They have their own cranes. Variations include the handymax bulker, which is bigger, the super handymax, which is too big for its boots, and the mega handymax, which is the next big thing.

Mark Twain said that many a small thing has been made big by the right kind of advertising. But handysize ships didn’t get where they are today by being big. Handysize is the new black. You can stop, offload your cargo in a small port, stop again, and then move on to the next job.

Every stop is neatly planned for a poet and a one-man band.

www.moorestephens.co.uk

Shipping confidence picks up despite eurozone fears

Overall confidence levels and the likelihood of major new investments in the shipping industry in the next 12 months picked up marginally in the quarter ended November 2011, according to the latest Shipping Confidence Survey from leading accountant and shipping adviser Moore Stephens. This was tempered by an expectation of a rise in finance costs. Respondents also continued to exhibit a high level of concern about the negative impact of overtonnaging on the market amid continuing fears about the global economic climate, and the eurozone crisis in particular.

In November 2011, the average confidence level was 5.4 on a scale of 1 (low) to 10 (high), up on the 5.3 recorded in August 2011. But, together with the February 2009 figure, it remains the second lowest confidence rating since the survey was launched in May 2008 with a rating of 6.8. Confidence among owners was up from 5.1 to 5.3, but down on the part of charterers, from 5.0 to 4.9. There was a small increase in confidence in the broking sector, from 5.1 to 5.2. Confidence was highest among managers, unchanged at 5.6. Europe, up from 5.0 to 5.1, was the least confident region. In May 2008, European confidence stood at a high of 6.6, and as recently as August 2010 was running at 6.1. Confidence in Asia rose from 5.7 to 5.8 and in North America from 5.1 to 5.8.

The eurozone crisis featured prominently in comments from respondents. “Above everything,” said one, “it is the European financial crisis which will decide how things turn out for shipping in general and for shipowners in particular.” Another remarked: “Volatility remains high, with prospects for a solution to the European debt crisis a long way away. A comparison with the Lehman Brothers collapse does not seem that far-fetched at the moment.” Lehman was also on the mind of another respondent who noted: “What is still unknown is how the eurozone crisis will unfold and what sort of knock-on impact this will have, not only on global demand but also on the availability of finance for trade and asset acquisition. When this is coupled with the increasingly strident demands from governments and regulators for banks to build up more and more capital to avoid further state bail-outs, what you have is a toxic financial brew that makes 2008/9 and the collapse of Lehman Brothers look like a vicar's tea party. These are deeply uncertain times.”

State intervention was also foreseen by another respondent who noted: “The supply overhang in almost all sectors remains a serious challenge despite slippage and cancellations. Cancelled newbuildings will still be built, especially in China, where they will simply be owned by state-supported yards and operators and will therefore continue to add to the level of over-supply. Ship finance will be available to only a few, financially strong companies.”

One respondent said: “The US and Europe need to take some drastic recovery measures sooner rather than later.” Another observed: “The tonnage oversupply situation, plus the eurozone crisis and a depressed world economy, equals misery.”

A number of respondents took a pessimistic view of how long it might take for shipping to turn the corner: “It is now more likely than ever that shipping will remain depressed for the next three years, with only marginal improvements thereafter over the next five years.” Admitting that some of its ships were only breaking even while others were operating at a loss, leading to vessel sales and redundancies, one respondent said: “We do not expect the market to recover for at least another three or four years.”

The threat posed by overtonnaging was very much on the minds of respondents. “After 30 years in shipping, I believe the summer of 2012 will be the worst I have experienced,” said one respondent. “The oversupply of tonnage bought at inflated prices, combined with turmoil in north European manufacturing, will mean that shipping companies, brokers and owners not involved in the transport of food products are going to be the hardest hit.” Another emphasised “more discipline and restraint is called for” while other comments included “owners should re-enter negotiations to further delay deliveries” and “the market is doomed.”

Despite these gloomy predictions, respondents overall were more optimistic of making a major investment or significant development over the next 12 months. On a scale of 1 to 10, the likelihood of such a development rose to 5.2 from 5.1 in the last survey. Owners (up from 5.3 to 5.5), managers (5.2 to 5.4) and charterers (5.7 to 5.8) were all more confident than last time. When the survey was launched in May 2008, the likelihood of major investments was rated at 5.9 overall.

Charterers are the only category whose expectations are higher now than they were in May 2008. Over the life of the survey, charterers have moved from being significantly less likely than owners and managers to make a major investment, to being the most likely of these three categories. One respondent noted: “By next year, it is hoped that there will be a significant increase of confidence in the shipping industry as various players get set to make big investments.”

Demand trends, competition and finance costs continued to dominate the top three factors cited by respondents overall as those likely to influence performance most significantly over the coming twelve months. 24% of respondents (up from 22% last time) cited demand trends as the most significant performance-affecting factor, with 17% opting for competition (unchanged from last time) and for finance costs (up from 16% last time).

For owners, demand trends continued to dominate, with an increase from 24% to 26%, ahead of finance costs and tonnage supply. Operating costs (up from 15% to 18%) emerged as the number one performance-influencing factor for managers, followed by competition and demand trends, both unchanged at 17%. For charterers, meanwhile, fuel costs moved into the number one spot, with a ten percentage point increase on last time, from 16% to 26%. Demand trends (up from 23% to 24%) and competition (down from 18% to 15%) made up the remainder of charterers’ top three.

Geographically, demand trends remained the most significant factor for respondents in Asia and Europe (18% and 26%, respectively). In Europe, finance costs (up from 16% to 19%) assumed increased importance compared with last time, moving into second place. Competition, meanwhile, was less significant this time for European respondents (in third place, down from 19% to 16%). Conversely, it assumed increasing importance (up from 19% to 26%) in North America, where tonnage supply also moved into the top three at the expense of finance costs.

Having fallen significantly in the last survey, there was a five percentage point increase this time (from 52% to 57%) in overall expectations of an increase in finance costs. Owners (up from 53% to 57%) and managers (up four percentage points to 56%) joined in thinking that finance costs would rise. But charterers (down from 48% to 46%) thought differently. Moreover, the number of charterers expecting finance costs to fall was down to its lowest figure since May 2010. There was an increase this time in the numbers of respondents in both Asia and Europe who thought finance costs would rise (up from 50% to 54%, and from 53% to 61%, respectively). The same was true of North America, where the increase was from 40% to 47%. One respondent noted: “Shipping cycles are nothing new, but there has never been a cycle which coincides with an acute liquidity crisis in the banking sector that will not be resolved in the short (two-to-three year) term.”

So far as expectations of rate increases in the markets were concerned, it was a case of down, down, down in all three main tonnage categories from owners and managers in all geographic areas covered by the survey. In the tanker sector, the number of respondents expecting rates to increase over the coming year was down from 34% to 30%. But while the numbers of owners and managers expecting increases were down (from 30% to 28% and from 36% to 33%, respectively), there was a 19 percentage point increase (from 21% to 40%) in the number of charterers who thought rates would go up. There was also a corresponding 19 percentage point fall (from 26% to 7%) in the number of charterers expecting tanker rates to fall over the next 12 months. Not for the first time, the chartering sector seems to know something which other parts of the market do not. One respondent emphasised: “The oversupply of crude tankers will be prolonged due to national governments intervening to prop up domestic owners and shipyards.”

It was the same story in the dry bulk sector where, for the first time in three years, the number of respondents overall predicting a decline in rates over the next 12 months exceeded the total of those who thought they would increase. The number expecting rates to increase was down this time from 27% to 23%, a new all-time low in the life of the survey. The number of owners who thought rates would go up also hit an all-time low (down from 22% to 20%), while for managers (down from 34% to 31%) it was the second-lowest figure ever recorded, just one percentage point up on the 30% for November 2010. Again, though, charterers bucked the trend, with 33% expecting dry bulk to rise over the next 12 months, compared to just 8% last time. In August 2011, 42% of charterers thought that rates would come down; this time, just 29% were of that view. One respondent admitted to “massive fears” about the dry bulk sector, noting: “Unless there are some major building contracts scheduled for next year, the bottom will fall out of the market.”

For the first time since February 2009, the number of respondents overall expecting a decline in container ship rates was higher than the number anticipating rate increases. Overall, just 23% of respondents (compared to 28% last time) expected rates to go up, the second-lowest figure since the survey began, behind only the 20% recorded in October 2008. Meanwhile, 31% thought that rates would go down, the highest figure since the 36% recorded in February 2009. The number of charterers expecting rates to increase fell from 30% in August this year to just 13% this time, while the figures for owners and managers were also down, from 25% to 23%, and from 31% to 23%, respectively.

Moore Stephens shipping partner, Richard Greiner, says: “It says a great deal for the resilience of the shipping industry that, despite the problems facing the sector, and notwithstanding the acute difficulties bedevilling the world economy, our survey showed a small increase in confidence. Like a boxer who refuses to lie down, shipping is fighting to ride the punches and to bounce back off the ropes. There was even an increased expectation that respondents would be making a major investment over the coming 12 months. This is encouraging, and supports the belief that now is a good time to buy for those who have access to funding.

“Nevertheless, it is undeniable that shipping is struggling on a number of fronts. Seldom, if ever, can classic problems within the industry have coincided with such a severe economic downturn and acute debt crisis. Overtonnaging is the issue dominating responses to our survey and, even when other concerns are raised, overtonnaging is still the ‘elephant in the room’. It will doubtless remain so for some time, but the situation could be eased in the shorter-term by sensible renegotiation and resourceful financing.

“Meanwhile, operating costs are set to rise, with a recent Moore Stephens survey predicting a 3.7% increase in 2012. Shipping is an expensive business in which to operate, and the returns currently available through the freight markets are generally not sufficient to offset operating costs and leave any prospect of a return on investment.

“These are challenging times. The shipping industry which emerges intact from the current downturn will be stronger than the one which entered it. The loss of some good, well-run companies is the sad but inevitable result of the singular economic conditions currently prevailing throughout the world. But the loss of short-termist, inadequately funded companies will leave the industry in much better shape than it was before the indicators started to point in the wrong direction."


The Moore Stephens Shipping Confidence Survey includes responses from key players worldwide in the international shipping industry to a targeted, web-based survey by the Moore Stephens Shipping Industry Group. Responses were received from owners, charterers, brokers, advisers, managers and others.

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 638 offices of independent member firms in 97 countries, employing 20,588 people and generating revenues in 2010 of $2,151 billion. www.moorestephens.co.uk

For more information:
Richard Greiner,
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
email: richard.greiner@moorestephens.com

Good and bad news on UK non-doms and residence

DRAFT legislation for the 2012 UK Finance Bill, published on December 6, 2011, contains both good and bad news for non-UK domiciled taxpayers (non-doms) and also leaves some uncertainties.

“One major disappointment is the fact that the proposed statutory definition of residence is to be deferred until 2013, pending further consultation,” says Gill Smith, Head of Private Client Services at Moore Stephens LLP. “The present rules are not to be found in legislation but are based on cases decided by the courts, in some cases many years ago. Some taxpayers are in limbo because it is virtually impossible to determine their residence status with certainty, and it is disappointing that they will have to wait another year for the position to be resolved. Nevertheless, it is better to wait a year and emerge with workable rules than for the government to rush into making changes before it has got to grips with all the issues.”

For non-doms, the changes are as expected. One element of the package is being deferred until 2013, but this is a measure dealing specifically with individuals who are resident but not ordinarily resident in the UK, and who carry out duties in the UK and overseas under a single contract of employment. It will not affect most non-doms.

Gill Smith says, “It is disappointing, but not unexpected, that the government is sticking to its plan to increase to £50,000 the annual fixed charge for non-doms who want to use the remittance basis, for individuals who have been UK-resident in twelve out of the previous fourteen years. The relief from tax for amounts remitted to the UK for commercial business investment is very welcome, but many of the practical problems that were identified in the course of the consultation still remain. In addition, it is disappointing that investments in listed shares are excluded.”

There is one significant administrative simplification. “The capital gains tax exemption for gains and losses on withdrawals from bank accounts denominated in foreign currency is very welcome,” says Smith. “This applies to all individual taxpayers (and trustees), not just non-doms, but it will be particularly valuable in simplifying calculations for non-doms taxed on the arising basis, where the time spent in making calculations is often out of all proportion to the resultant gains.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 638 offices of independent member firms in 97 countries, employing 20,588 people and generating revenues in 2010 of $2.151 billion. www.moorestephens.com

ITIC negotiates settlement for naval architect in hull cracking dispute

International Transport Intermediaries Club (ITIC) has highlighted the level of exposure to liability which naval architects can face, especially in today’s financially troubled shipping industry.

In the latest edition of its newsletter, The Wire, ITIC cites the case of a firm of naval architects instructed to design a vessel to be used for a new ferry service. When the vessel was completed, the owners alleged that it suffered from structural inadequacies, which included continued cracking of the hull. As a result, they claimed, it could not perform in certain weather conditions as they had requested it should do, even following repeated repairs.

At one point, the local maritime authority had to reduce the number of passengers which the vessel could safely carry. Eventually, the ferry service was completely suspended and the owners started legal action against the naval architects in the sum of $600,000. This covered the cost of repairs, loss of use, loss of profits and diminution of value of the vessel. Expert evidence was obtained on behalf of the naval architects, but it was not particularly helpful to the defence.

It became apparent that the owners were suffering from financial difficulties, in part due to the fact that the ferry service could not run. On this basis, ITIC instructed lawyers to make an application for security - to cover the defence costs incurred in the event that the owners became bankrupt - in the sum of £75,000. Legal costs and expert witness fees had already exceeded £40,000 and were estimated to go above £100,000 if the matter progressed to a full trial.

The application for security was granted in ITIC’s favour, but only in the sum of £25,000, as the judge had some sympathy with the claimants’ argument that they were in dire financial straits, allegedly as a result of the mistake made by the naval architect. Despite pleading poverty, however, the owners did manage to obtain the funds and pay them into court.

The naval architects were left in an awkward situation whereby, if the matter progressed to full trial, even if they were successful in defending the claim in its entirety (which was very unlikely in light of the expert evidence received) the costs alone could have been in excess of £100,000, and there was only £25,000 security.

The judge suggested that the parties would benefit if they could reach agreement between themselves, which ultimately resulted in a negotiated settlement whereby the original claim of $600,000 plus costs was settled for $30,000, plus costs of a further $100,000.

Elsewhere in The Wire, ITIC discusses, among other things, what naval architects can do to limit their potential exposure to liability and to substantial legal fees, and how they should respond to the new perils associated with acting as an expert witness. It also examines the defence of claims made against naval architects involving errors in transposing design specifications, and inadequate preparation of technical specifications.


ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com

For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com