Tanker brokers count cost of failure to pass on claims documentation

International Transport Intermediaries Club (ITIC) says delay in submitting - or failure to pass on - documentation is the most common cause of claims against tanker brokers. Moreover, the tightening of procedures in a difficult market may serve to make such failures more costly.

In the latest issue of its Claims Review, ITIC cites the case of a demurrage claim for $352,122 which was passed onto a charterer by a broker within the 90-day charter party time limit period. The charterer, however, declined to pay because it had not been given notice that a demurrage claim would be made within the 60-day period provided for in the charter party. Although the owner had informed the broker within the 60-day period that a demurrage claim would be made, the broker had not passed on this information to the charterer.

In the past, this 60-day notification deadline that a demurrage claim was coming had not been strictly adhered to, the owner and charterer tending to concentrate instead on the 90-day demurrage time limit for the relevant documentation to be sent to the charterer. A tightening of procedures by the charterer, however, meant that the claim in this case was rejected, whereupon the owner sought recovery from the shipbroker.

The relevant clause in the Shellvoy charter party provided that failure to give notice extinguished the claim and that subsequent presentation of the claim within 90 days did not remedy the situation. Although, in this case, there were issues as to whether the previous conduct had amounted to a waiver of the right to rely on the 60-day notice period, the fact that the broker had failed to pass on the message meant that it had to contribute substantially to the claim.

ITIC says the failure to pass on claims documentation within the relevant time limit is the most common cause of claims against tanker brokers. It adds that it has also settled liabilities arising from a failure to pass on documents relating to deviation and port costs, among other things.

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

Moore Stephens reports second successive quarterly rise in shipping confidence

Shipping confidence, notably on the part of charterers and managers, improved for the second successive quarter in the three months to end-August 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In August 2016, the average confidence level expressed by respondents was 5.4 on a scale of 1 (low) to 10 (high). This is an improvement on the 5.1 recorded in May 2016, and the highest rating for the past nine months of the survey, which was launched in May 2008 with a confidence rating of 6.8.

Although confidence on the part of owners was down this time from 5.7 to 5.3, charterers (up from 4.0 to 4.8), managers (up from 5.1 to 6.0) and brokers (up from 4.3 to 4.5) were all more optimistic than in May 2016. Geographically, confidence was up in Asia, from 5.2 to 5.5, and in North America from 5.0 to 5.8, with sentiment in Europe unchanged at 5.2.

Overcapacity was the dominant theme of comments from respondents to the survey. “Scrapping is still not sufficient to cope with newbuilding deliveries and the general supply-side overhang. Every new order will prolong the crisis,” said one, while another noted, “If we all stay away from ordering relatively cheap tonnage today, supply and demand will soon recover.”

Conditions in the dry bulk market also occupied the thoughts of large numbers of respondents. “Implementation of the Ballast Water Management Convention will most likely solve overcapacity,” said one, “but it will also cause a bloodbath among owners.” Another remarked, “Growth is non-existent, so there is no hope there,” while another still simply said, “We have lost confidence in the dry bulk market.” Other respondents were slightly more optimistic, with one noting, “We expect the dry bulk markets to improve significantly during the course of 2017.”

Concerns about the global economy were uppermost in the minds of a number of respondents, one of whom neatly encapsulated a number of the main issues currently impacting the shipping industry by noting, “Brexit, Trump, supply overhang, consolidation, demolition, bankruptcies, and the low risk appetite of banks for shipping and shipping stocks seem to be the main topics to follow for the next 12 months or so. We would be pleasantly surprised if this were to change.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged on the previous survey, with a rating of 4.9 on a scale of 1 to 10. The confidence of charterers in this respect was up significantly, from 4.1 to 5.0, while brokers also recorded a small increase, from 3.5 to 4.1. Owners and managers, however, were less confident in this regard than they were three months ago, dropping from 5.7 to 4.8 and from 5.4 to 5.3 respectively. One respondent said, “Massive investment, mainly from inexperienced funds and private entrepreneurs, has resulted in an oversupply of funding in some trades.”

The number of respondents who expected finance costs to increase over the next 12 months was down by six percentage points, to 35%. There was a noticeable fall in the numbers of owners (down by six percentage points to 31%), managers (down by 19 percentage points to 30%) and charterers (down by two percentage points to 27%) anticipating higher finance costs. One respondent said, “Shipping banks need to be more realistic about pricing if they want to sell debt as a means of reducing their exposure to the sector.”

Demand trends, competition and tonnage supply featured again as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (down by three percentage points to 20%) in second. Tonnage supply, unchanged at 16%, occupied joint-third spot with finance costs, which were up by one percentage point. Operating costs, up by one percentage point to 10%, featured in fifth place, ahead of fuel costs (5%) and regulation (4%). One respondent said, “We have read many, many times that we have reached the bottom of the cycle, only for a lower offer to appear in the market a few hours later.”

The number of respondents expecting higher charter rates in the tanker market over the next 12 months was unchanged at 23%, while the numbers anticipating lower tanker rates rose by three percentage points to 37%. Meanwhile, there was a five percentage-point drop, from 43% down to 38% in the numbers of like mind in the dry bulk trades, and a one percentage point increase, to 12%, in the numbers anticipating lower dry bulk rates. In the container ship sector, the number of respondents expecting higher rates was up by one percentage point to 22%, while there was a fall, from 20% to 16%, in the numbers anticipating lower rates.

The net sentiment in the tanker markets was -14, as opposed to +26 in the dry bulk markets and +6 in the container ship trades.

One respondent said, “Too many dry cargo ships have been built, and we are not confident that the freight market will improve sufficiently to justify investment, especially from people who have no previous experience of shipping.” Another remarked, “A whole class of container ships is essentially obsolete following the opening of the widened Panama Canal.”

Respondents were asked a stand-alone question about the perceived barriers to women playing a greater role in the shipping industry. Overall, 31% of respondents placed ‘workplace attitude or corporate culture’ in the top five factors in this regard. ‘Travel implications in day-to-day roles’, meanwhile, was a top five factor for 21% of respondents, while ‘lack of career progression’ was placed third, at 19%. One respondent said, “There are no barriers. It is up to the individual to pursue her career with determination and strength of character.” Another, however, complained that, “The culture in the industry is male chauvinist.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the ongoing level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry.

“Concern persists about too much tonnage and not enough recycling. Restoring the correct balance to tonnage supply and demand is a long-term undertaking, the complexities and diverse nature of which are arguably well captured by the respondent who noted, ‘We have divided interests. For our customers, we hope that nobody orders any vessels for the next 12 months. For us, we hope that people do, because we need newbuildings’.”

“Given the pace of technological development, the continuing imperative to improve the industry’s environmental footprint, and the exigencies of escalating regulation, the industry will always need newbuildings. The trick is to make sure that there is room – and work – for them in a market which encourages responsible competition and allows a sensible margin for profit. That requires, among other things, an increase in ship demolition levels which, given the recent decline in dry bulk recycling and the perceived impossibility of recycling enough container ships, seems unlikely.

“The maintenance of sensible levels of competition is also a prerequisite for a healthy and profitable shipping industry. Since the survey was launched in 2008, respondents have consistently identified competition as one of the main factors likely to influence their performance most significantly. All trade sectors thrive on responsible competition, which works as an incentive to progress and profitability. But irresponsible competition can have the opposite effect, witness the respondent who referred to ‘those who focus on how to trick, treat and corrupt under the broad term ‘competition’.”

“Perversely, the collapse of Hanjin Shipping Co., which occurred after our survey was concluded, may have a positive effect on overtonnaging, although nobody would have been looking for such an extreme solution. Hanjin’s collapse has sent shockwaves through the industry which will continue to reverberate for many months to come. It may also give pause for thought to those who see the future of container shipping as ever bigger and more diverse alliances.

“Equally perverse is the very real possibility that final ratification of the Ballast Water Management Convention may have a positive effect on overcapacity. It might not be correct to say that this development has sent shockwaves through the shipping sector, because the industry has known for some time that it has been coming, and has been pondering how best to meet its requirements and how to fund the considerable cost of so doing. It matters not whether it was the ratification by Finland which finished the uncertainty about implementation, or whether it was Panama’s huge fleet which activated the green light. A shock is no less shocking for being expected, and the fact is that the convention will enter into force in September 2017. It will be instructive to see how shipping deals with the issue, and from what level of preparedness, the extent of which will become clearer over the coming months.

“A stand-alone question in our survey asked respondents to name the biggest barriers to women playing a greater role in today’s shipping industry. More than 65% identified ‘workplace or corporate culture’ as the number one barrier. James Brown famously sang, ‘This is a Man’s World’, although not everybody remembers that the self-styled Godfather of Soul went on to say, “but it wouldn’t be nothing without a woman or a girl’. It is beyond any reasonable measure of doubt that shipping will need the efforts of every man and woman working within the industry today to tackle both current challenges and those which lie in wait.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 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

Moore Stephens says shipping must improve risk management

Not enough companies in the shipping industry are following joined-up risk management procedures, according to international accountant and shipping adviser Moore Stephens.

The second annual Moore Stephens Shipping Risk Survey revealed a fall, when compared to last year, in the overall level of satisfaction on the part of respondents that sound risk management had contributed to the success of their organisations. The involvement of senior management in managing risk at the highest level also declined against last year.

Respondents to the survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 6.6, on a scale of 1 (low) to 10 (high), compared to 6.9 last time. Under a quarter of respondents (23%) returned a rating of 8.0, compared to 26% last time, while 70% put the figure at more than 5.0 out of 10.0, as opposed to 74% in 2015.

Overall, respondents rated the extent to which enterprise and business risk was being managed effectively by their organisations at 7.0 out of 10.0 (unchanged from last time). One respondent noted, “Financially well-managed shipping companies need only fear another collapse in rates and values,” but another said, “We misjudge the market and don’t take the right course of action to protect profits.”

Demand trends were deemed by the greatest number of respondents to pose the highest level of risk to their organisation, closely followed by competition, with the cost and availability of finance in third place. One respondent said, “Market reports are uncertain. Company-specific risk matrices need to be drawn up on the basis of experience, fundamentals and hindsight following evaluation of available market analysis reports which are, however, uncertain.”

Respondents to the survey felt that the level of risk posed by most of the factors which impacted their business would remain largely unchanged over the next 12 months, with the exception of tonnage supply and competition, which were perceived to have the potential for increased risk. No-one overall expected less risk in any of the categories.

Overall, 69% of respondents felt that the senior managers in their organisations had a high degree of involvement in enterprise and business risk management, as opposed to 72% in the previous survey. Meanwhile, 20% said senior management’s involvement was limited to “periodic interest if risks materialise” (up from 18% last time), while almost 10% of respondents (up from 8%) said that senior management “acknowledged but had a limited involvement in” enterprise/risk management. Just over 1% said that senior management had no involvement whatsoever.

One respondent said, “The problems are internal rather than external. We are not versatile enough. Emerging IT is not a risk in itself, but we are too slow to adapt to changing needs and competition.” Elsewhere it was noted, “Embedded derivatives are not being disclosed. For example, bunker escalation clauses in contracts of affreightment are de facto derivatives, but I have never seen them disclosed separately.”

Overall, 35% of respondents (compared to 37% in the previous survey) confirmed that risk was managed by means of discussion without formal documentation, while 41% noted that risk was documented by the use of spreadsheets or written reports, compared to 42% previously. Internally developed software was employed by 17% of respondents (13% last time) to manage and document risk, as opposed to the 5% who used third-party software.

On a scale of 1.0 to 10.0, estimates of claims and provisions, and changes to legislation (both 4.2) were deemed the most likely factors to result in a material mis-statement in companies’ period-end financial statements. Impairment involving vessels in use (4.0) featured in third place in this regard.

Michael Simms, Moore Stephens Partner, Shipping & Transport, says, “The survey revealed that risk is being managed effectively within a high percentage of those organisations which participated in the survey. It is nonetheless disappointing to find that confidence in the level to which enterprise and business risk management contributes to the success of shipping organisations has fallen slightly in the past 12 months. So, too, has high-level involvement by senior managers.

“Shipping is a risky business, one in which an unwillingness to take any risk whatsoever sometimes represents the biggest risk of all. But that does not mean that the industry can afford to ignore or underestimate risk. It must achieve the right balance between risk and reward, and especially so when reward levels are low, as they are at present. The rewards may vary, but the risk will not go away.

“The shipping industry’s level of vulnerability is reflected in the diverse nature of the threats identified by respondents to the survey. Few other industries could claim to be exposed to risks arising from economic uncertainty, mis-diagnosed analyses, renegotiation of existing contracts, lack of financing, uncertainty over asset valuations, defaults on loan repayments, political sanctions, monopolistic policies, regulatory changes, falling crude oil prices, customer insolvency, fears over the Chinese economy, uncertainty in Europe (and not just as a result of Brexit), and plain old supply and demand.

“Since the start of the worldwide economic downturn in 2008, shipping has coped, to varying degrees of success, with what might be regarded as the ‘traditional’ risks associated with operating in the industry. But there is also a growing threat from extraneous factors such as cyber-security and the increasing level of IT-related risk. The industry’s risk profile is changing, and with that the industry itself must change its approach to identifying risk. For some, outsourcing is a solution. However, managing the risk of doing this must not be overlooked. If the risk is not recognised, it cannot be controlled.

“The key to identifying and mitigating any type of risk lies in the application of sound, firm-wide governance control systems. Simply paying lip-service to corporate governance will not do. The tone needs to be set by senior management, leading from the front.

“A rating of 7.0 out of 10.0 in respect of the level of effective management of risk at companies which participated in the survey is not too discouraging. But it needs to be higher, as does the figure of just over 40% of companies which formally document the management of risk. Not enough companies are pursuing joined-up risk management procedures. Ultimately, the price to pay for inefficient management procedures, and the failure to monitor risk in a systematic and documented fashion, could be corporate failure.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk

For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.simms@moorestephens.com

Maritime Museum Rotterdam to stage first offshore exhibition

New exhibition brings offshore ashore as the search for energy becomes an experience

Over forty-five leading companies in the shipping and offshore maritime sector are among those who have contributed to the funding for the first ever exhibition in the Netherlands dedicated to the offshore sector, to be housed at The Maritime Museum Rotterdam for the next seven years. Offshore Experience, which will open in mid-December, will provide visitors with a spectacular overview of the search for oil, gas, wind energy and renewables at sea.

Frits Loomeijer, General Director of the Maritime Museum says, “As the worldwide transition from fossil fuels to renewable energy continues apace, energy assumes increasing importance for the economy and is essential for everyday living. Without energy, we could not recharge our mobile phones, put fuel in our cars or cook our food. A lot of the energy comes from oil, gas or wind and is obtained offshore at sea.

“Dutch companies are in demand throughout the world for the expertise they can bring to complex high-tech offshore projects in the most dynamic conditions. After all, just how do you construct a wind turbine at sea? How do you position a 30,000-ton platform on the seabed, accurate to the centimetre? And how do you prevent gas leaks at 3 km depth? The question for the future is not whether we will be able to drill deeper or under increasingly difficult circumstances, but how we can be more sustainable. In a world where everyone has an opinion on energy, the Maritime Museum is offering its visitors a unique experience around energy production at sea, both now and in the future.”

Visitors to Offshore Experience can witness what it is like to work at sea, perhaps even 3 km below the surface. People of all ages will be able to embark on a challenging search at sea for energy. Wearing a safety vest and helmet, they will experience what it is like to be on an offshore construction in the middle of the sea. A 360° film projection stimulates the senses. Ships come and go and helicopters land. Models of the newest and most advanced offshore ships will demonstrate their capabilities.

Offshore employees will offer a glimpse into their lives at sea, and simulated presentations will enable visitors to experience for themselves how drillers, crane drivers, wind turbine specialists and helicopter pilots undertake their demanding tasks on the open sea, in a constant battle with the elements. A lift will take visitors down to a mysterious undersea world, from just below the surface to a depth of 3 km. The adventure ends in the future, as visitors vote for the best sustainable idea for producing energy at sea.

As well as developing the exhibition, the museum is also expanding the limits of Holland’s maritime heritage by adding offshore to its collection policy. It is carrying out extensive research into the history of the offshore sector in collaboration with Erasmus University and setting an innovative course in terms of technology education and project-funding.

The Offshore Experience has attracted strong support from the commercial sector. Over 45 companies from the offshore sector, plus a large number of other organisations, are financing two-thirds of the project, as well as contributing knowledge and items for the collection. Erwin Kooij, CEO of leading international energy logistics specialist Peterson Offshore Group, says, “We are proud of our sector and I think it’s time to show that to everyone”. Jan-Pieter Klaver, CEO of leading offshore oil & gas industry service provider Heerema Marine Contractors, adds, “The Offshore Experience is a unique opportunity, a challenging way of getting young people to be enthusiastic about technology.”

The Offshore Experience can also be programmed as an educational location for primary, secondary and vocational education. The exhibition is the basis of a new technology education programme in the museum which is in line with the National Technology Pact 2020. This is an agreement under which the Netherlands government and social partners are setting out a long-term approach for increasing the numbers of technically skilled professionals.

Companies which have made contributions as partners to the Offshore Experience include Heerema Marine Contractors, IRO, Van Oord Dredging and Marine Contractors B.V., Wärtsilä Netherlands B.V., SBM Offshore N.V., Huisman Equipment B.V., Bluewater Energy Services B.V., Royal IHC, Allseas Group S.A., Seaway Heavy Lifting, Tideway B.V., Oranje-Nassau Energie B.V., Teijin Aramid BV, Saab Seaeye Ltd., JB Systems, MARIN, Jumbo, Iemants N.V. , Peterson, ENGIE E&P Nederland B.V., HSM Offshore BV, GustoMSC B.V., TOS Netherlands B.V., STC-Group, Navingo B.V., Vroon B.V., Van Beest B.V, Falck, Volker Staal en Funderingen B.V., RedWave BV, Gunneman Group IMO, Hydac BV, Sif Group BV, Nature group, InterDam B.V., Primo Marine, RH Marine Netherlands B.V., International Paint (Nederland) BV onderdeel van AkzoNobel, Intramar Insurances, Scheepvaartkrant, Halliburton BV, Bureau Veritas Marine Netherlands, AncoferWaldram Steelplates bv, Koninklijke Niestern Sander Scheepsbouw B.V., Stemat bv, Fugro N.V., IHC Hytec BV, Rederij Groen, Seascape BV, TNO, Ulstein Design & Solutions B.V.

Funds which have made contributions include BankGiro Loterij, Mondriaan Fonds, Stichting VSBfonds, Stichting Bevordering van Volkskracht, Stichting Zabawas, Prins Bernhard Cultuurfonds, Stichting Ondersteuningsfonds N.I.S.S., Vaderlandsch Fonds ter Aanmoediging van 's-Lands Zeedienst, Van Cappellen Stichting, G.Ph. Verhagen-Stichting, Erasmusstichting, Stichting Swart-van Essen, Directie der Oostersche Handel en Rederijen, Dorus Rijkers Fonds, Stichting Job Dura Fonds, Janivo Stichting, Stichting Doelwijk, Van der Mandele Stichting, M.A.O.C. Gravin van Bylandt Stichting, STOER, Stichting Physico Therapeutisch Instituut, Rotterdamse Stichting Blindenbelangen, Stichting Blindenhulp, Landelijke Stichting voor Blinden en Slechtzienden, Mr. A. Fentener van Vlissingen Fonds, Stichting Verolme Trust.

Press photos:
https://www.maritiemmuseum.nl/offshore-experience-2

About the museum:
https://www.maritiemmuseum.nl/en


More information:
Judith Freijser
marketing en communicatie
Maritiem Museum Rotterdam
j.freijser@maritiemmuseum.nl
Tel 0031 10 402 92 42 / 0031 6 249 93 233

London P&I Club celebrates 150 years of operation

THE London P&I Club is celebrating its 150th anniversary during 2016/17, and has published a history of the club to mark the occasion.

Nigel Watson, author of 150 years of The London P&I Club, says, “When the London Club was founded in 1866, shipping was dominated by the British mercantile marine, and the general cargo steamer was developing as the major conduit for world trade. As the club reaches 150, the world’s shipping fleet is much more disparately owned and huge container vessels ship goods across the seas. One constant has been the prime importance of shipping to world trade and the way we live our lives in the modern world.”

As well as illustrating the momentous shifts in shipping since 1866, the story of the London Club also highlights the crucial role played by mutual insurance clubs in sustaining the role of international shipping.

In a foreword to the book, Alderman The Lord Mountevans, Lord Mayor of London and a former shipbroker with Clarksons, says, “The history highlights foresight and planning, for example in the early establishment of the overseas club offices. It also highlights enduring principles such as a commitment to mutuality and the strong shipowner interest and engagement, which clearly underpin the London Club’s work.”

Further details can be accessed at: www.londonpandi.com/about/history/

www.londonpandi.com

Shipping must not underestimate physical risk posed by cyber-attack

THE London P&I Club says the physical risk to ships from cyber-attack may not be

as well understood by shipowners as those threats posed to traditional back-office functions such as accounting, payments and banking.

 

In an article in the club’s latest StopLoss Bulletin, Philip Roche, a partner with Norton Rose Fulbright, notes that good cyber hygiene, up-to-date firewalls, penetration testing and staff training are routinely deployed in the shipping industry to counter the back-office threat. But he warns that the physical risk to ships themselves is less well-understood by owners.

 

“Although it might be said that the risk is currently low”, says Roche, “cyber-attacks potentially pose a serious risk to the overall operability of a ship because of the increasing use of onboard IT, even where there is no single network controlling numerous systems and where internet connectivity is low. Examples of such technologies in common use are the Automated Identification System (AIS), Electronic Chart Display & Information System (ECDIS), Global Navigation Satellite System (GNSS) and E-Navigation Systems (E-Nav).

 

“Although cyber-attacks can occur deliberately, it seems that currently the risk is principally from the inadvertent introduction of viruses and the like into key systems. For example, a crewman charging a mobile phone from a USB port in the ECDIS system causing a virus to render the system entirely inoperable. The ship’s maintenance and propulsion systems are exposed to the same hacking/malware risks and the consequences of cyber-attacks might be potentially severe if key systems are lost at crucial times.”

 

Roche acknowledges that cyber-attacks causing physical damage are still thankfully rare, not least because of the comparative invisibility of shipping to the general public, and the existence of a number of far easier targets for cyber criminals. But he warns that, because ships’ systems are centrally controlled, because connectivity with the shore is continuous, and because maintenance and diagnostics are increasingly carried out via USB ports in equipment, the risk will only increase.

 

Roche concludes, “It is time for shipping to consider these issues proactively. It is a matter of applying tried and trusted risk assessment methodology. Consider the risks, weigh the consequences and put proportionate steps in place to reduce that risk. IT and cyber-attacks are outside most marine professionals’ experience, and so help has to be sought from experienced IT consultants.”

 

 

www.londonpandi.com