Vale’s Plans to Win in a Cut-Throat Market

By Reuters 2015-09-19 19:19:42

Two kilometers out to sea, workers battle treacherous currents to build a huge dock capable of loading the largest iron ore ships on earth, a vital step as Brazil’s Vale fights for dominance in a tumbling market.

The work in the northeastern city of Sao Luis is a small part of an iron ore project that stretches 1,000 kilometers from the Amazon rainforest in Para to the Atlantic coast and costs almost twice as much as the 2016 Rio de Janeiro Olympic Games.

The mammoth undertaking will secure Vale SA as the world’s number one producer of the main raw material in steel making. In a cut-throat market where prices have halved since last year, it will reduce costs as well.

With a name like a space project, S11D will be delivered in the second half of next year.

The $17 billion price tag has scared some investors, who point to the pressure on Vale’s balance sheet as earnings fall. Analysts also express concern its iron ore will sink a market already oversupplied by mega mines delivered by Australian rivals BHP Billiton and Rio Tinto.

But workers here shrug at the idea the project could be slowed in order to balance the market.

“We are following a very mature plan. There has been no order to speed up or slow down,” said Adriano Mansk, who is responsible for the port work.

Chief Executive Murilo Ferreira, who was making a personal visit the same week, believes Vale’s future hangs on S11D. It is “untouchable”, he has told analysts.

By the end of July, 60 percent of the terminal’s back end expansion and 58 percent of the new loading dock had been completed, according to latest figures.

Work is on track, Mansk said.

The expanded port will be able to handle 230 million tons per year, as the new mine and rail increase annual production by 90 million tons, the equivalent of about 7.5 percent of the whole global sea-borne market.


The increased production will put unprecedented strain on Vale’s rail network and has led the miner to rethink maintenance on its 11,000 train wagons.

Instead of disconnecting individual wagons to replace wheels or axles, the whole train will now enter a workshop the size of multiple sports halls. There the wheel system on a wagon can be removed and replaced by equipment installed below floor level.

The train then moves forward, allowing the next wagon to stop over the equipment and be fixed in the same way.

A nearby workshop for the locomotives resembles a Formula 1 pit stop. While iron ore is unloaded from wagons, trains are re-fueled and checked for faults and given minor repairs.

“If I’d been stuck with the old system, I would have need a much bigger fleet (to deal with the extra output),” Mansk said.

Out at sea, it has been the Atlantic tides that posed the biggest problem.

When the tide changes and the currents are at their strongest, the water at Vale’s port resembles a raging river rather than a mooring spot.

In order to keep ships secured while they are being loaded, Vale is installing a huge web of pulleys, cables and steel. Electronic sensors monitor the tide, tightening and loosening the cables to keep the ship still.

By next year, Vale says the largest project in its history will be delivered. It is working like a company that believes its future depends on it.

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.


Global Warming Hiatus Never Happened

By MarEx 2015-09-18 21:33:46

A new Stanford study debunks a widely accepted view of a hiatus in the recent rate of global warming.

An apparent lull in the recent rate of global warming that has been widely accepted as fact is actually an artifact arising from faulty statistical methods, an interdisciplinary team of Stanford scientists says.

The study, titled “Debunking the climate hiatus” and published online this week in the journal Climatic Change, is a comprehensive assessment of the purported slowdown, or hiatus, of global warming.

“We translated the various scientific claims and assertions that have been made about the hiatus and tested to see whether they stand up to rigorous statistical scrutiny,” said study lead author Bala Rajaratnam, an assistant professor of statistics and of Earth system science.

The finding calls into question the idea that global warming “stalled” or “paused” during the period between 1998 and 2013. Reconciling the hiatus was a major focus of the 2013 climate change assessment by the Intergovernmental Panel on Climate Change (IPCC).

Using a novel statistical framework that was developed specifically for studying geophysical processes such as global temperature fluctuations, Rajaratnam and his team of Stanford collaborators have shown that the hiatus never happened.

“Our results clearly show that, in terms of the statistics of the long-term global temperature data, there never was a hiatus, a pause or a slowdown in global warming,” said Noah Diffenbaugh, a climate scientist in the School of Earth, Energy & Environmental Sciences, and a co-author of the study.

Faulty ocean buoys

The Stanford group’s findings are the latest in a growing series of papers to cast doubt on the existence of a hiatus. Another study, led by Thomas Karl, the director of the National Centers for Environmental Information of the National Oceanic and Atmospheric Administration (NOAA) and published recently in the journal Science, found that many of the ocean buoys used to measure sea surface temperatures during the past couple of decades gave cooler readings than measurements gathered from ships. The NOAA group suggested that by correcting the buoy measurements, the hiatus signal disappears.

While the Stanford group also concluded that there has not been a hiatus, one important distinction of their work is that they did so using both the older, uncorrected temperature measurements as well as the newer, corrected measurements from the NOAA group.

“By using both data sets, nobody can claim that we made up a new statistical technique in order to get a certain result,” said Rajaratnam, who is also an affiliated faculty member at the Stanford Woods Institute for the Environment. “We saw that there was a debate in the scientific community about the global warming hiatus, and we realized that the assumptions of the classical statistical tools being used were not appropriate and thus could not give reliable answers.”

More importantly, the Stanford group’s technique does not rely on strong assumptions to work. “If one makes strong assumptions and they are not correct, the validity of the conclusion is called into question,” Rajaratnam said.

A different approach

Rajaratnam worked with Stanford statistician Joseph Romano and Earth system science graduate student Michael Tsiang to take a fresh look at the hiatus claims. The team methodically examined not only the temperature data but also the statistical tools scientists were using to analyze the data. A look at the latter revealed that many of the statistical techniques climate scientists were employing were developed for other fields such as biology or medicine, and not ideal for studying geophysical processes. “The underlying assumptions of these analyses often weren’t justified,” Rajaratnam said.

For example, many of the classical statistical tools often assume a random distribution of data points, also known as a normal or Gaussian distribution. They also ignore spatial and temporal dependencies that are important when studying temperature, rainfall and other geophysical phenomena that can change daily or monthly, and which often depend on previous measurements. For example, if it is hot today, there’s a higher chance that it will be hot tomorrow as well because a heat wave is already in effect.

Global surface temperatures are similarly linked, and one of the clearest examples of this can be found in the oceans.

“The ocean is very deep and can retain heat for a long time,” said Diffenbaugh, who is also a senior fellow at the Stanford Woods Institute for the Environment. “The temperature that we measure on the surface of the ocean is a reflection not just of what’s happening on the surface at that moment, but also the amount of trapped heat beneath the surface, which has been accumulating for years.”

While designing a framework that would take temporal dependencies into account, the Stanford scientists quickly ran into a problem. Those who argue for a hiatus claim that global surface temperatures either did not increase at all during the 15-year period between 1998 and 2013, or they rose at a much slower rate than in the years before 1998. Statistically, however, this is a hard claim to test because the number of data points for the purported hiatus period is relatively small, and most classical statistical tools require large numbers of data points.

There is a workaround, however. A technique that Romano invented in 1992, called “subsampling,” is useful for discerning whether a variable – be it surface temperature or stock prices – has changed in the short term based on limited amount of data.

“In order to study the hiatus, we took the basic idea of subsampling and then adapted it to cope with the small sample size of the alleged hiatus period,” Romano said. “When we compared the results from our technique with those calculated using classical methods, we found that the statistical confidence obtained using our framework is 100 times stronger than what was reported by the NOAA group.”

The Stanford group’s technique also handled temporal dependency in a more sophisticated way than in past studies. For example, the NOAA study accounted for temporal dependency when calculating sea surface temperature changes, but it did so in a relatively simple way, with one temperature point being affected only by the temperature point directly prior to it.

“In reality, however, the temperature could be influenced by not just the previous data points, but six or 10 points before,” Rajaratnam said.

Pulling marbles out of a jar

To understand how the Stanford group’s subsampling technique differs from the classical techniques that had been used before, imagine placing 50 colored marbles, each one representing a particular year, into a jar. The marbles range from blue to red, signifying different average global surface temperatures.

“If you wanted to determine the likelihood of getting 15 marbles of a certain color pattern, you could repeatedly pull out 15 marbles at a time, plot their average color on a graph, and see where your original marble arrangement falls in that distribution,” Tsiang said. “This approach is analogous to how many climate scientists had previously approached the hiatus problem.”

In contrast, the new strategy that Rajaratnam, Romano and Tsiang invented is akin to stringing the marbles together before placing them into the jar.

“Stringing the marbles together preserves their relationships to one another, and that’s what our subsampling technique does,” Tsiang said. “If you ignore these dependencies, you can alter the strength of your conclusions or even arrive at the opposite conclusion.”

When the team applied their subsampling technique to the temperature data, they found that the rate of increase of global surface temperature did not stall or slow down from 1998 to 2013 in a statistically significant manner. In fact, the rate of change in global surface temperature was not statistically distinguishable between the recent period and other periods earlier in the historical data.

The Stanford scientists say their findings should go a long way toward restoring confidence in the basic science and climate computer models that form the foundation for climate change predictions.

“Global warming is like other noisy systems that fluctuate wildly but still follow a trend,” Diffenbaugh said. “Think of the U.S. stock market: There have been bull markets and bear markets, but overall it has grown a lot over the past century. What is clear from analyzing the long-term data in a rigorous statistical framework is that, even though climate varies from year to year and decade to decade, global temperature has increased in the long term, and the recent period does not stand out as being abnormal.”

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.


NYK Joins Anti-Corruption Network

By MarEx 2015-09-18 20:37:13

NYK has become a member of the Maritime Anti-Corruption Network (MACN), a global business network that works toward realizing fair trade across the entire shipping industry.

The network has a vision of a maritime industry free of corruption, and collaborates with governments, authorities, international organizations and key stakeholders to identify and mitigate the root causes of corruption in the maritime industry.

NYK and its group companies have implemented a number of measures to prevent corruption and bribery, and, as a good corporate citizen, will continue to give attention to fair business activities to earn the trust of stakeholders and contribute to the achievement of a sustainable global society.

MACN has welcomed 16 new members since the beginning of 2015: Anglo American, Bunker Holding, BW Group, China Navigation Company, EDF Trading, DONG Energy, Hafnia Tankers, Höegh LNG, Louis Dreyfus Commodities, MF Shipping Group, Masterbulk Pte Ltd, Mitsui O.S.K. Lines, Ltd., Smit Lamnalco, Scorpio Group, Unifeeder and Wallem Ship Agency.

Established in 2011, and formalized in 2012, MACN is comprised of vessel owning companies within the main sectors of the maritime industry and other companies in the maritime industry including cargo owners and service providers.


IMO Warns on Bauxite Liquefaction Dangers

By MarEx 2015-09-18 20:04:15

The IMO has taken action to warn ship masters of the possible dangers of liquefaction associated with carriage of bauxite, following the findings from the investigation into the loss of the 10-year-old Bahamas flag bulk carrier Bulk Jupiter, which was carrying 46,400 tons of bauxite when it sank rapidly off the coast of Vietnam with 18 fatalities in January 2015.

A circular approved by IMO’s Sub-Committee on Carriage of Containers and Cargoes (CCC), meeting this week at IMO Headquarters, warns ship masters not to accept bauxite for carriage unless:

• the moisture limit for the specific cargo is certified as less than the indicative moisture limit of 10 percent and the particle size distribution as is detailed in the individual schedule for bauxite in the IMSBC Code; or

• the cargo is declared as Group A (cargoes that may liquefy) and the shipper declares the transportable moisture limit (TML) and moisture content; or

• the cargo has been assessed as not presenting Group A properties.

The circular notes that while bauxite is currently classified as a Group C cargo (cargoes that do not liquefy or possess a chemical hazard) under the International Maritime Solid Bulk Cargoes (IMSBC) Code, there is a need to raise awareness of the possible dangers of liquefaction associated with bauxite. If a Group A cargo (cargo which may liquefy) is shipped with moisture content in excess of its transportable moisture limit (TML), there is a risk of cargo shift, which may result in capsizing.

The mandatory IMSBC Code requires Group A cargoes to be tested, before loading, to determine their TML and their actual moisture content. The testing should confirm the cargo is below the maximum moisture content considered safe for carriage.

The Sub-Committee was informed of the marine safety investigation into the loss of the Bulk Jupiter, which has uncovered evidence to suggest liquefaction of cargo led to loss of stability. Ongoing research to evaluate the properties of bauxite is being carried out by Australia and Brazil, while an ongoing research project in China suggests that bauxite has various behaviors, based on the parent rock and how the materials weather.

The Sub-Committee also established a correspondence group to evaluate the properties of bauxite and coal (some types of coal may liquefy) and consider any necessary amendments to the IMSBC Code.


Liquefaction occurs when a cargo (which may not appear visibly wet) has a level of moisture in between particles. During a voyage, the ship movement may cause the cargo to liquefy and become viscous and fluid, which can lead to cargo flowing with the roll of the ship and potentially causing a dangerous list and sudden capsize of the vessel. Special consideration and precautions should be taken when loading a cargo which may liquefy.


Bankruptcy Plagues Offshore Drilling Market

By Reuters 2015-09-18 18:43:14

The most significant bankruptcy of the current oil downturn has shone a spotlight on what is perhaps the most oversupplied corner of the energy world: the market for offshore rig services.

Samson Resources, an independent oil producer bought just four years ago for $7.2 billion, said in its late Wednesday filing for creditor protection that a 60 percent crude price slide had upended its business.

In the offshore space, restructurings and asset sales are widely seen as likely and some chief executive officers are now openly talking about acquisitions.

Paragon Offshore, which has an outdated fleet, said on Thursday it has hired Weil, Gotshal & Manges, a well-known restructuring firm, and the investment bank Lazard.

And Vantage Drilling, which has a hefty debt load, has also said it retained financial adviser Lazard to explore options. Vantage did not provide additional comment.

Leaders of Transocean, Noble Corporation and Rowan Companies say they are now on the prowl – to both eliminate competition in a saturated rig market and to pick up new rigs at bargain basement prices.

Talk of offshore consolidation – rare in a sector that saw its last big deal in 2011, when Ensco bought Pride International – comes as executives see prices staying low for a long time, meaning even less work for rigs.

“We believe we are the natural consolidator,” Transocean Chief Executive Officer Jeremy Thigpen said at the Barclays energy conference last week. “The industry needs to consolidate, and so we’re certainly looking and just waiting.”

Thigpen, who recently took his new post after being chief financial officer at highly acquisitive National Oilwell Varco, seems to be steering Transocean in a new direction.

Insiders say the Switzerland-based company lost its technological edge and hesitated to invest after the deadly 2010 explosion of its Deepwater Horizon rig leased for BP’s Macondo well.

In a distressed industry, buyers may find cheap targets. Second-hand rigs are going for half the price of building a new rig, which can run to $600 million.

Consolidation would also allow buyers to scrap older rigs faster. Rental rates for new rigs bring in about $375,000 a day, almost 50 percent more than old rigs.

Vantage, along with Pacific Drilling, has a young fleet that would be valuable to larger rivals Transocean or Diamond Offshore Drilling – both of which are saddled with old rigs, said Bill Costello, a portfolio manager of the Westwood Small Cap Value fund.

The average age of Pacific and Vantage’s fleets is three years, compared with 16 years across the industry, said Leslie Cook, a consultant at Quest Offshore Resources.

Pacific spokeswoman Amy Roddy acknowledged the company’s rigs are attractive but said “we do not have a plan or desire to be taken over.”

Diamond may have the most financial flexibility to make an acquisition because the company does not have to set aside money for new rig payments, said Edward Jones analyst Rob Desai.

Diamond, which did not comment, has just one ultra-deepwater rig on order, while Transocean has seven.

Any buyers are more likely to save dwindling cash balances and take out whole companies in stock rather than pay cash for individual assets, even those of bankrupt companies, analysts said.

Companies will likely be taken out at eight to 10 times forward earnings before interest, taxes, depreciation and amortization (EBITDA), said Reorg Research analyst Kyle Owusu.

That is less than half of Ensco’s valuation for Pride.

“We are looking at buying, we’re looking at distressed assets,” Rowan CEO Thomas Burke said at the Barclays conference.

Noble Corp Chief Executive David Williams said he is a potential buyer but is biding his time.

“We fully expect to participate in consolidation in the industry, if and when we believe it’s appropriate, and we get the reasonable valuations that we want to get,” he said.

Asked how much Noble would pay for a new high-tech rig, he quipped: “I wouldn’t give 10 cents right now.”


Lost, but Not Forgotten

By MarEx 2015-09-18 17:43:17

According to the U.S. Defense POW/MIA Accounting Agency, more than 83,000 Americans remain missing in action (MIA) from WWII, the Korean War, the Vietnam War, the Cold War, and the Gulf Wars/other conflicts. Out of the 83,000 missing, 75 percent of the losses are located in the Asia-Pacific, and over 41,000 of the missing are presumed lost at sea (i.e. ship losses, known aircraft water losses, etc.).

President Barack Obama has issued the following proclamation on September 18 – National POW / MIA Recognition Day.


America has long stood tall as a beacon of freedom thanks to the women and men of our Armed Forces who safeguard our country and our ideals with courage, honor, and selflessness. While our heroes and their families continue to give of themselves for us all, we must recognize the unthinkable pain that remains with the loved ones of those who have not returned home. Today, we honor them, as a Nation forever indebted. We rededicate ourselves to our ironclad commitment to never leaving one of our own behind, and we pay tribute to those patriots known to God and never forgotten.

To further uphold our eternal promise, we established the Defense POW/MIA Accounting Agency. This Agency will help recover and account for prisoners of war and those missing in action, work to better anticipate family needs, and ensure that timely, accurate information is communicated to loved ones. Bringing home Americans who have been taken prisoner or who have gone missing is a sacred mission, and my Administration is increasing our efforts to ensure every service member knows with absolute certainty that — should they ever find themselves in that position — ours is a country that will never give up on retrieving them.

As a grateful Nation, we owe it to all who put on the uniform of the United States to remain unwavering in our promise to them. With hearts full of love, families carry on with an unfillable void, and we stand beside them — one and all — acutely aware of the cost at which our liberty comes. Today and every day, let us renew our pledge to never stop working to bring home the ones they love to the land they risked everything to protect.

On September 18, 2015, the stark black and white banner symbolizing America’s Missing in Action and Prisoners of War will be flown over the White House; the United States Capitol; the Departments of State, Defense, and Veterans Affairs; the Selective Service System Headquarters; the World War II Memorial; the Korean War Veterans Memorial; the Vietnam Veterans Memorial; United States post offices; national cemeteries; and other locations across our country. We raise this flag as a solemn reminder of our obligation to always remember the sacrifices made to defend our Nation.

NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim September 18, 2015, as National POW/MIA Recognition Day. I urge all Americans to observe this day of honor and remembrance with appropriate ceremonies and activities.

IN WITNESS WHEREOF, I have hereunto set my hand this seventeenth day of September, in the year of our Lord two thousand fifteen, and of the Independence of the United States of America the two hundred and fortieth.



Department of Defense Outlines Asia-Pacific Maritime Strategy

By MarEx 2015-09-18 16:14:30

The Department of Defense’s (DoD) plan to rebalance the Asia-Pacific region is a strategy that safeguards U.S. interests and military access, builds partner capabilities and preserves stability in that part of the world, the assistant secretary of defense for Asian and Pacific security affairs stated earlier this week.

David Shear and Navy Admiral Harry Harris Jr., commander of U.S. Pacific Command, outlined to Senate Armed Forces Committee members how the U.S. Maritime Security Strategy for the Asia-Pacific will uphold maritime security in the region.

The strategy reflects U.S. interests and the importance of maritime peace and security in a critical part of the world, Shear said. It is also one part of a larger strategy to protect American interests in “international law, freedom of navigation, unimpeded lawful commerce, and peaceful resolution of disputes,” he added..

“As we’ve stated clear to [the] Chinese, ‘These actions are not only unilaterally altering the status quo; they’re also complicating the lowering of tensions and the peaceful resolutions of disputes.’” Shear said.

Strategy Uses 4 Lines of Effort

DoD’s strategy employs four lines of effort to counter such challenges, he said, which would:

— Strengthen military capacity to deter conflict and coercion, and respond decisively;

— Build U.S. allies’ and partners’ maritime capacity for greater interoperability and more integrated operations. And DoD’s new Southeast Maritime Security Initiative, he added, will increase training, exercises, personnel support and maritime domain awareness;

— Leverage defense diplomacy to reduce miscalculations and conflict risk, and promote shared maritime rules of the road; and,

— Strengthen regional security institutions and encourage open regional security architecture. As an example, Shear cited Defense Secretary Ash Carter’s recent announcement to deploy a technical adviser to support the Association of Southeast Asian Nations’ maritime security.

“We’ve seen positive momentum in promoting shared rules of the road,” Shear said, adding thanks to committee members for their support of the United Nations Convention on the Law of the Sea. “Our efforts would be greatly strengthened by Senate ratification of UNCLOS,” he added.

Asia-Pacific is Vital to Nation

Harris said the Asia-Pacific region’s importance to U.S. security and prosperity cannot be overstated, and he noted that nearly 30 percent of the world’s maritime trade, or more than $5 trillion, transits the South China Sea each year. “This includes $1.2 trillion in shipborne trade bound for the United States,” he said

And while the region has remained free of conflict for decades, “the security environment is changing, potentially placing … stability at risk,” Harris said.

“Rapid economic and military modernization and a growing demand for resources have increased the potential for conflict,” he said. “Peacetime freedom of navigation is under pressure. If not handled properly, territorial and maritime disputes in the East and South China Seas can disrupt stability throughout the region.”

DOD’s maritime strategy “capitalizes on the momentum” of the Asia-Pacific rebalance, Harris told the panel.


Chilean Earthquake Shuts Down Port

By MarEx 2015-09-18 15:10:52

Operations have been halted at Chile’s Coquimbo Port after a magnitude 8.3 earthquake rippled off the cost of Coquimbo and caused a tsunami on September 16. The quake was the largest to hit the country since 2010. Waves reached heights more than 15 feet in the area surrounding Coquimbo Port.

Chile’s national emergency agency issued an evacuation notice for the country’s coastal regions and more than one million have found refuge in shelters. At least ten people are confirmed dead. Officials say 1,800 people in the city of Illapel are without drinking water.

According to reports, the port’s pier sustained no damage, but its cruise passenger terminals and administrative offices suffered extensive damage. Coquimbo will not resume normal operations until a full damage assessment has been submitted. All port employees have been taken to safety and suffered no injuries.

There were at least 12 recorded aftershocks of magnitude 4.9 or higher in the area surrounding the quake’s epicenter within less than two hours of the initial tremors.

Chile is among the world’s most earthquake-prone countries. The 2010 earthquake registered at an 8.8 and in 1960, Chile suffered the largest-ever recorded quake.

Coquimbo Port handled 770,000 metric tons of cargo last year.


China Promises Cooperation in South China Sea

By MarEx 2015-09-18 14:52:00

After years of being locked in a bitter dispute with Japan, Indonesia, Malaysia, the Philippines, Singapore and Vietnam, Chinese Vice Premier Zhang Gaoli vowed to step up maritime cooperation with members of the Association of South East Nations (ASEAN) at the 12th annual China-ASEAN Expo in Nanning City, China.

Mr. Gaoli was clear in noting that China’s disputes are with individual countries and not ASEAN.

The Chinese have conducted several reclamation projects, constructed artificial islands as well 16 offshore platforms in the South China Sea. Gaoli also accused countries outside of the region with meddling in the territorial disputes and fueling discontent.

China has been particularly displeased with the U.S., who they claim has militarized the region by conducting military drills with countries like Japan and the Philippines. It remains to be seen if China will actually deescalate regional tensions.

In August, Japan released 14 photos pinpointing 16 offshore platforms located in disputed territories in the South China Sea. China announced that it would cease its reclamation projects shortly after the photos were released. But earlier this week, the U.S. released a report that China had in fact continued dredging in the Spratley archipelago.

On September 16, Chinese Foreign Minister Wang Yi stated that Beijing was conducting necessary construction work to improve conditions on the island.

“The Nansha islands are China’s territory. In this regard, China possesses ample historical and legal basis,” Wang said, using the Chinese name for the Spratly Islands.

On September 15, Japan promised an unnamed amount of warships and a donation of $1.7 billion to Vietnam to strengthen its maritime forces.

While not specifically naming China, Japanese Prime Minister Shinzo Abe cited stability-threatening, large-scale land reclamation projects and the building of outposts as the primary motivators for the donations.