Cyber attacks are becoming more frequent and significant in today’s commercial environment and there are a number of technology growth factors that drive cyber risks. Our entire lives are spent online – we work online; we shop online; we play online; we communicate online. Even our technology systems have started communicating with each other online – without us, without a human being involved.

In recent weeks we have seen the true extent of the over-reliance of large organisations on their IT systems in both the public and private sectors. And when IT systems fail or are compromised, a very real commercial issue emerges and it is not one that can be ignored.

Such incidents are now the new norm – get used to it and expect plenty more too. IT systems function to provide an organisation with availability to its information and in the cases of the recent ransomware attacks of ‘WannaCry’ and the arguably more destructive ‘Petya’, this is an attack against that availability and access.

In shipping and international logistics, this means that everything from cargo management systems, supply chain manifests, crew change tracking, personnel onboard, and onshore payment systems are unable to do what they are supposed to.

Such business disruption is extremely challenging and damaging for shipping because it is not localised to one area, but many. In a large group like Maersk, which is still reeling after this week’s ransomware attack, a global cyber incident tests its business resilience to the extreme. Even if certain departments do not appear to be affected, services may be taken offline to reduce any further risk or spread, possibly compounding serious business disruption, never mind the reputational, financial, and safety risks that must be managed.

First and foremost are the direct costs associated to the event, which will include containing and eradicating the threat. With destructive malware, this is normally while the business or parts of it are offline adding further downtime cost.

With ransomware, there is the dilemma of paying the extortionists or not. If an organisation chooses to pay, it runs the risk of falling victim again and again (a weak and easy target), or as was seen recently, market demands increase.

A web-hosting service in South Korea was held to ransom and agreed to pay USD1.1 million in bitcoin. The criminals originally demanded USD2 million and settled for less. This would seemingly represent the level of exposure that this company faced. To release that sort of money would suggest that there was no backup or business continuity management plans in place – and that the company was desperate. Should an organisation choose not to pay, then there is the cost of either recovering the data from backups, paying thousands of dollars to cyber-security teams (third parties I may add – presenting new risks) in consultancy fees to obtain the decryption keys, or potentially losing the data all together.

Other substantial costs could include the potential loss of profits from the disruption to IT networks, leading to loss of hire of vessels. At present it looks like ‘Petya’, the most recent cyber attack, has only reached as far as these IT networks, which is good news for vessels and operations that require the use of operating technology to run their control systems. It means that vessels can still operate and the risk of physical damage or potential loss of life is minimalised.

Criminal intentions
These incidents highlight a new type of threat. We are now starting to see intent from criminal or other threat actors that is perhaps more sophisticated in nature. It could be that attackers have learned from ‘WannaCry’ and honed their attack to vectors (routes in and across networks) to a point that causes real-world disruption. Vessels themselves are inherently vulnerable because no two are configured exactly the same – which in itself creates a risk – and many will also be riddled with out-of-date software, but the motivation to attack a lone single vessel is less attractive. Criminals are leveraging scale – taking out a business’s HQ or a series of port terminals is much more disruptive and damaging to an organisation than taking out a single vessel. Why take out a solider on the battlefield when you can wipe out the whole battalion? That said, people (the human factor) will always be one of the biggest vulnerabilities and criminals will look to use the human target as gateways and access points into the companies wider operation and critical networks.

All seafarers and shoreside staff need a general basic awareness about cyber risks, not least because it’s just good practice in 2017. Safety is paramount but the maritime industry cannot hide behind a blanket of cyber awareness alone. It is simply not enough. Not when the more direct threat is financially motivated towards the business.

The latest spate of attacks show that any company – big or small – can fall victim. Imagine if critical software that is used to run payroll or manage logistics tracking is compromised and becomes inoperable; a company that can’t pay suppliers or staff or cannot locate its cargo could end up in real trouble very quickly. These hypothetical scenarios are starting to look more and more realistic every day. The online environment is growing more complex and hostile and understanding the enemy isn’t easy.

So what should we do?

Guidelines are available, including the widely accepted BIMCO ones that provide an enterprise-wide approach for cyber security on board vessels. The principles it sets out can be applied to shoreside and overall business operations too.

Organisations must take responsibility and act sooner or later or they too will end up being one of the case studies for others to learn from. There is no excuse for a shipowner or manager to not understand the need to adopt security frameworks and policies across all business units – on land and at sea.

Good cyber hygiene across all IT networks is vital. This needs to be assessed, tested, and continually reviewed.

Organisations needs should have crisis management and business continuity plans in place. These need to be tested with exercises and drills, exactly like you do with all other aspects of marine safety and security in accordance with the ISM and ISPS code
Organisations should run desktop exercises on this exact scenario, identify gaps, and work to mitigate against this very real 21st century threat. The world is changing rapidly and so too is the threat landscape.

A wise man (or industry) learns from his mistakes, but an even wiser man learns from the mistakes of others – the shipping and the offshore industries are in the cross-hairs of cyber criminals and fortune will only favour the prepared.
Jordan Wylie is the Managing Director of JWC International and the founder of the global cyber-awareness initiative Be Cyber Aware At Sea. Jordan spent 10 years in the British military and the last eight as a maritime security adviser to shipowners. Jordan holds an MA in Maritime Security and a BA (Hons) in Risk Management (Marine) and recently developed the first UK Maritime & Coastguard Agency-recognised maritime cyber security awareness course for seafarers online (1 hour), which has also been approved by GCHQ.

A global team of researchers has observed an entirely new phenomenon that affects the solid bulk cargo bauxite, which could result in vessels capsizing.

The Global Bauxite Working Group (GBWG) set out to investigate the risk of liquefaction in bauxite cargoes – a mechanism affecting other solid bulk cargoes that has caused numerous sinkings worldwide – but its tests showed that liquefaction did not occur at all, even with worst case ship motions.

Instead, it observed the moisture controlled mechanism ‘dynamic separation process’ whereby, when subject to sufficient dynamic loading, very wet finer grained bauxites go through a process of slumping and dynamic separation, with the upward expulsion of water/ slurry.

The findings, set out in the peer-reviewed report, Research into the Behaviour of Bauxite during Shipping, state: ‘This [mechanism] could result in the significant formation of a free surface, which could result in vessel capsizing.’

The study was recently reviewed by the IMO Correspondence Group on the Evaluation of Properties of Bauxite, and forms the basis of its own report report which will be discussed at the Carriage of Cargoes and Containers 4 Sub-Committee session in September.

Ai-Cheng Foo-Nielsen, assistant manager at BIMCO, a key participant in the Correspondence Group, told Fairplay: “The GBWG has come up with very surprising conclusion. I don’t know if this is a more serious phenomenon than liquefaction. At present, there is nothing mentioned about it in the International Maritime Solid Bulk Cargoes Code (IMSBC). We were not aware of it, it is something very new.”

The GBWG report recommends changes to the IMSBC Code, including amendments to the classification of Type A cargoes (those considered likely to liquefy) to include other cargo instabilities due to moisture, such as dynamic separation process. At present, Bauxite is classified as a Type C cargo (cargoes that do not liquefy or possess a chemical hazard).

In addition, the Proctor-Fagerberg Test methodology, developed as part of the research, is outlined for consideration of inclusion in Appendix 2 of the Code.

The research examined materials representing over 90% of the seaborne trade in bauxites, including those from Australia, Brazil, India, Indonesia, Guinea, Guyana, Jamaica and Malaysia. They ranged from silt with a large proportion of gravel, to silty gravel with sand and cobbles. Particle shapes ranged from spherical and round, to angular.

None of the bauxite tested liquefied in so-called Hexapod tests or in DC rolling tests, where the cargo was undrained and extreme vessel motions were simulated.

Liquefaction is known to affect other solid bulk cargoes, such as nickel ore and coal. It occurs when a large volume of fine particles, with a sufficiently high moisture content, start to behave like a liquid when a vessel moves, rolls or pitches. This can result in a sudden and dramatic loss of stability, causing a capsize.

Physical modelling tests on bauxite indicated that some exhibited instabilities due to moisture, whereby the cargo dynamically separated to form a perched free slurry surface with an underlying drier, unsaturated and competent solid cargo.

The report states: “Evidence from real world shipments of bauxites showing instabilities due to moisture cannot be explained by liquefaction phenomena, but can be explained by a dynamic separation mechanism of instability.”
The findings contradict recommendations issued by the IMO in a circular in September 2015, intended to raise awareness of the possible dangers of liquefaction associated with bauxite.

The circular was approved by IMO’s Sub-Committee on CCC, in the wake of an investigation into the loss of the 10-year-old Bahamas flag bulk carrier Bulk Jupiter, which was carrying 46,400 tonnes of bauxite when it sank rapidly with 18 fatalities in January 2015.

Foo-Nielsen commented: “Further discussion is required as to decide what should be done about this phenomenon and whether to call for further research to examine the process and determine if it applies to other cargos, not just bauxite.”

In related news, amendments to the IMSBC Code were adopted earlier this month to help prevent incidents of liquefaction in solid bulk cargoes.

The amendments will enter into force on 1 January 2019 and explicitly assign the shipper the responsibility to ensure that a test determining the Transportable Moisture Limit (TML) of a cargo liable to liquify is carried out within six months prior to the date of loading. The TML is defined as the maximum water contect a Group A solid bulk cargo may contain while being transported on a bulk carrier without it being at risk of liquefying. Previously, no single entity was assigned this responsibility in the IMSBC Code.

The Code also requires the shipper to ensure that, when cargo is exposed to rain or snow during loading, the moisture content is less than the TML by providing evidence as required by the Code. For example, this could be in the form of additional cargo testing.

BIMCO originally suggested the amendments in a submission to IMO, Foo-Nielsen told Fairplay: “Currently the IMSBC only calls for one test for moisture content, at the start of the loading operation, but when the loading operation goes beyond the normal period and the cargo is exposed to additional moisture intake, the probability of liquefaction increases.”

The US Department of Justice has thrown the book at two shipping companies for failing to adhere to the Act to Prevent Pollution from Ships and obstruction of justice for attempting to conceal the illegal dumping of oily bilge water and other waste into the sea by a vessel.

Egyptian Tanker Company and Singapore-based Thome Ship Management both pleaded guilty to the charges and were ordered to pay a $1.9m penalty. They were also ordered to carry out marine and coastal restoration projects at three National Wildlife Refuges in the Gulf of Mexico near East Texas, which was the area the vessel had sailed through and called at ports.

ETC is the owner of the 2001-built, 107,200 dwt ETC Mena oil tanker, while Thome is the operator.

US authorities started investigations into the matter after receiving a tip-off from a crew member on April 26, 2016 that the vessel had illegally discharged bilge water into the sea. The individual, subsequently, submitted a written statement, images and video of the act.

Upon an inspection by the US Coast Guard, a pump covered in oil was discovered in the vessel’s main bilge tank, which resembled the pump the crew member said was used to discharge the bilge water.

The companies admitted that the crew had circumvented the oily water separator and directly pumped the oil-contaminated bilge water into the sea, while further investigations uncovered evidence that crew members were ordered to also dump plastic bags filled with waste such as metal and incinerator ash into the sea in March 2016.

These acts were deliberately omitted from the vessel’s oil record book and garbage record book, which were presented to the authorities, thus leading to the obstruction of justice charge levelled again the companies.

“This case involved egregious violations of US and international laws that are key to protecting the oceans from pollution, and deliberate efforts to mislead US Coast Guard officials about these criminal acts,” said Acting Assistant Attorney General Jeffrey Wood.

“The Department of Justice will continue to aggressively prosecute criminal acts that pollute the oceans.”

Both companies will also be placed on probation for four years, during which they will have to abide by a comprehensive environmental compliance plan.

One aspect of the plan requires all vessels operated by Thome that sail to the US to fully abide by all the relevant marine environmental protection regulations laid down by national and international laws.

Polaris Shipping has taken one of its converted very large ore carriers out of service, after the loss of Stellar Daisy prompted safety concerns over such vessels.

The 280,000 dwt Stellar Unicorn has been anchored off Labuan port in Malaysia since delivering its iron ore cargo to China at the end of May, according to Lloyd’s List Intelligence.

While the reasons for the layup are not clear, the vessel is empty, with no crew on board, said sources with knowledge of the matter. The carrier is probably waiting to go to a scrapyard, said another source.

If that is the case, it may be good news for the industry, whose numerous participants have called for the removal of converted VLOCs following a spate of incidents this year that have called their safety into question.

Officials at South Korean company Polaris could not be reached for comment on Tuesday, but one official said last week the vessel had not yet been retired.

Stellar Unicorn was originally built in Japan in 1993 as a very large crude carrier and was converted to an ore carrier in 2009 at the Shekou yard in China. The vessel is classed by the Korean Register and flies the Marshall Islands flag. Neither society could comment on the fate of the vessel.

Prior to depositing its load in China, the vessel had ended up in Cape Town for repairs as it was found to have small cracks in its hull. It had picked up the iron ore cargo from Brazil and was due to have delivered its load at the beginning of May.

The vessel was on long-term charter with Vale.

Vale could not comment on the status of the vessel’s employment when contacted by Lloyd’s List.

Polaris has been in the news of late not least because of the loss of the Stellar Daisy, another converted VLOC, that had reportedly spilt and sunk in high seas off Uruguay at the end of March, with 22 crew members presumed dead.

After the Stellar Unicorn repair work, another Polaris vessel was found to have cracks in its deck plating and had been anchored off the coast of Brazil with its load, prompting Brazil’s Port State Control to announce it would inspect all such vessels before loading at its ports.

Polaris has said it too is carrying out inspections of all such vessels in its fleet, of which it has 21, with a total capacity of almost 6m dwt, in consultation with KR and Lloyd’s Register and a hull strengthening firm.

Some industry participants have called into question the appropriateness of such conversions on the basis that oil tankers have different structures to ore carriers due to the load distribution.

Given the age of the vessels, they may now be suffering from fatigue, they said.

So, what are the buzzwords in the dry bulk world for the moment?

“Optimism”, “hope”, and “change” spring to mind, with freight rates comfortably above operating costs.

But there is always the threat that the recovery can be short-lived, as the strong demand growth seen in the first quarter may not last much longer.

The other main concern is fleet growth amid continued newbuilding deliveries and slow scrapping. As newbuilding interest improves on low prices, more cautionary words would be “forgetfulness” or even “recklessness”, for over-ordering caused the Baltic Dry Index to hit all-time lows last year.

Coupled with this are potential regulatory developments following the sinking of Stellar Daisy in March, and changes in the way traditional business is conducted.
Lloyd’s List analyses the five things to watch in the coming months.

Consolidation
Listed companies with market capitalisation of over $1bn can win confidence from owners and lenders more easily. That, at least, seems to be the prevalent rationale behind the consolidation talks.
A case in point is Golden Ocean’s purchase of Quintana’s entire fleet in exchange for shares. Observers will keenly watch whether some other smaller participants will follow the Greek owner’s example to exit direct vessel operation without cutting ties to shipping.

“The dry bulk market is still fragmented and the smaller shipowners are challenged on market access, positioning of vessels and running costs,” said Torvald Klaveness head of pool management Hans Olstad.

Also, banks and financial institutions preferred to deal with larger firms so they can build corporate services, Mr Olstad said, and their economies of scale enable them to survive in an industry long plagued by weak earnings.
“As the shipping banks restructure their shipping portfolios, we see that they take an active part in the consolidation of the industry,” he added.

Star Bulk Carriers’ long-time director Tom Softeland shared similar sentiments, saying scale will be the driver of consolidation and predicting more activity of this nature going forward.

But Drewry analyst Rahul Sharan said the recent market recovery could reduce incentives for consolidation. “I think when the market is very low and owners struggle to earn a profit, you will see consolidation increase as they come together to reduce costs,” he said.

“But as the market improves, I think the efforts for consolidation will wane away.”

Will demand hold?
Norden’s boss doesn’t think so.
In the first quarter, China imported 271m tonnes of iron ore and 64.7m tonnes of coal, up 12% and almost 30%, respectively, from a year earlier.

But the Danish player’s chief executive Jan Rindbo said he did not expect the rest of 2017 to see similar strong demand as in the first quarter.

That was because the first three months of this year were unusually and unseasonally strong, which surprised many. Coupled with that were concerns about stimulus in the Chinese economy showing signs of slowing.
“We can’t expect these sorts of growth rates to be maintained,” he said.

According to brokerage and reserach firm Banchero Costa, Chinese lending has eased for the real estate sector, raising questions about the country’s level of steel production. By mid-May, stockpiles of iron ore at Chinese ports reached a record 139m tonnes, which adds to an uncertain outlook for the rest of the year.

The World Steel Association has forecast flat steel demand growth in China this year, Bancosta noted.

And according to Clarksons Platou, falling iron ore and steel prices are negatively influencing chartering interest. “In our view, the market has realised that the first quarter was likely overshooting fundamentals,” the Clarksons unit said in a note.

However, the coal and grains trades remain strong.

Despite coal volumes being curtailed from Queensland, Australia, in the wake of Cyclone Debbie, shipments from further afield such as the US to China were helping tonne-miles, according to BIMCO.

The BIMCO shipping association’s analyst Peter Sand added that for grains, which had seen healthy flows to date, shipping demand should go up as greater global soyabean volumes were expected to be shipped in the second quarter.

The International Grains Council raised its forecast for overall grains trade in the 2017-18 season to 346m tonnes as of May 25, 4m tonnes higher than the previous month’s projection. The figure for the 2016-17 season reached a new high of 349m tonnes

Supply side concerns
As secondhand prices have risen towards newbuilding values, owners may find placing orders an attractive investment — and many industry officials warn that newbuilding orders, if they materialised in a large number, would prolong oversupply.

For the prudent ones, the good news may be that Chinese yards are trying to raise newbuilding prices because the current levels are not profitable.

The guidance price provided by China Newbuilding Price Index for a 38,800 dwt handysize climbed 1.6% to $19.9m in April; that for a 64,000 dwt ultramax rose 2.2% to $22.7m; for an 82,000 dwt Those prices have inched up in May.

The pace of newbuilding deliveries will slow, according to BIMCO. Its calculations show 20m dwt were delivered in the first four months, out of a total amount of 37m dwt due this year.

Drewry’s Mr Sharan said oversupply was easing. Vessel supply was expected to exceed demand by 26.5% by the end of 2017 versus 28.5% at the end of last year, according to his consultancy.

Thus charter rates would stay on the upward trajectory over the next couple of years at least, Mr Sharan said.

Regulatory developments
Stellar Daisy, a very large ore carrier converted from a very large crude carrier, has prompted owner Polaris Shipping to conduct a review of all such vessels in its fleet.

Only two out of 24 crew members were rescued after the VLOC reportedly split and sank in high seas off Uruguay at the end of March.

The company’s VLOCs, converted mostly at second-tier yards in China, will be thoroughly inspected at loading or discharge ports by the Korean Register and Lloyd’s Register, as well as officials from Polaris and a hull strengthening firm.

Intercargo has called for an investigation, as has the International Maritime Organization. But it may take months before a clear answer is found, if at all.

Many European industry participants have called for the removal of these converted vessels over safety concerns surrounding the technicalities of such engineering work.

Polaris has 24 VLOCs, with a total carrying capacity of 6.78m dwt; 21 of those are conversions. There are 26 other conversions in the global dry bulk fleet at present, according to Lloyd’s List Intelligence data.

The removal of these vessels would certainly improve market balance, which is already in a gradual recovery mode. Whether any such ban may be enforced will likely depend on how regulators view the results of the investigation.

Nevertheless, the vessels are very old and may well exit the fleet through a natural end-of-life process.

Another regulation on everyone’s minds is the International Maritime Organization’s ballast water treatment rules, due to come into force in September.

Under the new regulatory framework, ships trading in international waters will have to be fitted with type-approved systems. But each system costs about $1m to $1.5m.

The industry has been slow to act not only because of the cost of installing the systems, but also due to uncertainty over their approval by the US, which applies more strident rules in its waters.

Eagle Bulk chief executive Gary Vogel said the different approaches by the IMO and the US have been problematic for the industry, but that may benefit larger owners that will be able to take share from smaller players on routes calling in the US.

The IMO has in effect set out a five-year adjustment, with vessels required to adopt the systems when their next Oil Pollution Prevention Certificates are due. The US rules came into force in 2012 but enforcement has been problematic due to the lack of approved systems.

Digitalisation
BHP caused a commotion when it launched its online freight trading system in January.

While the consensus is that the e-platform could only work for standard, non-complex routes such as the Western Australia to China iron ore trade on capes for now, the world’s largest miner’s digital initiative has still sent shockwaves across the shipbroking world.

The Baltic Exchange also created jitters among brokers when it announced new initiatives to digitalise the “post-trade space” even as details are still unclear. This has made some brokers nervous, as negotiations and settlements for many post-fixture works, such as inspections and cargo tests, remain on their job scope.

In yet another case, Klaveness has established a platform called Klaveness Digital, which assists its customers in post-fixture contract workflows.

But many shipping executives still think brokers remain invaluable in facilitating trades, especially for smaller vessels in non-standard trades. Artificial intelligence with strong trade knowledge and networking ability has yet to be developed for shipping.

That said, they are also waiting for brokers to add more value to their services. Perhaps via digital means.
The trend seems to have been set and some owners believe digitalisation is the way forward for the industry.

A Hong Kong judge has granted an application by Huangpu Wenchong Shipbuilding to freeze the assets of Dry Bulk Services, formerly known as KC Maritime, in its dispute over the cancellation of four bulker newbuilding contracts. The Chinese yard first went to the court seeking a Mareva injunction to the value of $13,742,916 in support of its London arbitration proceedings in June 2016.

The row dates back to November 2013, when companies associated with KC Maritime placed an order for four 64,000-dwt bulkers at the Chinese yard. However, the yard claimed default when the Hong Kong owner failed to come up with the second and third scheduled payments.

KC Maritime contended there were “serious defects” with the first in the series of four ships. According to the court judgment, KC Maritime claimed it had “excessive fuel consumption, faulty stern tube design and excessive torsional vibration.” The same problems were claimed to affect the second vessel.

In his ruling, High Court Deputy Judge Nicholas Cooney said Huangpu had “a good arguable case that instalment payments are due and payable”. He pointed to evidence that a second sea trial had shown the first newbuilding met fuel consumption specifications. Tests on the stern tube also showed it to be “satisfactory”. There was no reference to vibration problems in a readiness for delivery report from Lloyd’s Register, Cooney pointed out.

He also raised the matter of KC Maritime’s decision to change its trading name to KC Maritime Hong Kong and Dry Bulk Services. KC Maritime said the move was part of a long-planned reorganisation and that it had no connection with the timing of the arbitration claim.

Cooney commented in his ruling: “A restructuring or reorganisation may dispose of assets. The question is whether the disposal is otherwise than in the ordinary course of business.” He later added: “I consider there is a real risk that the defendant [KC Maritime] will dispose of its assets to avoid the possibility of judgment or render the possibility of future tracing of assets remote in fact or in law.” The court order allows the company to use funds for ordinary and proper business expenses.

Two of the four ships ordered by KC Maritime were never built. The two that were constructed were sold to Celsius Shipping, one of which, the CH Citation, broke down shortly after delivery with suspected stern tube problems in October last year and had to return to the yard for repairs.

Chinese shipyards have seen steel nearly double in cost over the past year, adding to their woes of few contracts and rock-bottom newbuilding prices. Depressed demand for newbuildings hit shipyards hard in 2016 with orders falling by 63% from the previous year to just 419 contracts worth $30.9bn, according to London broker Clarksons. Those yards are now also having to cope with the rise in the cost of steel plate, by far the most expensive item on the shipbuilding materials list.

According to a Chinese shipyard official, the price of Chinese steel plate has soared from CNY 2,000 ($287) per ton early last year to CNY 4,200 per ton. The sharp increase is being linked to the closure of private steel mill suppliers in the country. A major concern is whether yards will be able to turn a profit on recent orders with newbuilding prices already at low levels.

“Newbuildings that were contracted from the second half of 2015 and the whole of 2016 will be mostly affected as shipyards normally start procuring building materials for new ships 10 months to one year after signing the contract,” a yard official said. One industry player believes the construction of nine medium-range (MR) tankers ordered by Maersk Tankers at Samsung Heavy Industries Ningbo will cost the shipyard an extra CNY 10m ($1.4m) per ship. About 10,000 tons of steel plate is required for building each of the 50,000-dwt tankers. “We understand shipyards normally peg the price of steel plates at CNY 3,000 per ton when they quote newbuilding prices,” said the source.

Analyst Chong Hui Ru of broker Banchero Costa (Bancosta) says the hike in the price of steel plates is bad news for Chinese shipbuilding, which saw far fewer new orders in 2016. “Chinese shipyards had only 27 new orders for dry bulk carriers last year (as of our data extracted at the start of December 2016). This compares to 98 new orders for dry bulk carriers in China the previous year, and the high of 579 Chinese new orders seen in 2013,” said Chong.

“Newbuilding prices have generally also slid down between 8% and 15% year-on-year, adding further pressure to yards’ margins. With the dry bulk shipping industry still struggling to recover, and tankers possibly facing oversupply next year, newbuilding prices are likely to remain low into 2017. With fewer orders, low newbuilding prices, and higher material costs, Chinese shipbuilders have been facing added pressure to lower costs. Such conditions have set the framework for cost-cutting measures, one example of which would be the Cosco shipyards merger. Chinese shipyards don’t really have many options left for them, with a lot of factors working against their survival: few new orders, low newbuilding prices, shrinking of down payments from 30% to 10%, and the unwillingness of banks to provide refund guarantees for especially the small and medium-sized shipyards. It also doesn’t really help that China is on an overall drive to cut excess industrial capacity, so government support is expected to be limited, if there is any, to state-run yards. As it is, we have already seen news this year of Chinese shipyards going bankrupt, with estimates that half to three-quarters of the shipyards that China had in the peak years may have, or will be closed,” Chong said.

One shipbuilding observer says the hike in Chinese steel plate prices has erased the cost advantage of Chinese yards compared with Korean shipbuilders. But all that could change with other shipbuilding countries also facing potential increases in steel plate costs. “Generally Chinese shipbuilding prices are around 10% less than the Koreans because of the building material costs and labour costs,” said the same source. “However, there is talk that Korean steel mills may also jack up the price of shipbuilding steel plate.”

Technology in shipping has been focused largely around the online booking of containers and rate management platforms, but Silicon Valley’s attention has now fallen on a labour intensive area virtually untouched by start-up technology – the process of booking dry bulk ships.

London-based Shipamax has received USD2.5 million seed investment from venture capitalists to build a data-driven platform for dry bulk shipping and improve the huge administrative burden and error-prone process of booking ships required for the transport of bulk commodities.

The investment is led by Cherubic Ventures, with participation from AME Cloud (Yahoo co-founder Jerry Yang’s fund) and FF Angel (PayPal co-founder Peter Thiel’s fund), and the funding will be aimed at building out the team, accelerating product development and expanding the customer base.

Shipamax, founded in 2016 by CEO Jenna Brown and Fabian Blaicher, plans to become an in industry platform replacing the thousands of unnecessary emails, siloed excel files and instant messages between players required for each booking. It is using technology to bring communications, data and market insight into one platform supporting the dry bulk shipping industry’s move into the digital age.

Brown said over 50% of the work in bulk shipping was centred around communications. “Empowering employees with intuitive technology to increase the efficiency of these interactions will transform this industry in the next five years. And just like no one builds their own database, a technology company is required to provide this solution so the industry can focus on what they do best,” she said.

In bulk tech, there are other innovators, such as New York-based Nautilus Labs that enables shipowners to automatically collect data onboard a ship to help reduce operational costs. The Shipamax solution dovetails with that technology and focuses on commercial teams in the shipping organisations.

The price of booking a bulk ship has dropped by 90% since 2008 and hasn’t recovered since, putting strain on the industry to cut costs and become more data driven, Shipamax pointed out.

“Booking a ship for dry bulk commodities is a slow and painful process. Data is siloed, making it hard to work as a team – shipowners and brokers receive in excess of 5,000 emails daily. Administrative costs are incredibly high with room for error every step of the way.”

This is placing ship brokers under increasing pressure to prove they are still relevant and can add value to the booking process. In addition, shipowners must use all the data they have to improve return on their assets as banks tighten access to capital.

While Shipamax was originally launched as a tech driven ship broker, arising from the founders’ frustrations with the ship booking process, they quickly realised the problem was not the brokers, but the process itself.

“There is fundamentally no modern technology to help brokers provide the seamless experience we’re all used to in the consumer world,” Brown said. Pilots with the new ship booking product were launched in January and have now been rolled out to shipping companies around the world.

There was a measured response to the booking solution from two Asia-based dry bulk ship companies contacted by Fairplay. A spokesman for Hong Kong-listed Pacific Basin agreed that new digital initiatives could improve the work flow, provide more big data analysis, better time and cost management with an increase in information accuracy.

However, the spokesman pointed out that shipping was essentially a people business. “A lot of negotiation and networking work, which done by the shipbrokers within the shipping industry, cannot simply be replaced by computer,” Pacific Basin said.

“We believe the shipbrokers will continue to play an important role in the future especially with the aid from new technology, they are much more knowledgeable, reachable and reliable, and if they digitalise quickly can even possibly increase their value to shipowners.”

Khalid Hashim, managing director of Precious Shipping, said the Bangkok-based carrier used a set of smart electronic ship management modules that allowed for a far greater degree of cooperation between ship staff and office staff, providing a greater degree of information sharing now than ever before.

“My guess is that most shipping companies are using some such system to effectively manage their ships and keep abreast of all the paper work required by the onerous regulatory environment, where it seems that having the right paper work is far more important than real ship management work,” he said.

“If we could be connected to our clients well before the cargo needs to be moved, then we could have a ship in place for that client at the right time and place.”

Technology in shipping has been focused largely around the online booking of containers and rate management platforms, but Silicon Valley’s attention has now fallen on a labour intensive area virtually untouched by start-up technology – the process of booking dry bulk ships.

London-based Shipamax has received USD2.5 million seed investment from venture capitalists to build a data-driven platform for dry bulk shipping and improve the huge administrative burden and error-prone process of booking ships required for the transport of bulk commodities.

The investment is led by Cherubic Ventures, with participation from AME Cloud (Yahoo co-founder Jerry Yang’s fund) and FF Angel (PayPal co-founder Peter Thiel’s fund), and the funding will be aimed at building out the team, accelerating product development and expanding the customer base.

Shipamax, founded in 2016 by CEO Jenna Brown and Fabian Blaicher, plans to become an in industry platform replacing the thousands of unnecessary emails, siloed excel files and instant messages between players required for each booking. It is using technology to bring communications, data and market insight into one platform supporting the dry bulk shipping industry’s move into the digital age.

Brown said over 50% of the work in bulk shipping was centred around communications. “Empowering employees with intuitive technology to increase the efficiency of these interactions will transform this industry in the next five years. And just like no one builds their own database, a technology company is required to provide this solution so the industry can focus on what they do best,” she said.

In bulk tech, there are other innovators, such as New York-based Nautilus Labs that enables shipowners to automatically collect data onboard a ship to help reduce operational costs. The Shipamax solution dovetails with that technology and focuses on commercial teams in the shipping organisations.

The price of booking a bulk ship has dropped by 90% since 2008 and hasn’t recovered since, putting strain on the industry to cut costs and become more data driven, Shipamax pointed out.

“Booking a ship for dry bulk commodities is a slow and painful process. Data is siloed, making it hard to work as a team – shipowners and brokers receive in excess of 5,000 emails daily. Administrative costs are incredibly high with room for error every step of the way.”

This is placing ship brokers under increasing pressure to prove they are still relevant and can add value to the booking process. In addition, shipowners must use all the data they have to improve return on their assets as banks tighten access to capital.

While Shipamax was originally launched as a tech driven ship broker, arising from the founders’ frustrations with the ship booking process, they quickly realised the problem was not the brokers, but the process itself.

“There is fundamentally no modern technology to help brokers provide the seamless experience we’re all used to in the consumer world,” Brown said. Pilots with the new ship booking product were launched in January and have now been rolled out to shipping companies around the world.

There was a measured response to the booking solution from two Asia-based dry bulk ship companies contacted by Fairplay. A spokesman for Hong Kong-listed Pacific Basin agreed that new digital initiatives could improve the work flow, provide more big data analysis, better time and cost management with an increase in information accuracy.

However, the spokesman pointed out that shipping was essentially a people business. “A lot of negotiation and networking work, which done by the shipbrokers within the shipping industry, cannot simply be replaced by computer,” Pacific Basin said.

“We believe the shipbrokers will continue to play an important role in the future especially with the aid from new technology, they are much more knowledgeable, reachable and reliable, and if they digitalise quickly can even possibly increase their value to shipowners.”

Khalid Hashim, managing director of Precious Shipping, said the Bangkok-based carrier used a set of smart electronic ship management modules that allowed for a far greater degree of cooperation between ship staff and office staff, providing a greater degree of information sharing now than ever before.

“My guess is that most shipping companies are using some such system to effectively manage their ships and keep abreast of all the paper work required by the onerous regulatory environment, where it seems that having the right paper work is far more important than real ship management work,” he said.

“If we could be connected to our clients well before the cargo needs to be moved, then we could have a ship in place for that client at the right time and place.”

The dry bulk market was deemed to be in recovery but caution was still needed going forward especially in terms of newbuilding orders. This seemed to be the consensus of a panel of experts in the dry bulk industry at the Marine Money 10th Hong Kong Ship Finance Forum.

“We have passed the worst but we came from such an incredibly low level,” said Pacific Basin Shipping ceo Mats Berglund. “It’s time to let the market come to us this time,” he reiterated, noting that while freight rates have been at break-even levels for about a week, owners really need these rates to be sustained over the 25-year life of a ship to reasonably consider buying a new ship.

“So please have some soberness and consider that there’s lingering surplus capacity out there,” he implored. Berglund added that this extra capacity can come in various forms, such as a reduction of slow steaming, which is already starting to take place as rates improve.

Berglund emphasised that while there is a positive outlook on demand, the fleet is still growing and scrapping has almost stopped with the higher rates. “So we have stronger fleet growth now than we did a year ago, so be cautious; we need more patience before a sustainable recovery,” he warned.

Asia Maritime Pacific ceo Mark Young concurred with Berglund on the current state of the market but also noted that it was recovering from a low base. He suggested that it would be “very, very unlikely” to see last year’s market bottom of around 290 points on the BDI but did not discount falling back for some period to the around 600 points level seen at the beginning of 2017. Young however warned that it is equally uncertain whether the market will stay at current levels around 1,200 points, and ended tentatively: “Probably not.”

Cargill head of ocean transport for China Lei Yang also agreed the market is on a recovery curve and as such has been taking on more long-term charters. But he expressed surprise at the pace of the recovery. Citing the widening gap in growth between China’s producer price index (PPI) and consumer price index (CPI), he noted that in February the gap had widened to as much as seven percentage points, signalling that the domestic commodities are in short supply. This could have caused the spike in rates as traders scrambled to restock.

Meanwhile shipping veteran Langton Shipping md Michael Birley said “Overall I’m optimistic but I think we’ve seen the market go from very bad to less bad, it’s not good yet.” He also noted that there had been quite a lot of short covering going on in the cape market as people were caught short of freight as commodity prices, especially of iron ore and coal, moved up substantially from the first half of last year. This is consistent with observations made by other speakers.