Conventional wisdom a year ago was that the threat of a double-dip recession was passé. But then several externalities, including catastrophic weather events, came to the forefront and impacted the recovery of a fragile global economy. Even without the many natural calamities and geopolitical uncertainties that accentuated a nagging worldwide economic malaise, for shipping it was a stressful year.
Catastrophic weather in Japan, Thailand, Australia, and the United States interrupted global supply chains in unfathomable ways. The Arab Spring, though filled with hope, also brought a great sense of uncertainty, compounded by the Eurozone implosion and economic lethargy in the United States and other developed countries. No wonder the global maritime community breathed a collective sigh of relief as a new year waded in.
According to World Bank statistics, in 2011 international trade in goods and services grew 6.4 percent. However, this was only because of the strong momentum in trade growth carried over from 2010. By midyear a sharp deceleration became clearly evident. Furthermore, the modest increase experienced in 2011 tonnage-demand growth came from an unexpectedly high increase in liquefied natural gas (LNG) trade.
China’s hold on the global economy strengthened last year. According to Lloyd’s List data, the country accounts for one-fifth of world seaborne trade today. Also, one-third of all containerized trade is China-centric, and one-fourth of all containerized exports originate from that country, despite its strengthening currency, the yuan. Chinese macroeconomic conditions also accounted for huge increases in commodity imports and overall domestic consumption. The country’s shipping and shipbuilding continued to grow and, along with India, Brazil, and other developing countries, provided fuel for the global maritime sector’s increase, albeit lackluster.
Overall, 2011 is a year best forgotten from an international-shipping perspective, with the sole exception of the LNG sector. Still, several market conditions and other domestic and international maritime developments are noteworthy.
Market Developments
Along with the aura of discomfort that again enveloped the markets by mid-2011, the high level of new-ship deliveries exceeded trade growth, and the overall utilization level of the world shipping fleet reached barely 84 percent, per the 2012 R. S. Platou database. In the severely depressed containership market in particular, the nominal capacity of one out of every five ships remained unused.
Ship operating costs rose 3.8 percent in 2011, according to the Moore Stephens annual survey. The index of operating costs (with base year 2000) is expected to double by 2015. The cost of lubricants is the fastest-growing component, followed by crew wages at 3.1 percent. The decline in asset value of ships and shipping companies has been very telling. The price of vessels has dropped precipitously, both for new constructions and second-hand tonnage. For example, a ten-year old very large crude carrier (VLCC) dropped in price from $135 million in August 2008 to $63 million in January 2011, and by August 2011 to $36 million.
Dry Bulk Market
With a rough start, world seaborne trade in dry-bulk commodities picked up some momentum during the year’s latter half. This was primarily because of increased demand in China for iron ore and coal to support economic growth. The Chinese substitution of South American sources for traditional bulk imports from India increased sailing distances and, consequently, demand for dry-bulk tonnage. Shipowners slowed down their operating speed to stem the rising fuel costs and also prop up demand. None of these measures were robust enough to collectively offset the tremendous increase in supply caused by the introduction of several new ships in 2011. In addition, the 2010 bankruptcy of Korea Line continues its prolonged domino effect on several shipowners who had chartered vessels to it.
One of every five new ships that entered this market beginning in 2000 was delivered in 2011. The giant Vale-max 400,000 deadweight-ton ships made their market entry in 2011, with the intention of transporting Brazilian iron ore to China. However, China remains steadfastly opposed to their berthing in Chinese ports, citing safety concerns. This is widely perceived as a blatantly protectionist action, but the Brazilian silence has been remarkable and a strong testimonial to growing Chinese economic might. Interestingly, perhaps as a face-saving measure, the first ship of this size built in a Chinese yard is listed at 380,000 DWT carrying capacity, even though it is no different from the other Vale-maxes.
Tanker Market
The tanker market was another victim of adverse market conditions. From the supply side, there was again a huge influx of new ships. Asian yards alone delivered 331 new tankers (36.2 million DWT) in 2011, almost one a day! There was no corresponding increase in demand for tonnage; on the contrary, trading conditions were severely adverse thanks to overall dismal economic conditions worldwide, and the temporary but critical loss of (one million barrels per day of) Libyan crude. The escalation of crude prices in spring 2011 subdued the demand for oil in traditional consumption centers (the United States and European Union). In addition, mild North American winter weather led to a general decline in the demand for oil. The U.S. demand was impacted as well by a boost in domestic production, including shale oil, and increased imports transported by pipeline from Canada. These developments negatively affected the demand for oil tankers worldwide.
Although demand for oil by countries not in the Organization for Economic Cooperation and Development grew 3 percent, driven by China and India, it was not sufficient to maintain market profitability and led owners to undercut each other to the point of operating ships without recovering even their variable costs. At one point, the benchmark Middle-East-to-Asia VLCC route was earning $8,448 per day while encumbering $11,000 in daily operating costs. The R. S. Platou tanker index dropped to a depressingly low 44 percent.
The demand for storage tankers, historically a safe employment for large oil tankers, became insignificant because of widely available land-based storage options in major locations. Overall, VLCC rates dropped more than 50 percent to $15,000 per day, and the value of secondhand vessels plummeted, with a ten-year-old ship losing as much as 50 percent and older ones being only worth scrap iron.
The giant tanker operator Frontline reported major losses for the year, and its chief executive John Fredriksen pleaded with other tanker owners to scrap as many as 50 double-hull tankers to bring back market equilibrium. Owners and operators have resorted to traditional cost-saving strategies such as slow steaming. Studies show that a VLCC dropping average speed to 11 knots on the ballast leg from Asia back to the Middle East can save $16,000 per day. In general, according to ICAP Shipping, dropping speed by 1 knot, from the standard 14 to 13 knots, creates demand for 30 additional vessels. An additional drop of 1 knot would employ another 35 VLCCs.
Liner Market
Liner operators began the year with optimism, based on their remarkable 2010 turnaround from unprecedented losses suffered the previous year. There was a flurry of ambitious new-ship construction announcements early in the year, including the biggest-ever new order by Maersk Line for 20 Triple E mega containerships at $190 million each, discussed last year. However, with the supply of new tonnage continuing unabated, rates and utilization levels dropped, and freight rate per 20-foot-equivalent unit (TEU) fell 25 percent from 2010. In the severely affected Asia-Europe trade, rates dropped 65 percent. A mid-year raid on the offices of a dozen global carriers by EU antitrust inspectors investigating allegations of market abuse did not help morale.
Industry-wide, the emphasis was on defending market share and filling container slots at any cost. As a result, the Drewry report cites the industry as a whole losing $5.2 billion in 2011 (compared with the $20 billion profit in 2010). Industry leader Maersk Line lost $602 million in 2011, after earning a record $2.6 billion profit the previous year. CMA CGM lost $30 million after a profit of $1.6 billion in 2010. Chilean national carrier CSAV reported a loss of $1.24 billion. The list goes on. MISC Berhad, the Malaysian carrier, lost $405 million during the last nine months in 2011. Realizing it was no longer a relevant player, MISC left the market at an exit cost of $475 million.
While revenue shrank because of lower freight rates, operating costs continued to escalate, especially fuel. The average freight rate on a 40-foot container dropped from $3,064 to $2,828. Maersk lost $75 on each container it transported in 2011, whereas it had earned a profit of $384 each in 2010.
Consolidation in the liner market is at its highest level ever, with the top 20 carriers now controlling 84 percent of the market, say Alphaliner statistics. This is a 14 percent increase since 2000. There is a fragmented fringe sector outside the dominant players, but barriers to entry are becoming somewhat insurmountable. Some believe that by 2020, the number of relevant carriers will be fewer than ten.
Shipbuilding Market
A significant drop in the total order for new ships in 2011 indicates the prevailing conservative market sentiment. Remarkably, despite this, new containerships and LNG ships ordered in 2011 surpassed 2010 numbers. The logic behind the latter seems rational, but increasing containership orders may be only speculative, or perhaps to erect effective (scale) barriers to market entry.
South Korean shipbuilders held off strong Chinese competition and earned close to 50 percent of all tonnages ordered, versus 30 percent for the Chinese. It is estimated that the cost of building new ships is 40 percent below what it was in 2008. There was considerable slippage in new-ship deliveries, with about one-fourth deferred for later delivery. A number of dry-bulk and tanker new orders were canceled despite financial penalties. In the containership sector alone, new-construction orders to the year 2015 amount to $57 billion, said Alphaliner. In tonnage, this represents one-third of the current containership fleet.
European shipyards continue to exit from merchant-ship construction, the latest casualty being the 92-year-old Odense Steel Shipyard, a wholly owned subsidiary of A. P. Moller Maersk. This premier shipbuilding facility, which built the Emma Maersk and other E-class Maersk ships, is now for sale, unable to withstand the competitive onslaught from Asian yards. VesselsValue.com reports that 39 percent of the total value of tankers, bulk carriers, and combination carriers were built in Japan, pointing to that nation’s dominance in shipbuilding before the emergence of South Korea and China. South Korean–built ships constitute 30 percent in value, and Chinese-built 23 percent.
Cruise Market
The cruise sector enjoyed another banner year, increasing clientele in North America and Europe. The total fleet today consists of 350 vessels carrying upwards of 15 million passengers annually. Their innovative strategies, including amenity-rich new ships, focus on providing affordable cruises to a wide cross-section of the population. The market continues to be highly concentrated at ownership level, as well as brand level and ship level (for example, among the brands that Carnival Cruise Lines owns is Costa in Europe. Each owner also has a variety of ships).
The average number of passengers per cruise is now more than 2,500, which explains why more than 80 percent of new these ships built in the past five years are of megaships (meaning they have more than 2,000 berths). Despite the 13 January 2012 Costa Concordia shipwreck, to be discussed in next year’s review, the sector remains robust—even though its image has worsened in the public eye.
The U.S. Merchant Marine
The somber global outlook on shipping permeated the domestic maritime ambience as well. On the optimistic side, the BG Group signed a 20-year deal to buy 3.5 million tons of LNG per year beginning in 2015. By 2020, the U.S.-Canada LNG export trade will be the fourth largest in the world, and shale gas will constitute 50 percent of the entire U.S. supply of natural gas.
Yet the whole year was rather unpleasant and somewhat discomforting for the traditional maritime sector, primarily driven by market uncertainties and adverse economic pressures. The stock market delisted eight U.S. carriers: American Commercial Lines, K-Sea Transportation Partners, Omega Navigation Enterprises, Horizon Lines, Ocean Freight, General Maritime, Trailer Bridge, and B+H Ocean Carriers. Several difficulties continued to plague key Jones Act carriers.
Jones Act Developments
In the trouble-afflicted U.S.–Puerto Rico Jones Act trade, three of the four carriers are in disarray. Horizon Lines, the biggest, has spent $32 million in litigation costs since 2008, in addition to $66 million in antitrust damage-settlement costs, and is now addressing a $750 million debt. Sea Star Lines is facing a $14.2 million criminal penalty in a price-fixing case, and Trailer Bridge is in Chapter 11 financial restructuring. This leaves Crowley Maritime as the only carrier in the Puerto Rican trade that remains unscathed. The Government Accountability Office is conducting a study on the impact of the Jones Act on Puerto Rico’s economy, based on a request from the island’s congressional representative.
The trans-Pacific service launched by Horizon Lines in December 2010 was terminated 11 months later, in November 2011. With that exit from the U.S.-Guam trade, Matson Navigation remains the sole operator there. Matson has split from its parent Alexander and Baldwin and plans further expansion in addition to its recent entry into the China trade. Its current assets include 17 Jones Act ships, 47,000 containers, a dedicated container terminal in Hawaii, a logistics arm, and a 35 percent stake in SSA Terminals.
The Maritime Administration sold the two Hawaiian high-speed superferries, Huakai and Alakai, to the U.S. Navy for $35 million. The agency acquired them when Hawaii Superferry defaulted on loans that MARAD had guaranteed. The two catamarans can carry 288 cars and 866 passengers; it is expected that the Navy will use them to transport troops and equipment.
Maersk Line and Rickmers-Linie (America) formed a partnership called Maersk-Rickmers to carry break-bulk and project cargoes on two new U.S.-flag heavy-lift ships. The innovative marine-highways operator American Feeder Lines is seeking a waiver from the build-U.S. requirement until they can raise funds to construct ten ships in U.S. yards.
A MARAD-sponsored PriceWaterhouseCooper study found that the operating cost of U.S.-flag ships is 2.7 times more than that of foreign-flag ships, the highest difference in scale being crew costs. Wages account for 72 percent of the operating cost of a U.S.-flag containership, compared with 28 percent of a foreign-flag (68 percent versus 35 percent among ships of all types). The current top ten U.S.-flag shipowners in deadweight tons owned is shown in Figure 1.
Shipbuilding
Aker Philadelphia Shipyard signed a letter of intent for building two new Alaskan trade crude oil tankers with SeaRiver Maritime, Exxon-Mobile’s domestic shipping subsidiary. The two Aframax Liberty-class tankers, 115,000 DWT with double hull, will be built in collaboration with Samsung Heavy Industries at a cost of $400 million and are due for delivery in 2014. They will transport Alaskan North Slope crude oil from Prince William Sound to the U.S. West Coast. This comes at a crucial time for Aker, given the delay and uncertainty with the American Feeder Lines’ new construction plans for Jones Act coastal ships.
In December 2011, Hornbeck Offshore Service announced its $720 million plan to build 16 new-generation platform supply vessels at Gulf Coast shipyards. Earlier, Harvey Gulf International Marine ordered LNG-fueled PSVs at Trinity Offshore. Increased oil drilling in the U.S. Gulf and Alaskan regions has contributed to a major boost for the American niche market in shipbuilding.
Marine Highways Initiative
The Port of Stockton, California, has initiated a weekly container-on-barge service to the Port of Oakland. The Sacramento River franchise was of 11 corridors identified last year for its commercial potential. The port received a Transportation Investment Generating Economic Recovery grant as well as two regional ones to procure the gantry crane and two barges. The option promises to be a good alternative to the 72-mile, weight-restricted truck route to the Port of Oakland. It is estimated that four fully loaded containers on the barge will replace five weight-restricted ones transported by truck. The service will be competitive with trucking services, and no subsidies are involved.
Regulatory Developments
The U.S. Coast Guard commandant’s final commentary on the 2010 Deepwater Horizon catastrophe specific to marine operations exonerated the Marshall Islands Registry and the two class societies involved: ABS and Det Norske Veritas. The joint investigation panel (Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement) placed most of the blame on BP. Rig owner Transocean, contractor Halliburton, and blowout-preventer designer Cameron were also found at fault. The panel emphasized the need for stronger, more comprehensive federal regulations—but no changes have been made as of yet.
In 2011, two more countries were added to the Coast Guard’s list of terror-risk nations—Côte d’Ivoire and Comoros. They join the existing 13—Cambodia, Cameroon, Cuba, Equatorial Guinea, Guinea-Bissau, Indonesia, Iran, Liberia, Madagascar, Sao Tome and Principe, Syria, Timor-Leste, and Venezuela. Additional restrictions will be imposed on vessels entering the United States if they have visited any of these countries during their previous five port calls.
In June, the Merchant Marine Reserve program transitioned into the Strategic Sealift Officer Program. This supports national-defense sealift requirements and capabilities that are executed by the Military Sealift Command. It provides the Navy with officers that have expertise in sealift, maritime operations, and logistics, as well as mariner’s licenses. The new initiative is expected to improve stewardship, integration, and opportunities for about 2,400 Navy Reserve officers. The program is expected to strengthen the current tradition and provide greater opportunities for service.
The Federal Maritime Commission conducted a study to examine the impact of the five-year-old European Union ban on liner conferences. The study did not provide definitive results, other than that shippers in general were not affected by the absence of conferences in European liner trades.
The House Transportation and Infrastructure Committee plans to review the huge surpluses in harbor-maintenance-tax collections. The estimated current surplus at the end of Fiscal Year 2012 is $6.9 billion. In 2010 alone, these funds grew by $1.3 billion, of which only $828.5 million was spent on dredging. The Association of American Port Authorities has been highly vocal about the current lethargy in port investment, in particular federal funding for dredging navigation channels.
Harbor-maintenance tax collection was also cited as a reason for container-cargo diversion to Prince Rupert, the new Canadian port 480 miles north of Vancouver, British Columbia. An eastbound trans-Pacific liner voyage is not only three to four days shorter in sailing time, but also $137 per container cheaper because Canada (and Mexico) does not levy this tax. Seven hundred and fifty thousand TEUs of U.S.-bound containers are presently transshipped through Canadian ports.
Unions and Protests
The International Longshoremen’s Association and International Longshore and Warehouse Union (ILWU) are increasing ties and even reaching out to create global partnerships with foreign labor organizations, akin to the multinational orientation of carriers and shippers today. The 250-member Panama Canal Pilots Union has signed on as an ILWU affiliate. This is particularly noteworthy as it extends ILWU’s reach to Panama well before the canal’s scheduled expansion, and is likely to provide leverage during contract negotiations.
On 12 December 2011, protesters occupied many ports on the West Coast, in particular the Port of Oakland. This turned out to be ill-advised and poorly planned. The activities did not involve ILWU, but even if they had, shutting down ports that provide employment for thousands of blue-collar workers appears to be self-defeating. The protesters succeeded in stopping cargo-handling operations for a work shift, but otherwise the impact was minimal. The Association of American Port Authorities statistics show that West Coast ports generate $704 million in economic activity and account for “up to 260,000 person hours of employment and more than $9 million in wages” in a single day. Port services and activities generate $3 million in taxes daily.
International Developments
Iran Sanctions
Both the United States and European Union have enacted economic sanctions against Iranian oil exports. The EU’s proposed ban against the third-party liability insurance of ships that carry Iranian oil will have far-reaching consequences apart from the intended outcome. Iran, second only to Saudi Arabia when it comes to oil exports, shipped close to 2.3 million barrels per day of crude in 2011. This is roughly the equivalent of one fully loaded VLCC that stands to lose gainful employment and further depress the market.
Iranian-owned tankers transported only 25 percent of their 2011 exports, for which they used 80 percent of their total carrying capacity. Ninety-five percent of oil tankers are insured on a mutual basis through the International Group of Protection and Indemnity Clubs. Without this coverage, tankers must either stop carrying Iranian oil or get the insurance elsewhere. Major owners such as Frontline, OSG, and Maersk have started canceling the carriage of Iranian oil. Intense lobbying is ongoing to convince the EU to relax its insurance ban on ships calling at Iranian ports and avoid the collateral damage from a total ban.
This measure would also impact several tankers beneficially owned by companies based in the EU. If the sanctions were extended against Iranian oil pumped into the Sumed pipeline, the effects would further extend to tankers operating in the Mediterranean market as well. Iran has threatened to close the Strait of Hormuz if punitive sanctions are enforced, which would be a direct violation of the UN Convention on the Law of the Sea.
Daily Maersk
Maersk Line identified three areas vital to meet future customer demands: unmatched reliability, ease of doing business, and best environmental performance. A website, changingthewaywethinkaboutshipping.com, was launched to discuss the future of liner shipping. In September 2011 the company announced Daily Maersk, a high-frequency, high-reliability service in its Europe-Asia trade. The ocean-borne “conveyor belt” is intended to help shorten supply chains and lower inventories.
The service connects four key ports in Asia—Ningbo, Shanghai, Yantian, and Tanjung Pelepas—with the three European gateways Felixstowe, Rotterdam, and Bremerhaven. Seventy large container ships will facilitate the seven-day-a-week premium service. If the promised delivery windows are not met, shippers will be compensated at a rate of $100 per container for one to three days of delay, and $300 for delays of four days or more except for reasons beyond the carrier’s control. If successful, Maersk plans to expand Daily Maersk to other ports.
Other carriers are reacting competitively to Maersk’s customer-focused initiative by consolidating their tonnage. Examples include the two-year vessel-sharing agreement between Mediterranean Shipping and CMA CGM. The six other top carriers (APL, Hyundai Merchant Marine, Mitsui O.S.K. Lines, Hapag-Lloyd, NYK Line, and Orient Overseas Container Line) have created a new alliance of their own to collectively position themselves and enhance their overall global competitiveness.
Environmental Considerations
It has been understood for several years that ballast water may introduce potentially damaging invasive marine species. The only known way to eliminate this risk was to change the water well before reaching port, which would seriously impact ships’ stability. Thus even after IMO member nations approved a Ballast Water Management Convention in 2004, no practical solution to the dilemma existed.
Several new ballast-water treatment systems have now been developed, and the convention is finally expected to get the required endorsement (30 nations with 35 percent of the combined world gross shipping tonnage) in 2012. The state of New York had intended to enforce its own version of a controversial rule that would have been 100 times more stringent than the international standard and could have effectively shut down shipping operations on the Saint Lawrence Seaway. The state’s Department of Environmental Conservation recently changed its stance in favor of the more technically feasible national standard. This was enthusiastically welcomed by the maritime community.
Another environmental effort has been slow steaming, which lowers the emission of noxious fumes and saves on operating costs. A variation on this, “virtual arrival,” made its mark in 2011. The idea is that virtual sailing saves money through improved efficiency, regardless of market conditions. The charterer and the shipowner enter into an agreement to slow down the ship if a delay is expected at the port of destination, without overriding the legal and monetary obligations defined in the original contract of carriage. The benefit comes in huge savings in fuel expenses, reportedly 40 percent on some trades, and is split between the charterer and the shipowner.
Currently, the International Maritime Organization (IMO) distinguishes three categories of potential emission-reduction measures: technical, operational, and market-based. The first of these includes use of more efficient engines, ship hulls, propellers, cleaner fuels, alternative fuels, and so on. Operational measures consist of speed optimization, optimized weather routing, and fleet development. Market-based measures encompass emission-trading schemes, carbon tax, and levy on fuel. The three categories are not necessarily mutually exclusive.
But the pace at which global efforts toward emission control are progressing is cause for serious concern, especially in the EU. Ten separate market-based measures have been under IMO review for two years, and analysis will not likely be ready for another two. The IMO and the UN Framework Convention on Climate Change did not reach a consensus on replacing the Kyoto Protocol at their 2011 meeting in Durban, South Africa, Platform for Enhanced Action. It is now feared that the EU will enact its own regional initiatives for shipping movements, similar to what it did with aviation in 2011. Several nations are opposed to this likely unilateral green initiative; trade organizations such as the International Chamber of Shipping and the Baltic and International Maritime Consultative Organization have also announced their opposition.
Meanwhile, on 1 January 2012, the global limit on maximum sulfur content in fuel oil used outside restricted emission-control areas was lowered to 3.5 percent. In all ECAs, maximum sulfur content will drop to 0.1 percent by 2015 (equivalent to gasoline or clean distillate) from the current level of 1 percent. This will cause huge increases in fuel costs for shipowners. By 2020 the global standard will be 0.5 percent maximum sulfur content, although this will be mitigated in part by the introduction of energy-efficiency measures.
A NOAA study has determined that new clean-fuel regulations in California and voluntary slowdowns by shipping lines have lowered air pollution from coastal shipping movements by as much as 90 percent. Studies show significant drops in SO2 levels, particulate matter, and black carbon levels. The first-ever direct comparison of the overall environmental footprints of the top 20 container carriers was released in 2011 summer (see Figure 2). It is expected that all shipping lines will lower their carbon footprints competitively.
Piracy
The most recent statistics indicate a clear swing in combating piracy at sea. Attacks dropped from 445 to 421 in 2011; hijacks from 53 to 42. Although Somali attacks increased from 210 in 2010 to 231 in 2011, many were repelled, and only 26 resulted in a hijack (versus 49 in 2010). A number of factors have contributed to the gains, notably key players’ adoption of the latest best-management practices.
Three naval coalitions now operate 18 warships on antipiracy duties, in addition to several other navies acting independently. Even on land, military forces and authorities from neighboring countries (and within Somalia) are making a concerted effort to root out this problem. Armed guards called vessel-protection teams are an increasing presence; UK-flagged ships are the latest to use them when sailing through piracy-prone areas. The only major maritime nations that do not allow them on board ships today are Greece, the Netherlands, and Japan. Companies offering security services have grown in both number and the scope of their activities, sometimes controversially as seen in the Februrary 2012 Enrica Lexie incident to be covered next year. They have formed their own trade association: Security Association for the Maritime Industry.
A study sponsored by One Earth Future Foundation found that world governments are spending about $1.3 billion to control piracy, with the shipping industry spending $5.5 billion (of which more than a billion was spent on security guards in 2011, and $2.7 billion on increasing speed). A total of $160 million was paid out in ransoms. According to Oceans Beyond Piracy, the economic cost of Somali piracy in 2011 was $6.6–6.9 billion, with the average ransom exceeding $5 million.
Mariner Issues
The Manila Amendments 2010, known as the Standardization of Training, Certification, and Watchkeeping, came into effect on 1 January 2012, with a five-year transition period until 1 January 2017. They constitute major revisions to the original version. In addition to a general tightening of educational and training requirements, the amendments include strict mandatory limits for alcohol consumption, at least ten hours of rest in any 24-hour period, and a minimum of 77 hours’ rest in any seven-day period.
The minimum rest-hour requirements will be strictly enforced by the Port State Control officials. This comes in the wake of a recent report titled Project Horizon: A Wake-Up Call, sponsored by European maritime interests including the British Maritime and Coastguard Agency, Warsash Maritime Academy, Chalmers University in Sweden, and the seafarer union Nautilus International. So we now have empirical data for scientific assessment of seafarer fatigue, a causal factor in numerous maritime casualties. The research involved 90 volunteers over a 32-month period. Using bridge, engine-room, and cargo simulators, participants were subjected to weeklong, intense, high-pressure voyages on board a small product tanker to analyze their performance and reaction. Forty-five percent of those who worked on the midnight-to-0600 watch had at least one instance of microsleep (defined as a 30-second nap); 40 percent of those who kept the midnight-to-0400 watch were similarly affected.
Nautilus International, a union representing merchant-marine officers in the United Kingdom and Netherlands, found in a recent survey that more than 40 percent of all British and Dutch officers have experienced bullying, harassment, or discrimination at work in the past five years. This is roughly twice as high as in other sectors in those countries. The survey of 539 officers, including 8 percent women, found that the worst perpetrators were line managers, colleagues, and employers, in that order, and that the bullying was linked to nationality, racism, sexism, homophobia, and/or prejudice against older workers. Forty-one percent of female respondents had suffered sexual harassment, compared with 2 percent of males. Sixty-seven percent of all respondents did not believe their employer had appropriate workplace employee-protection policies. However, 75 percent felt their complaints had been addressed satisfactorily, and 81 percent enjoyed their seafaring careers.
Last year we reviewed the EU retraction of merchant-marine credentials issued by Georgia; in 2011 it was the turn of the Philippines, a nation that turns out 280,000 mariners every year. Unlike Georgia, the impact of a ban on Filipino mariners serving on board non-Philippine ships would have been catastrophic. Thankfully, the Philippines responded promptly to EU concerns about educational standards, and three allegedly inadequate institutions were shut down in October 2011.
Safety Issues
Current statistics from the International Union of Marine Insurance show a clear downward trend in total loss of vessels over 500 gross tons for more than 30 years. Between 1994 and 2010, total losses by number of vessels dropped from 175 to 75 per year and from 2,000,000 to 700,000 by tonnage. From 2001 to 2010, 74 lives and 135 ships of 500 gross tons or more were lost per year. Casualty statistics from Lloyd’s List Intelligence Casualty Service for the first half of 2011 show an 18 percent decline from the previous year.
Even though a typical cargo-ship transit today is as predictable as a commute to the suburbs and the industry gets noticed for its failures rather than successes in facilitating global commerce, catastrophes continue to haunt us today. The containership Rena, operated by the Mediterranean Shipping Company, was speeding up to make the 0300 ETA at the port of Tauranga on 5 October 2011 when she hit a reef and caused New Zealand’s worst environmental disaster on record. The ship’s captain and navigating officer were attempting to pass 1.25 miles off the Astrolabe reef, less than half the recommended closest point of approach. The same ship had been cited for 17 serious safety violations in Australia barely ten weeks prior to the incident. Along with the ill-fated Costa Concordia, a state-of-the-art cruise ship sailing recklessly close to the Italian coast, it is clear we have a lot more to learn and a long way to go when it comes to maritime safety.
All indications are that 2012 will not be any easier for the global maritime industry. The World Bank has lowered its worldwide GDP growth forecast by 1.5 percent, and the International Monetary Fund predicts a significant decline in world trade. Advanced economies will continue their lackluster growth. Even the Chinese economy shows signs of cooling, which could be severely problematic as that nation has been the major driver of global commerce and shipping for almost a decade. New capacity will continue to enter all major trading markets, and ship-utilization levels will remain on the discomfort side. The tanker and liner markets in particular will be the most adversely affected, even without the geopolitical uncertainties ahead of us. Sadly, the collective sigh of relief for which the industry longs is unlikely to materialize quickly.