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Monday 27 October 2014

Liberian Registry backs IMO advice on Ebola virus


The Liberian Registry has come out in full support of the International Maritime Organization’s recommendation that there should be no general ban on international travel or trade due to the Ebola virus. Meanwhile, operation of the US-based registry remains unaffected.

IMO cites the recommendations of the World Health Organization (WHO), and indeed recommends to all member states, as well as to the broader maritime community, shipping companies, ship operators and port and terminal operators, that they follow the recommendations of the WHO. These recommendations advocate that the movement of ships, including the handling of cargo and goods, to and from affected areas, should continue as normal.

Scott Bergeron, CEO of the Liberian International Ship & Corporate Registry, the US-based organisation which manages the Liberian Registry, says, “Liberia supports the IMO recommendations wholeheartedly, and believes that shipping should continue to operate safely and efficiently, and trust to the common sense of owners and charterers in these difficult times.

“The Ebola virus continues to claim thousands of innocent victims, mainly in West Africa, many in Liberia. The Liberian Registry is deeply saddened at this tragic loss of life, although its ships and crews, and its operations, are not directly affected by the virus in any way.

“The Liberian Administration has taken every precaution to ensure that the Ebola virus does not affect the Liberian Registry in either an operational or financial sense. The registry is managed from the United States, from where its global operations are administered. It is operating as normal, and continues to offer the first-class service, innovation and financial strength with which it has become synonymous.

“A number of shipowners have contacted us to express support for the Liberian people, and some have helped to provide much-needed supplies to affected areas. We will be continuing to co-ordinate more efforts of this kind over the coming weeks.”


The Liberian Registry is one of the world’s largest and most active shipping registers, and has long been considered the world’s most technologically advanced maritime administration. It has a long-established track record of combining the highest standards of safety for vessels and crews with the highest levels of responsive service to owners. www.liscr.com

Guidance to help shipowners and vessel masters prepare for the prevention of the spread of Ebola is available at:
http://www.liscr.com/liscr/Maritime/DocumentsNoticesAdvisories/tabid/87/Default.aspx



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FONASBA endorses ITIC' s post-fixture clause

ITIC has recommended that brokers place a post-fixture clause at the end of recap messages in order to reduce the chances of exposure to severe financial loss as a result of important messages being overlooked.

The following wording was endorsed by FONASBA at its recent annual general meeting in Gothenburg:

“Important: Operations

It is essential that all messages in respect of operations be sent to the relevant email addresses (ops@broker.com). We can accept no responsibility for delay or other consequences if messages are sent to any other email address within the company. Please ensure that all important operational messages are followed up with a telephone call, especially after office hours.”

ITIC says, “Shipbrokers receive a vast number of messages every day. It is not surprising that messages sometimes get missed. The failure to spot and pass on a post-fixture message can have severe financial consequences. In one case, a broker failed to pass on berthing instructions. The vessel remained at anchorage and a substantial demurrage claim was passed to the broker. In another case, a broker received instructions from the time-charterer to notify the owner that the vessel should change direction. This message was not passed on for two days, during which time the ship had been steaming in the wrong direction. The broker received a claim for the costs incurred and the time lost.”

Use of ITIC’s post-fixture clause should lessen the chances of a claim as a result of an important message being missed among the large number of market circulars and negotiation messages received during the average day.


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

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Friday 24 October 2014

Moore Stephens expects vessel operating costs to rise over the next two years


Vessel operating costs are expected to rise by almost three per cent in both 2014 and 2015, according to a new survey by international accountant and shipping consultant Moore Stephens.

The survey is based on responses from key players in the international shipping industry, predominantly shipowners and managers in Europe and Asia. Those responses revealed that vessel operating costs are expected to increase by 2.9 per cent in both 2014 and 2015, with crew wages and repairs & maintenance the cost categories likely to increase most significantly.

Crew wages are expected to increase by 2.4 per cent in 2014 and by 2.6 per cent in 2015, with other crew costs thought likely to go up by 1.9 per cent and 2.1 per cent respectively for the years under review. The cost of repairs & maintenance, meanwhile, is expected to escalate by 2.3 per cent in 2014 and by 2.4 per cent in 2015

P&I insurance costs are expected to go up by 2.0 per cent in 2014 and by 2.2 per cent in 2015, this compared to the increases of 1.6 and 1.8 per cent respectively predicted in respect of the cost of hull & machinery insurance.

Drydocking costs are expected to rise by 2.1 per cent in 2014 and by 2.2 per cent in 2015, while expenditure on spares is expected to increase by 2.1 per cent and by 2.2 per cent over the same period. Meanwhile, respondents anticipate increases of 1.7 per cent and 2.0 per cent respectively in the cost of lubricants in the two years under review. The cost of stores is expected to increase by 1.7 per cent and 1.9 per cent respectively for 2014 and 2015.

As was the case in last year’s survey, management fees are deemed likely to produce the lowest level of increases in both 2014 and 2015, at 1.2 per cent and 1.5 per cent respectively.

A number of respondents commented on the impact of increased crew wages and costs. “Crew costs remain a critical factor,” said one. “There will continue to be a high level of demand for trained crew, especially for top-end ships.” Another predicted, “There will be further rises in crew costs, especially for officers and engineers, with a shortage of the latter in all sectors of the shipping industry.” Elsewhere it was noted, “The full implementation of the Maritime Labour Convention 2006 is likely to be a significant factor in higher labour and crewing costs.” Another respondent said, “Crew and labour costs will continue to increase due to the strong presence of labour unions in the shipping industry.”

The cost of regulatory and legislative compliance was a recurring topic in responses to the survey. “Most of the costs we have experienced are based on legislation and more and more government interference with doing business,” said one respondent. Another remarked on the cost of “the entry into force of new regulations such as the US ballast water treatment rules,” while another still emphasised, “The need for existing vessels to comply with new regulations will be a significant factor to consider.” Other comments included, “Recent legislation in Europe will push costs up dramatically, especially in the UK,” and, “SECAs will have a serious impact on ships’ equipment maintenance costs.”

The combination of low freight rates and increased operating costs dominated the thinking of a number of respondents, one of whom noted, “Owners are hard-pressed to cut costs and lower operating expenses because of poor freight markets. There is a particularly severe impact on running costs for ships bought prior to 2009.” In similar vein, another said, “Operators are keeping any increases in operating expenses to a minimum due to low freight rates.” Another still observed, “There is no light at the end of the tunnel. At present, earnings are negligible, and operating costs keep going up.” In slightly more optimistic mood, it was noted elsewhere, “Although operating costs are going up, the advent of bigger ships and the projected opening of the enlarged Panama Canal in 2016 should mean that profits will go up, too.”

A number of respondents to the survey felt that a surfeit of tonnage on the market would inevitably have the effect of increasing operating costs. “The recent increase in tonnage supply will add pressure to operating costs,” said one, while another observed, “Only those owners and managers who can trim their vessel operating costs will come out ahead.” Another still predicted that owners and operators “will look at possibilities to reduce their cost base by looking at alternative ship management options, or whatever else will result in cost reductions, in order to remain competitive.” Several respondents, meanwhile, noted that reductions in oil prices were likely to result in reduced operating and voyage expenses, respectively, in terms of lubes and fuel.

Moore Stephens also asked respondents to identify the three factors that were most likely to influence the level of vessel operating costs over the next 12 months. Overall, 20 per cent of respondents (compared to 21 per cent in last year’s survey) identified finance costs as the most significant factor, followed closely by competition (19 per cent). Crew supply was in third place, with 18 per cent, followed by demand trends (17 per cent) and labour costs (13 per cent). The cost of raw materials was also cited by 11 per cent of respondents as a factor that would account for an increase in operating costs.

Moore Stephens shipping partner Richard Greiner says, “The predicted increases in ship operating costs for this year and next follow the findings in our recent OpCost report that ship operating costs fell by an average of 0.3 per cent across all the main ship types in 2013. But the level of increases anticipated for 2014 and 2015 are, at just under 3 per cent, still way below many of those we have seen in recent years. In 2008, for example, operating costs rose by 16 per cent. But there are a number of factors which are likely to drive up costs both this year and next.

“Firstly, the gradual global economic recovery now under way, notwithstanding the challenges placed in its way by political and social unrest in certain parts of the world, should result not only in improved earnings for shipping but also in increased costs. More ships in the water, and more cargo on board, entails more handling, transportation and other costs.

“Crew costs are once again the category of operating expenses predicted to rise most significantly. The only surprise would be if this were not the case. The bill for regulatory and legislative compliance, meanwhile, remains difficult to assess with any great accuracy. While the cost of complying with ECAs and other environmental initiatives can be gauged with reasonable accuracy, and business plans accordingly amended if deemed necessary, the cost of - and timeline for - complying with the BWM Convention continues to be the elephant in the room. Everybody knows it’s coming, and everybody knows it is going to be expensive, but until the discussions over different routes to compliance are concluded, and until the final signature bringing the convention into force is lodged at IMO, the item can remain, albeit uneasily, a little way down the list of priorities.

“Sensible owners with adequate funding are planning for the future by investing in eco-friendly ships and by weighing up the advantages of LNG propulsion. Such initiatives will bring long-term benefits but are likely to increase costs in the short term because new technology and associated research and development costs do not come cheap. On the plus side, oil and gas prices are falling, which should translate into savings for owners and operators, and shipping continues to attract new money from both internal and external investors.

“The projected increases in vessel operating costs for the next two years will be difficult for owners, operators and managers to absorb. History shows, however, that good husbandry, sound business planning, experience, patience and the right amount of entrepreneurialism are likely to carry the day.”

Bone fide journalists can request an electronic copy of the Future Operating Costs survey by emailing chris@merlinco.com

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 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk


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





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London P&I Club warns on failure to preserve VDR data

THE London P&I Club says failure to preserve Voyage Data Recorder (VDR) data in the event of an incident can compromise the owner’s position in the event of a claim

In the latest issue of its StopLoss Bulletin, the club says that its ship inspection programme confirms that the operation of VDR units is generally well-understood by its shipowner members. But it notes that there have nevertheless been instances where masters have failed to perform the steps required to preserve VDR data, or failed to recognise circumstances in which such data – and particularly voice traffic on VHF and on the bridge – may be very valuable in the defence of a claim.

In one instance, a ship heading into port was presented with a ‘head-on’ situation as described in Rule 14 of the International Rules for the Prevention of Collisions at Sea. Although it was a departure from the rules, a deal was struck on the VHF between the two ships, involving an alteration of course. The ships subsequently collided, resulting in a substantial claim on the club.

The club says, “The master did not save the VDR data, presumably because the data could have been incriminating and used against him. While the same information was not likely to have reversed any liability for the incident, it may have been useful evidence to assist in reaching an amicable settlement. The effect on the settlement of the claim cannot now be quantified, although it stands to reason that the shipowner would have preferred the master to have saved the information. In an attempt to protect himself, the master may have exposed the owners to a larger settlement.”

In another incident, a container ship entered with the club was forced, due to impending poor weather, to depart from a container berth with many of its containers unlashed. Unfortunately, when the ship was exposed to the poor weather, a number of the unlashed containers were lost overboard. The club says, “In some ways, understandably, the master did not consider this situation to be one where VDR data ought to be saved. But, during the handling of the ensuing claim, the club felt that the VDR data would probably have represented a valuable narrative of the exchanges between the port authorities and the bridge team and could have helped greatly in the claim negotiation.”

The club notes that onboard emergency guidance manuals usually contain aide memoir sheets to assist the master with those structured and ordered tasks which need to be taken in priority order, and are aimed at ensuring that steps are not missed in an emergency. It advises its members to consider the insertion or addition of VDR data saves in an appropriate position on such lists.

www.londonpandi.com

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Thursday 9 October 2014

ITIC warns of email fraud

ITIC has warned of continued attempts by fraudsters to target payments between shipping companies.

Speaking at the 45th FONASBA Annual Meeting in Gothenburg, ITIC claims director Andrew Jamieson explained that recent cases had been variations on earlier frauds.

In April this year, ITIC warned its members about a scam resulting in pre-funded port costs being diverted to a fake bank account. In each case the owners received an email advising them that the port agent’s bank account was inoperable because of an annual audit. If the owners complied with the instructions, which came from an email address very similar to the agent’s, the funds were stolen.

Jamieson explained, “In recent cases, the fraudsters have changed their story. A ship manager received a message asking if money could be sent directly to the agent’s foreign exchange broker who ‘could secure banknotes which were in short supply in that part of the world’. Unfortunately, the ship manager queried the instruction by simply hitting the ‘Reply’ button, asking, ‘As we don't know the broker, would it be possible to remit to your bank account as usual?’ If the ship manager had checked its records first and seen that the email address did not correspond to the details it held for its principal, the attempted fraud would have been uncovered.”

Not all attempted frauds succeed. In another case, a Norwegian shipbroker foiled an attempt to steal a monthly hire payment by questioning a request to forward revised payment details. He telephoned his contact in the owner’s accounts department, who confirmed that the request was spurious.

Andrew Jamieson concluded his warning to the FONASBA meeting by saying, “We appreciate the large number of payments processed by our members, but changes to account details should always be treated with suspicion. Very few such changes are legitimate. ITIC’s advice is always to take separate steps to verify instructions to alter the destination payment.”

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


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Thursday 2 October 2014

Moore Stephens reports small decline in 2013 ship operating costs


International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average of 0.3 per cent in 2013. This compares with the 1.8 per cent average fall in costs recorded for the previous year. Crew costs was the only category this time to show an increase over the 12 month period, indicating that ship owners continued to focus on managing costs and conserving cash in 2013.

The findings are set out in OpCost 2014 (www.opcostonline.com), Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that total operating costs for the tanker sector were up in 2013, the financial year covered by the study, but down in the bulker and container ship sectors. The tanker index was up by 2 points, or 1.1 per cent, while both the bulker index and the container ship index were down by 2 points, or 1.2 per cent, on a year-on-year basis. The corresponding figures in last year’s OpCost study showed falls of 5 points, 7 points and 3 points respectively in the tanker, bulker and container ship indices.

There was a 0.2 per cent overall average rise in 2013 crew costs compared to the 2012 figure, which itself was 0.2 per cent down on 2011. (By way of comparison, the 2008 report revealed a 21 per cent increase in this category.) Tankers overall experienced an increase in crew costs of 1.8 per cent on average, compared to the 2.3 per cent fall recorded in 2012. Within the tanker sector, Handysize product tankers reported an overall increase of 3.3 per cent in crew costs, while for operators of Suezmaxes and product tankers the increases were 2.5 per cent and 1.9 per cent respectively. The only tanker category to show a fall in crew costs was VLCCs, down by 0.9 per cent.

For bulkers, meanwhile, the overall average fall in crew costs was 0.5 per cent, the same as in the previous year. The operators of Panamax bulkers paid 2.3 per cent less in crew costs than in 2012, but there was a 1.2 per cent increase in this respect for Handysize bulkers, this following a 4.8 per cent reduction for 2012. Expenditure on crew costs remained unchanged over the 12 month period in the container ship sector, although operators of vessels of between 100 and 1,000 teu did record a 1.7 per cent increase in such costs for 2013.

Expenditure on stores was down this time by 1.9 per cent overall, compared to the fall of 2.1 per cent in 2012. The biggest fall in such costs was the 5.5 per cent recorded by VLCCs. For bulk carriers overall, stores costs fell by an average of 4.1 per cent, while in the tanker and container ship sectors the overall reductions in costs were 2.1 per cent and 3.4 per cent respectively. The most significant increase in stores expenditure was that recorded by the operators of tankers in the 5,000-to-10,000 dwt range (6.0 per cent).

There was an overall fall in repair and maintenance costs of 0.4 per cent, compared to the 1.9 per cent reduction recorded for 2012. The most significant cost reduction here was that recorded for bulkers of between 10,000 and 20,000 dwt (7.2 per cent), while the highest recorded increase was that for 40,000-to-50,000 cbm chemical tankers (3.6 per cent).

The overall drop in costs of 0.3 per cent recorded in respect of insurance compares to the 6.2 per cent fall recorded for 2012, and was the lowest in this category for a number of years. The operators of all categories of bulkers paid less for their insurance in 2013 than they did in 2012, in the case of Handysize bulkers to the tune of 4.1 per cent. In the tanker category, all but two types of vessel – 5,000-to-10,000 dwt tankers and Handysize product tankers – paid less than in 2012, while operators of 100-to-1,000 teu container ships paid 2.7 per cent more in 2013 than in 2012.

Moore Stephens partner Richard Greiner says: “This is the second successive year-on-year reduction in operating costs. The fall in costs for 2013, however, is 1.5 per cent below that recorded for 2012, and coincides with a period of slowly returning confidence in the shipping industry, according to the Moore Stephens Shipping Confidence Survey.

“Crew costs were the only category of expenditure to show an increase over the 12-month period covered by the survey. This time it was a comparatively small rise for an industry which had seen increases of more than 20 per cent at their peak. The fact that crew costs were the only category to show an increase for 2013 is perhaps a reflection of a diminution in the number of owners and operators exiting the industry and a reminder that investment in good people is a must.

“Expenditure on repairs and maintenance and on stores was down in 2013, but by a smaller margin than in 2012, so it is to be hoped that owners and operators are continuing to pursue the sort of sound husbandry which competition and regulation demand. Meanwhile, the fall in insurance costs this time of 0.3 per cent is significantly down on the 6.2 per cent decrease for 2012, suggesting that underwriters in the hull market are taking a harder line.

“Overall, the fall in operating costs recorded in OpCost 2014 must be good news for owners and operators. So, too, must the gradual and continuing improvement in the global economic climate, if not the current political unrest. Shipping operates on a global stage and must inevitably be affected by international events.

“Shipping is an expensive business in which to operate, and revenues earned in the freight markets must ultimately be sufficient not only to cover operating costs but also to generate a reasonable return. While slowly emerging from an extended global economic downturn, the industry remains under pressure to manage and reduce operating costs wherever possible, whilst making suitable budgetary provision for achieving forthcoming regulatory compliance, which is likely to be significant.”

Bone fide journalists can request an electronic copy of OpCost 2014 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking study, is now in its 14th year of publication. The 2014 edition is available online, providing optimum reporting functionality for users, wherever they may be. Running cost information is obtained on a confidential basis from clients of Moore Stephens, and from other shipowners and ship managers who submit data for inclusion. OpCost is widely used for benchmarking running costs, the preparation and ongoing monitoring of business plans and in forensic accounting. Access to OpCost 2014 is available free to owners who submit their data for inclusion, or can be purchased by contacting Richard Greiner at Moore Stephens.

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 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk


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



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Wednesday 1 October 2014

ITIC urges shipbrokers to put it in writing

Specialist transport intermediary insurer, ITIC, has warned shipbrokers that they face the risk of serious financial loss if they fail to ensure that all parties to fixture agreements are in possession of full, confirmed information prior to the conclusion of negotiations.

In the latest issue of its Claims Review, ITIC cites the case of a shipboker asked by a charterer to increase the volume of cargo already booked under a contract of affreightment. The broker, working from home, contacted the owner via text to ask if there was additional space available on the ship. The owner responded ‘Max load 18k’, whereupon the charterer, having initially booked 15,000 tonnes of cargo, sold an additional 2,500 tonnes to its client.

Once the sale was concluded and the ship nominated, it transpired that there was no extra space available on board. In fact, the extra space had never been available. The charterer had no option but to book the extra cargo with another ship on the spot market, at a freight rate approximately $80,000 higher than that under the original contract of affreightment.

The charterer held the owner responsible, but the owner rejected the claim on the basis that there was no formal offer/option given for the additional space. The charterer then looked to recover the additional cost from the broker, maintaining that the broker had not made it clear that it did not have a firm option to ship the additional cargo. The issue was ultimately settled with each party absorbing some of the costs, the broker’s contribution being reimbursed by ITIC.

In another case, a shipbroker was asked to find a suitable ship to transport a consignment of steel pipes. Shortly after negotiations had started, the charterer informed the broker of an additional dunnage requirement between each of the layers of pipes. But the broker failed to forward this new information to the owner, and it was only when the ship was fully fixed that it transpired that the dunnage requirement meant that the vessel was too small to carry the cargo.

The owner refused to accept the unilateral cancellation of the fixture and reserved its right to deadfreight in the absence of a full cargo. Efforts to find alternative employment were unsuccessful, and the claim was passed on to the shipbroker, on the grounds that it had not relayed the message. The claim was settled by ITIC.

ITIC says, “It is important to ensure that all parties have the correct information. If the broker is not clear as to what has been agreed, it is unlikely that the other parties will be any clearer. A short message, in writing, should be passed between all relevant parties in order to avoid any misunderstandings or incorrect assumptions.”

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

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