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Flexible take on capacity

Flexible take on capacity
TOP executives from United Arab Shipping Co were among the first to head to Seoul early last year to try to get out of a $1.5bn order for nine 13,100 teu ships placed just a few months earlier.

Flexible take on capacity.

TOP executives from United Arab Shipping Co were among the first to head to Seoul early last year to try to get out of a $1.5bn order for nine 13,100 teu ships placed just a few months earlier.

But Samsung Heavy Industries, along with other South Korean shipyards, stood firm and refused to make anything more than very minor concessions. UASC hopes to reach agreement for the delivery dates to be pushed back a year, but the order is going ahead, and at the original price.

That position is much the same across the industry, with boxship owners making little progress on renegotiating contracts for the very biggest ships they ordered in such vast numbers in 2007 and 2008.

Having said that, it is now clear that there has been some movement.

With the panic of 2009 now replaced by a more rational perspective, shipbuilders and their customers are making adjustments to the orderbook that will remove some of the pressure from the supply side.

Japan"s NYK has had particular success, with a pair of 9,600 teu ships converted to large tankers, and some smaller 4,500 teu units also switched to other ship types. Likewise, K Line has managed to convert a containership order to bulk carriers.

With their diverse fleets, it is easier for the Japanese lines to juggle orders around, but these developments also show that the yards realise it is as much in their interests as anyone else"s to be flexible.

That does not mean that shipowners who over-stretched themselves should be bailed out. But the yards will benefit as much as owners if delivery dates are postponed so that work is stretched out until, hopefully, ordering activity resumes.

Latest Alphaliner figures also show that some owners have managed to get out of contracts, estimating that 140 orders totalling 436,000 teu have been cancelled since the start of the crisis in October 2008.

That represents nearly 7% of the total orderbook and provides one more piece of evidence that capacity growth is edging back to a more manageable size.

Ducking the punch

SEVERAL miles before you reach the Indian shipbreaking yard at Alang, the remains of old ships come into roadside view. In a poor, regional economy, these bits of maritime scrap have value.

Pan across to the other side of the subcontinent, to the shipbreaking yards of Chittagong, and the economic imperative of this industry is laid bare.

Demolishing old ships might be dirty and dangerous but it should not cause loss of life. It was a spate of recent deaths from tank explosions in Chittagong yards that spurred the Bangladeshi government to enact legislation insisting that vessels destined for recycling hold pre-cleaning certificates.

This move, as reported in Lloyd"s List, saw steel and shipbreaking interests take umbrage and engage in rent-a-mob politicking to make their feelings known.

For what touches the economic nerve of the steel-rolling mills and yard owners can indirectly affect shipping, buffeted as it is by a politics of the environment that ranges from the sulphur content of bunker fuel to asbestos-riddled ships destined for the breakers" yards.

How can the shipping industry ensure the safe disposal of its waste when the breaking yards are in countries where work, any work, is at a premium?

In an ideal world, an old ship would go to a breaking yard with all the right rules in place. Making that a reality is easier said than done. Is it the responsibility of shipping companies to put the world to rights?

Of course not. But the industry would do well to avoid becoming embroiled in political fisticuffs not of its own making.


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