Australia-China FTA could be scrapped

The Australia-China Free Trade Agreement (ChAFTA) could unravel this week, as Australian unions intensify the attack on a key clause. In response, China has threatened to retaliate by requiring changes to a deal that has taken 10 years of negotiations.
Unions have taken umbrage to a provision
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Neptune Orient Lines Says No Decision on Sale

By Reuters 2015-07-19 20:52:21

Neptune Orient Lines Ltd said it has not made any decision on a potential sale of the company, nor entered into any agreement, after media reports that Temasek Holdings had put the shipping company up for sale.

Singapore state investor Temasek, which owns nearly 67 percent of Neptune, had hired a bank to seek buyers for the business that made a net loss in five of the past six years, sources told Reuters last week.

“The company has a duty to consider its options to maximize shareholder value as part of its conduct of normal business,” Neptune Orient said in a statement late on Sunday.

“The company has not made any decision with respect to, and has not entered into any agreement for, a potential sale of the company and there is no assurance that any agreement for the sale of the company will be entered into,” it said.

The company advised investors to exercise caution when dealing in its shares and other securities.

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Skuld Highlights Arctic Insurance Uncertainties

By Wendy Laursen 2015-07-19 20:38:32

“We must bring into stark focus the uncertainties and difficulties that will face operators in this formidable region,” said Ståle Hansen, President & CEO of marine insurer Skuld, in an editorial published after Shell received approval for its latest round of Arctic exploration.

Skuld was one of the pioneers of liability insurance for the offshore energy market, having set up the first liability insurance program for the industry in the 1970s.

The responsibility falls to us as an insurer to consider fully the risks and challenges that our members and clients will encounter and to prepare accordingly to meet them head on, says Hansen.

From an insurance perspective, the cost of an accident similar to the Deepwater Horizon blowout in 2010 is of great concern, and Hansen said that BP estimated its share of Deepwater Horizon liabilities totals roughly $42 billion. “It is not difficult to envisage that a similar-scale incident in the Arctic would cost even more. BP assumed most of its risk itself, so the insurance industry felt little impact. However, an insured accident of similar proportions in the Arctic would certainly test the market’s resolve.”

Another potentially significant exposure from a protection and indemnity (P&I) perspective is the removal of the wreck of any unit or vessel lost during Arctic operations. The costs of wreck removal operations are increasing significantly, and Hansen cites the removal of the container ship Rena that is estimated to have cost $500 million. In the Arctic, Hansen believes it is not difficult to foresee removal costs that will be greater than ever before.

These factors complicate the price of insurance. Hansen says: “As with the underwriting of any new risk category, the first real challenge is the lack of data that underwriters can bring to bear to draw a clear picture of the risk. The experience of Arctic operations on this scale is simply still too limited to have yielded any useful numbers.”

In an editorial published in Insurance Day, Hansen outlines some potential comparisons between Arctic oil and gas exploration and other sectors of the maritime industry:

“Cruise ships sometimes visit lower Arctic waters and may offer some insights (although intuitively, the loss of a cruise ship in the Arctic would probably be very much more serious than any event involving an offshore installation there).

“Hypothetically speaking – because they are unlikely ever to be a regular feature of Arctic water, risk pricing for ultra large container vessels may be similar, but only because of their massive size, which makes the cost of casualties much higher than for more regular-sized containerships. We can learn little, I believe, about possible frequency from this comparison.”

Hansen sees ocean mapping as a concern as appropriate charts for the Arctic are “sorely lacking.” This increases the risk of groundings and is complicated by the perils of floating ice as demonstrated by tragedies such as the Titanic.

As the energy sector currently has a surplus of capacity, rates have been pushed to very low levels compared to the real risk, he says. “With increased exposures, rates have to be priced realistically and fairly. A race to the bottom at the outset is not what the industry needs, now or in the future.”

Hansen concludes that the insurance market has absolutely nothing to gain from Arctic shipping and energy exploration and production. “It brings extremely large risks which are at present unquantifiable.”

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One Dead after Grounding in the Philippines

By Wendy Laursen 2015-07-19 18:18:55

20 Filipino seafarers were rescued from a Singaporean-flagged ship that ran aground on Friday one nautical mile off Santa Lucia, Ilocos Sur, in the Philippines.

The 231 gross tonnage Alam Manis was reportedly battered by huge swells that drenched its nickel ore cargo, causing the vessel to lose its stability until it listed and eventually grounded.

Alam Manis was enroute to China when the incident occurred.

Two of the 21 crew were earlier reported missing, one of whom was identified as C/M Henry Libo-on who passed away due to heart attack.

Meanwhile, the rest of the 20 seafarers were successfully rescued by the escort tug Salviscount and ferried to the port of San Fernando, La Union.

According to Ng Cock Soon, manager of PSM Perkapalan Sdn, Bhd, a wholly owned subsidiary of Malaysian Bulk Carriers, the survivors were brought to San Fernando where their families were waiting.

No signs of oil spill were found where Alam Manis ran aground, but oil spill boom equipment was provided by the Philippine Coast Guard as a precaution.

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AMVER Anniversary: 2,800 Lives Saved

By Wendy Laursen 2015-07-18 22:44:53

Saturday marked the 57th anniversary of the establishment of AMVER. The program, sponsored by the United States Coast Guard, is a unique, computer-based and voluntary global ship reporting system used worldwide by search and rescue authorities to arrange for assistance to persons in distress at sea.

The U.S. Coast Guard has issued a statement saying, “We just want to salute the thousands of vessels that have enrolled in the AMVER program over the years. You, the seafarer, have made AMVER the voluntary powerhouse it is today. Because of your selflessness countless lives have been saved.”

Amver ultimately finds its roots in the RMS Titanic disaster in 1912. Ships passing within sight of the ill-fated passenger liner were unaware that it had hit an iceberg and was sinking. Upon later investigation, those who had seen the distress flares from the stricken ship admitted they thought they were merely part of the maiden voyage celebrations.

However, the resultant idea of a ship reporting system that could identify other ships in the area of a ship in distress, which could then be sent to its assistance, would not become a reality until the advent of computer technology. As late as the mid-twentieth century the world’s commercial shipping fleet and burgeoning air transport system lacked an available full-time, global emergency reporting system. On April 15, 1958 the United States Coast Guard and commercial shipping representatives began discussions which led to the creation of AMVER.

Originally known as the Atlantic Merchant Vessel Emergency Reporting (AMVER) System, it became operational on July 18, 1958. Today, over 22,000 ships from hundreds of nations participate in AMVER. An average of 4,000 ships are on the AMVER plot each day and those numbers continue to increase. The AMVER Center computer receives over 14,000 Amver messages a day.

Over 2,800 lives have been saved by AMVER-participating ships since 2000. The success of AMVER is the direct result of the extraordinary cooperation of ships, companies, SAR authorities, communication service providers and governments in supporting this international humanitarian program to protect life and property at sea.

Rescues in 2015

Some rescue highlights from 2015 include:

• The cruise ship Celebrity Solstice rescued two sailors from a deserted island after their 37-foot sailboat was damaged after running aground on a deserted island near Malden Island, Kiribati on Thursday, April 16, 2015.

• The cement carrier Cozumel rescued an injured woman from the Dutch sailing vessel Tycha 180 miles northeast of Caracas, Venezuela on Tuesday, March 24, 2015.

• The bulk carrier Jin Yun rescued three people from a sunken panga 500 miles north of the Galapagos Islands on Wednesday, March 4, 2015.

• The cruise ship Disney Wonder rescued a Cuban migrant from a rustic raft 21 miles south of Marathon, Florida on Monday, March 2, 2015.

• The cruise ship Celebrity Reflection notified U.S. Coast Guard authorities their crew rescued ten Cuban migrants from a sinking rustic vessel 26 miles southeast of Lower Matecumbe Key, Fla. on Sunday, March 1, 2015.

• U.S. Coast Guard rescue authorities in Guam diverted the Amver participating bulk carrier Hebei Triumph after they received a 406 MHz Emergency Position Indicating Radio Beacon (EPIRB) for possible tug boat distress 154 miles northeast of Palau on Wednesday, February 11, 2015.

• Rescue authorities in Taiwan requested Amver assistance from U.S. Coast Guard officials to divert the Amver participating ship NSS Fortune to assist fishermen abandoning their burning fishing vessel 400 miles southeast of Kagoshima, Japan on Monday, February 9, 2015.

• The offshore supply vessel Harvey Falcon and the tanker Moscow University assisted in a search for the fishing vessel Captain Mike after an EPRIB alert was received for the fishing vessel 170 miles off the coast of Galveston, Texas on Wednesday, February 4, 2015.

• The tanker Aqualeader assisted in the rescue of five sailors after they alerted rescue personnel they were in distress 120 miles southwest of Monterey, California on Saturday, January 31, 2015.

• The car carrier Astral Ace rescued five fishermen in the South China Sea on Sunday, February 1, 2015.

• The cargo ship Ocean Crescent responded to a call to rescue the crew of a 55-foot catamaran with five people on board 200 miles south southeast of Cape Hattaras, North Carolina on Friday, January 30, 2015.

• The cruise ship Veendam rescued a pilot after he ditched 200 miles northeast of Maui on Sunday, January 25, 2015.

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Vietnam Plans Southern Mega-Port

By MarEx 2015-07-18 22:14:33

Vietnam’s government has agreed on a port project in the country’s southern-most province Ca Mau in the Mekong Delta. The port is costing some $2.5 billion according to media reports and would be able to host some of the world’s biggest ships.

The Hon Khoai port would be built under a public-private partnership, the government said in a statement on Saturday, while local media, citing a provincial proposal, said 85 percent of the funding would be via loans from the Export-Import Bank of the United States.

The remaining 15 percent of the cost will come from the private sector.

State-run news website VnEconomy said the provincial authority had proposed local, unlisted Cong Ly Construction-Trading-Tourism as investor for the project.

The five-year project, to be completed in 2020, will need further evaluation and approval from the Ca Mau provincial authority, the government said in a directive posted on its website on Friday.

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Bleak Outlook for Asian Shipbreaking

By Reuters 2015-07-17 18:33:32

In the world’s biggest ship recycling center of Alang on India’s Arabian Sea coast, workers with blow torches cut segments of steel stripped from the rusting hull of a towering cargo ship, sold for scrap by its Japanese owner.

But in this town – located in Prime Minister Narendra Modi’s home state of Gujarat – more than half of the ship-breaking yards have shut in the past two years and the future of the trade in India and neighbors Bangladesh and Pakistan is bleak.

The industry has been hit by a flood of cheap Chinese steel and new European Union environmental rules due later this year threaten to push business to more modern yards in places like China and Turkey – in turn devastating local economies.

“People are running this business from their heart, not from their mind,” said Chintan Kalthia, whose company R.L. Kalthia Ship Breaking Pvt Ltd runs one of Alang’s more modern yards.

Still, he takes pride in the fact that after months of negotiations with a Japanese owner, his yard secured the biggest ship currently being recycled in Alang.

“But this is my last ship. This business is dying,” he added, suddenly sounding weary, as workers outside his beach-side glass office sized slabs of steel peeled from the ship.

Ships sold to South Asian breakers, which control about 70 percent of the market, are winched at high tide onto a beach, where they are taken apart by mostly migrant laborers.

Equipment, such as radars, engines – and even tables and chairs – is taken off and sold, while the steel from the hull is removed for scrap.

The trade in Alang used to employ about 60,000 directly, with thousands more in spin-off businesses, said yard owners.

But roads on the 11 km (seven mile) beach front that locals say used to buzz with people and trucks now appear deserted and dozens of shops displaying everything from crockery to computers ripped out of ships are struggling to get supplies.

“I used to make five, six, seven trips a day,” said Munna, sitting atop his tractor with extra wheels able to carry heavy scrap from the yards. “Now I hardly get one or two calls.”

BLAME CHINA

With a plunge in steel prices, ship owners are getting about $3.6 million less for the 25,000 tons of recoverable metal from a typical iron ore or coal carrying ship than just eight months ago.

The finger of blame is being pointed at China.

“China is selling below the price of recycled steel,” said Amit B. Padia, owner of Sagar Laxmi Ship Breakers, as an orange crane lifted a bathroom removed from a ship onto a trailer.

With China’s economy slowing, its steel exports soared 51 percent to a record 93.78 million tons last year and are up nearly 30 percent in the first five months of 2015.

The impact has been felt in Alang where the number of active yards fell to 50 this year from more than 100 in 2014, according to the Ship Recycling Industries Association India.

The number of vessels beached also dropped to a six-year low of 275 last year and was only 54 in the last three months, it said.

“WORST IN 30 YEARS”

The situation in Pakistan appears equally bad.

“It has always been a cyclical business but people who have been in this industry tell me this is the worst in 30 years,” said Shoaib Sultan, the owner of Horizon Ship Recycling in Karachi.

The story in Bangladesh is similar.

“Three years ago there were about 80 yards, now it’s down to 25. I think another 10-15 yards will go,” said Zahirul Islam, director of PHP Shipbreaking and Recycling Industries Ltd in Chittagong.

Ship breakers globally bought 25.2 million deadweight tons (dwt) of vessels up to early July, against 33.8 million dwt all of last year, with Bangladesh the largest buyer, according to shipping services firm Clarkson.

“Everyone thought prices will improve and bought a lot, but now they are sitting on huge inventories,” said Islam.

“It will be a disaster in the coming months.”

It takes up to nine months for a typical bulk carrier in India to be broken up and its steel processed, said Rakesh Khetan, chief executive of Singapore-based Wirana Shipping Corp, a major buyer of ships for scrap.

ENVIRONMENTAL CONTROLS

As well as facing pressure from cheap Chinese steel, there are also calls to stop beach scrapping because of the danger and environmental damage from pollutants left to drain into the sea.

Highlighting the risks, five people were killed and at least 10 injured after an explosion in a chemical tanker being dismantled in Alang last year, local media said.

Workers can also face health hazards such as lead paint and asbestos when working on ships.

The European Commission will introduce tougher environmental controls some time after December. While not specifically banning beach scrapping, owners of ships registered in E.U. countries will have to scrap them at approved facilities, a move that could favor countries such as China and Turkey where ships are taken apart in docks.

“The European Commission’s intention is not to discourage vessel owners from using facilities outside of the EU but to discourage ship owners from using facilities which have proven to present very real danger to life and the general environment,” said Mark Clintworth, head of shipping at the European Investment Bank.

In a bid to allay environmental concerns, some yards in South Asia have cemented their work area to try to prevent seepage of oil or chemicals, but many lack the money to do this.

“It takes about $5 million to improve a yard. How can somebody do that when they are bleeding?” said Islam of PHP Shipbreaking in Bangladesh.

Clintworth said his bank and the European Commission could provide investment for South Asian ship scrappers to improve existing operations, as well as for safer and more environmentally friendly new facilities.

But for many that could come too late and some, including Alang’s Sagar Laxmi Ship Breakers, are simply targeting other industries such as construction.

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