The dry bulk market’s strong end to 2016 is unlikely to last long into 2017, according to the latest research from Maritime Strategies International. In its latest quarterly dry bulk market report, MSI predicts a depressed year for rates in 2017, a year marked by multiple risks to recovery.

Stronger freight markets in Q4 2016 had been broadly expected by MSI, albeit for slightly different reasons. While iron ore trade undershot its expectations, coal trade overshot them with geographical imbalances playing a key role.

However, MSI believes the short term support factors will have unwound in a matter of weeks. Chartering of Capesize vessels for iron ore out of Brazil and Australia for January loading had slowed before year-end, dragging down spot rates. French nuclear power capacity is set to resume output in January, placing downwards pressure on Panamax coal demand, coinciding with a slowdown in grains trade from the US Gulf.

Will Fray, Senior Analyst at MSI says a combination of factors will continue to shape the market during 2017, but in general, rates will remain depressed.

“In our Base Case there is little to suggest any significant changes to the market through the remainder of 2017 and it is MSI’s view that freight rates will remain depressed. Overall, we forecast deadweight demand growth will broadly match supply growth at around 3-3.5% year on year. On this basis we see little reason for freight rates to move meaningfully, other than for short-lived or localised spikes.”

MSI is marginally more positive for smaller geared bulkers, but marginally more negative for the larger vessels than earlier forecasts, based on year to date earnings data.

“In the longer-term, our forecasts for 2018 and beyond are still positive but have come down since our last update, mainly as a result of a slightly more bearish view of Chinese steel production, iron ore imports and European coal imports,” adds Fray. “We see very little room for supply-side adjustments to compensate given our already-weak contracting and strong scrapping Base Case forecasts. On average we have lowered our 2018-20 timecharter rate forecasts by 8-10% from our Q3 report.”

MSI highlights a strong potential for 2017 coal trade to deviate from its Base Case forecast due to uncertainty over Chinese and Indian imports. It also identifies Chinese iron ore imports as a key risk for the Capesize market, due to uncertainty over the timing of the peak of steel production and how quickly Chinese domestic iron ore production falls – or if it stops falling should iron ore prices surprise to the upside.

Source: Maritime Strategies International

The dry bulk market’s strong end to 2016 is unlikely to last long into 2017, according to the latest research from Maritime Strategies International. In its latest quarterly dry bulk market report, MSI predicts a depressed year for rates in 2017, a year marked by multiple risks to recovery.

Stronger freight markets in Q4 2016 had been broadly expected by MSI, albeit for slightly different reasons. While iron ore trade undershot its expectations, coal trade overshot them with geographical imbalances playing a key role.

However, MSI believes the short term support factors will have unwound in a matter of weeks. Chartering of Capesize vessels for iron ore out of Brazil and Australia for January loading had slowed before year-end, dragging down spot rates. French nuclear power capacity is set to resume output in January, placing downwards pressure on Panamax coal demand, coinciding with a slowdown in grains trade from the US Gulf.

Will Fray, Senior Analyst at MSI says a combination of factors will continue to shape the market during 2017, but in general, rates will remain depressed.

“In our Base Case there is little to suggest any significant changes to the market through the remainder of 2017 and it is MSI’s view that freight rates will remain depressed. Overall, we forecast deadweight demand growth will broadly match supply growth at around 3-3.5% year on year. On this basis we see little reason for freight rates to move meaningfully, other than for short-lived or localised spikes.”

MSI is marginally more positive for smaller geared bulkers, but marginally more negative for the larger vessels than earlier forecasts, based on year to date earnings data.

“In the longer-term, our forecasts for 2018 and beyond are still positive but have come down since our last update, mainly as a result of a slightly more bearish view of Chinese steel production, iron ore imports and European coal imports,” adds Fray. “We see very little room for supply-side adjustments to compensate given our already-weak contracting and strong scrapping Base Case forecasts. On average we have lowered our 2018-20 timecharter rate forecasts by 8-10% from our Q3 report.”

MSI highlights a strong potential for 2017 coal trade to deviate from its Base Case forecast due to uncertainty over Chinese and Indian imports. It also identifies Chinese iron ore imports as a key risk for the Capesize market, due to uncertainty over the timing of the peak of steel production and how quickly Chinese domestic iron ore production falls – or if it stops falling should iron ore prices surprise to the upside.

Source: Maritime Strategies International

Just 149 merchant ship orders (comprising bulk carriers, oil and products tankers and container ships) were placed in 2016, as shipbuilders in the powerhouse nations of China, Japan and South Korea saw a sharp drop in contracting, according to IHS Maritime and Trade newbuilding data assessing ships greater than 10,000 gt.

The total for the past 12 months compares with 1,094 orders recorded in 2015, and a peak of 1,568 orders in 2013.

China remained the top destination for vessel newbuilding orders in 2016, accounting for 43% of new orders seen. South Korea secured 27% of orders and Japanese yards secured 24%. Tankers took top spot at 40% of global orders with container ships coming in at 29%, bulkers 24%, and gas carriers 6%.

Chinese shipyards won 68 ship orders in 2016, down 82% year on year when they secured 379 and a 91% drop from the 788 vessel orders in 2013.

Only 21 individual Chinese shipyards recorded orders in 2016, compared with 47 in 2015 and 67 in 2013. Some 23 container ship were ordered in 2016, a decrease from the 132 box ships ordered in 2015. In 2016, bulker orders also pipped container ships at 25, although they were down from the 90 units ordered in 2015.

While shipbuilders in Japan and South Korea gained market share in 2015, new orders were dismal in 2016.

Japanese yards, which are renowned for constructing bulkers and stainless steel chemical tankers, have seen their dry bulk orders fall from a sustained level of around 260 new orders each year in 2013–15, to just 13 orders in 2016.

Across vessel types, only 11 individual Japanese shipyards recorded a total of 40 new orders in 2016, compared to 41 yards in 2015 with 483 orders.

Bulk carriers have formed the majority of Japanese new orders over the past few years, but the prolonged weak state of the dry bulk market has resulted in a low interest for newbuilding orders. The Baltic Dry Index’s fall to a historical low of 290 in February 2016 was certainly of no help to buying sentiments too.

In terms of tankers, South Korean yards have been maintaining their edge as the top destination for orders. However, as both the Baltic Dirty Tanker Index and Baltic Clean Tanker Index went on a continuous downward trend in the first three quarters of 2016 to levels last seen in 2009, tanker orders at South Korean yards fell to just 32 units in 2016, down from 137 units in 2015, according to IHS Maritime and Trade newbuilding data.

Across vessel types, only six individual South Korean yards recorded a total of 43 new orders in 2016, versus 11 yards with 232 orders in 2015.

Shipyards are likely to remain under pressure this year, with Chinese shipyards now facing the added challenge of higher steel prices. However fewer orders should help restore balance in the shipping market given current vessel oversupply.

Looming environmental regulations are pushing many shipowners to consider scrapping, according to a UBS survey. The increasingly likely candidates for scrapping appear to be vessel 15 years or older as a result of new ballast water and emissions rules.

Based on an online survey of owners and other shipping executives, UBS analyst Spiro Dounis says about half of respondents expect to scrap vessels between 15 and 25 years old rather than spend on retrofits, including ballast treatment gear and sulphur scrubbers.

Dounis says tankers may see higher levels of scrapping due to the relative age of the fleet, with nearly one-quarter of the tanker fleet at 15 years old or older. Some 17% of the dry-bulk fleet has that age profile and 19% of the container fleet.

Ballast water rules are more pressing as the International Maritime Organization (IMO) has set a phased-in implementation starting this September. The respondents to the survey believe only about 30% of the world fleet is already compliant with the new rules.

The survey showed 65% of respondents plan to retrofit vessels for ballast water treatment regulations. Owners are expected to spend between $250,000 and $1m on those retrofits with the special survey itself costing about $750,000.

The phase-in of the IMO’s rules for ships to emit no more than 0.5% sulphur, which are set to begin in 2020, is going to be implemented primarily through use of marine diesel fuel, with 74% of respondents expecting to use that fuel in place of high-sulphur fuel oil.

Scrubbers would allow ships to continue to burn high-sulphur bunkers, but only 19% of owners expect to install that technology, the investment banks survey showed.

The option to use LNG fuel, meanwhile, remains the least popular with only 5% of respondents expecting to use LNG.

THE three emission control areas established by Chinese authorities have now implemented low-sulphur fuel requirements for all key ports within the areas.

As of January 1, 2017, emissions regulations have come into effect for Tianjin, Qinhuangdao, Tangshan, Huanghua, Guangzhou and Zhuhai, according to a circular from the London P&I Club.

They join the core ports of the Yangtze River Delta, Shanghai, Ningbo-Zhoushan, Suzhou and Nantong which were part of the first phase of emissions regulations in which the ports were subject to a 0.5% fuel sulphur content cap as of April 1, 2016. The other two ECAs include ports in the Pearl River Delta and the Bohai Rim. Vessels will also be encouraged to use fuel with a maximum 0.1% sulphur content when at berth in the ECA, and 0.5% fuel when in ECA waters.

Emissions regulations at Shenzhen port in the Pearl River Delta ECA came into force on October 1 last year. In September 20016, the Yangtze River Delta (YRD) region said it would launch an incentive scheme for shipowners to cope with China’s own port emission control area, where vessels at berth are required to switch to low-sulphur fuel. The incentives, or subsidies, are to maintain the competitiveness of the ports encompassed by the ECA.

Ships calling at their terminals must pay more for the cleaner bunker fuel compared with ports elsewhere, according to an official in Shanghai Combined Port Administrative Office (a government body that co-ordinates port development in Jiangsu, Zhejiang and Shanghai).

Shanghai is proposing a unified subsidy level in the region, which is expected to come out by the end of this year, the official added.

China’s rapid implementation of ECAs at its ports will boost demand for cleaner marine fuels, and subsequently raise fuel costs for owners at a time when most shipping companies are struggling to survive.

Shipowners will have to find ways to accommodate higher bunker prices and decide whether certain trades are still feasible and whether they still want to do them, Hong Kong Shipowners’ Association managing director Arthur Bowring said in an interview.

ALTHOUGH owners’ earnings have been hit by overcapacity and a dearth of cargoes in 2016, demand for iron ore in China seems to be growing significantly. Chinese annual iron ore imports are certain to reach as high as 1.1bn tonnes in 2016 marking a year-on-year trade growth of 6% as compared to 953.37m tonnes in 2015.

Banchero Costa data revealed that total imports by China in the first eleven months stood at 935.8m tonnes as it tapped cheaper, higher quality iron ore from Australia and Brazil.

According to Arrow Research, China which imports almost two-thirds of the world’s iron ore supplies is expected to push past the billion tonne mark in 2016.

Chinese Customs data show that November imports reached 91.97m tonnes which is China’s third higher monthly volume in history.

“If the past is anything to go by and December imports outshine November’s, China total iron ore imports through 2016 could push to as much as 1.1 billion tonnes,” Arrow Research said.

Banchero Costa head of research Ralph Leszczynski also had similar views and said that, “I think it’s almost certain that the total for the year exceeded one billion tonnes, as it looks impossible that the volume in December could have been below 65m tonnes. My guess is that the figure for December should be about 90m tonnes, which would give a total of 1.02bn tonnes in 2016,” Mr Leszczynski added.

However, stockpiled iron ore across 41 major Chinese ports amounted to more than 111m tonnes by the end of 2016, nearly 18m tonnes more than at the close of 2015. “Such a voluminous accumulated inventory could see China pull back slightly on iron ore import volumes through the first quarter of 2017, but this would mark no deviation from past years,” Arrow Research said.

Meanwhile, Vale’s endeavour to build its inventory base in Malaysia and a distribution centre in China to increase its share of iron ore trade into China is likely to improve tonne-miles as shipments will increase between Brazil and Malaysia and Malaysia and China.

Ships at all major commercial ports in emission control areas (ECAs) set up by China last year are now required to burn low sulphur fuel for the majority of the period while at berth.

Although requirements were already mandatory at some ports in 2016, enforcement was limited, though not unheard of, as authorities gave ship owners the chance to prepare for the changes under laws that were developed and announced with very little lead time.

Enforcement is widely expected to be stepped up this year, particularly in the wake of recent pollution levels that prompted red alerts and closed businesses and schools across the north of the country. The port city of Tianjin was one of the locations hit most severely by pollution, to the point where port operations were suspended due to safety concerns over poor visibility and excessive particles in the air.

Under the timetable issued by the ministry of transport, since 1 January, ships at berth in the ports of Tianjin, Qinhuangdao, Tangshan, Huanghua, Shenzhen, Guangzhou, Zhuhai, Shanghai, Ningbo-Zhoushan, Suzhou and Nantong are required by law to burn fuel with a sulphur content of equal to or less than 0.5mm for the berthing period, excluding one hour after berthing and one hour before departure.

The Yangtze River Delta (YRD) ports of Shanghai, Ningbo-Zhoushan, Suzhou and Nantong had already made it mandatory for ships to burn low sulphur fuel from 1 April last year. They were joined on 1 October by Shenzhen, where authorities issued a local directive covering the terminals of Yantian, Shekou, Mawan and DaChan Bay.

The next key deadline under the national regulation is January 2018, when ships will be required to burn low sulphur fuel at all ports in the three ECAs for the entire berthing period. In January of 2019, all ships entering the ECAs, whether at berth or not, will be required to burn low sulphur fuel.

Huatai Insurance Agency, a mainland-based company that specialises in helping the private sector navigate China’s maritime environment, said the government may introduce stricter requirements at later date.
“The government will evaluate the effect of the requirements in order to determine whether to take the following steps in the future: (i) when entering the ECAs, ship shall be required to use fuel with the sulphur content of no more than 0.1% m/m; (ii) enlarge the geographical scope of ECAs; (iii) other further measures.”

Ships in breach of the rules are liable for fines of between USD1,500 and USD15,000 under the Law of Prevention of Air Pollution of the Peoples’ Republic of China. Ships are required to keep bunker delivery documents on board for three years and a sample of fuel for one year, under the Regulation of Prevention and Control of Marine Pollution Act. Fines up to USD1,500 can be imposed on owners that fail meet the fuel record keeping requirements.

The China Maritime Safety Administration (MSA) issued guidelines on the implementation and supervision of ECAs that state how compliance with emission control measures will be verified.

For ships using low sulphur fuel, verification will be made by check of bunker delivery notes, fuel changeover procedures, engine room logbook records and fuel oil quality/samples. For ships using alternative measures to reduce emissions, such as shore power, LNG or exhaust gas scrubbers, checks will center on the International Air Pollution Prevention (IAPP) Certificate/Record and engine room log book records.

Analysts said the availability of low sulphur fuel for vessels and support of the national oil companies that dominate oil and gas upstream and downstream sectors would be critical to ensure the success of the new regulations.

Local authorities in Shenzhen said ships could apply for immunity and exemption from the regulation in certain cases, including supply of sufficient proof that they made every effort but did not succeed to obtain low sulphur fuel.

The Shenzhen order said shipowners could also take alternative measures to reduce pollutants while at berth, including use of liquefied natural gas and other clean energy sources. Alternative measures need to be approved in advance by the Shenzhen Residential Environment Committee and the Shenzhen Maritime Safety Administration.

The Shanghai Maritime Safety Administration also launched an exemption scheme that allows shipping companies or agencies to apply for an exemption if using low sulphur fuel oil is unsafe for vessels.

Protection and indemnity (P&I) clubs have been feeling the pressure, with many in 2016 looking to give members an end-of-year boost.

A scarcity of major losses has led to clubs increasing their reserves in recent years, while demands to give some of that excess cash back have been growing. In recent months several clubs have announced that they will not seek a general increase for the year and will also hand back a percentage premiums from prior years.

Unless major losses break out in 2017, the calls for a similar approach for the 2018–19 renewals will continue. Joe Hughes, chairman and CEO of the American Club’s managers, Shipowners Claims Bureau, said another dynamic was the willingness of owners to look elsewhere for placing tonnage in hope of reducing costs.

“I feel that over the last 12 months, for ourselves and other clubs the churn effect has continued to influence both the level of turnover and the risk profile of vessels entered in the club, the more so as the freight market slump has endured,” he told IHS Fairplay. “For us, annualised premium income for 2016 has increased over the period since 20 February,” Hughes pointed out. “At the same time, the club has experienced a comparatively larger rise in total tonnage and the average size of entered vessels, together with a reduction in their average age.”

American Club, like many others, had announced there would be no general increase across all classes of business for the 20 February 2017 renewal, but Hughes said the club expected “a period of vigorous negotiation from the related perspectives of both member and club”.

Jeremy Gross, Standard Club’s CEO, told IHS Fairplay, “2016 has been a gruelling year for most sections of the shipping market. Sadly, we have seen some major players fail this year, while there appears to be a drive for consolidation. I suspect that this ongoing existential pressure will continue to force many shipowners to re-evaluate historic strong relationships to ensure they continue to best serve their needs. We in the club market need to be responsive to this. We need to examine our costs, our structures, and our service to make sure they are lean and fit for purpose. Fortunately, it has been a relatively benign year for claims, but if we see an upswing we will need to be able to keep our underwriting results in tight equilibrium as investment markets continue to be unpredictable,” Gross pointed out.

North P&I Club joint managing director Paul Jennings said the club had a good year, adding that it “has been positive in terms of claims experience, investment performance, and membership development.” Co-MD Alan Wilson said the club was working with its clients to smooth the burden of the current financial downturn. “The benign claims performance is a positive development, given the operational and financial challenges facing the shipping industry in 2016-17,” he added. “Members have increasingly collaborated with the club in 2016-17 to share trends, emerging risks, and best practice within the industry. By taking this information together with extensive internal analysis and benchmarking across the insured fleet, North was able to work with members and other partners in the industry to help reduce claims exposures.” Wilson cautioned that challenges remained for 2017. “North believes the outlook for investment and bond markets remains highly uncertain, with high-profile political factors likely to have an impact. Regulatory issues likely to have a bearing on activities during 2017-18 include the amendments to the Maritime Labour Convention (MLC), which enter force on 18 January 2017,” Wilson explained.

Peregrine Storrs-Fox, risk management director at the TT Club, said the absence of market-changing losses was a positive but was also difficult for the clubs. “There is a problem at present for any insurers to get the premiums they want,” he added. “Our clients are struggling, we have seen some high-profile insolvencies. The market is not seeing the losses that allow it to prove its worth, and the insurers are expected to support their clients. For 2017, pricing will remain the name of the game,” he predicted. “There are some green shoots but we have seen them in the recent past and they seem to get cut as quickly as they grow.”

Winston Churchill is credited with saying, “Those who fail to learn from history are doomed to repeat it.” The curious thing about shipping is that history’s lessons are learned and understood, but rarely followed.

IHS Fairplay is conducting a series of interviews with industry veterans to examine the lessons of the latest shipping cycle. Over the past few months, we’ve sat down with shipping registry partner Clay Maitland, executive Robert Bugbee, consultant Paul Slater, and restructuring specialist Randee Day – with many more interviews to come in 2017.

Regarding shipping’s inability to follow this famous dictum, Bugbee explained, “The lessons are always shown. They’re always the same lessons. It’s always the same syllabus. And yet the participants and capital providers just won’t learn.” Likewise, Maitland is convinced that “the same thing will happen all over again” in the cycle to come.

What does the past teach us? The central theme that emerged in conversations with industry veterans is: Beware investing when you see undisciplined behaviour by equity, debt, and management, which is almost always, and increase your exposure when you see discipline across all three categories, which is almost never.

For Slater, the bellwether of undisciplined shipping behaviour is the ordering and financing of newbuilds with no long-term charters attached, driven by faith that such vessels will earn high returns from spot trading and/or asset value appreciation.

“If I was to ask you to invest USD75 million in anything and the only income stream that was for sure lasted for three months, you’d think I was crazy,” said Slater. Nevertheless, this is exactly what shipping has done, repeatedly and on a large scale, most recently when private equity-backed entities piled up bulker and product tanker orders in 2010–13.

For Day, undisciplined management behaviour can be seen in the booking of ships on long-term contracts at rates that are clearly unsustainable, a practice laid bare by Hanjin charter defaults. “If owners had looked at any sort of historical standards, they would have seen that the rates were too high, they couldn’t be supported, and they were not sustainable – and these owners would never have ordered those ships in the first place if they had not been backed up upon delivery by these charters,” she asserted.

Day also pointed to undisciplined management behaviour at public companies that pay out all free cash flow via dividends. “If all your cash is going out every year [via dividends] and the market is lousy and you have a giant bullet payment due on your loan, you’re going to fall off a cliff,” she warned.

Maitland highlighted the lack of discipline at shipping banks, which “have a tendency to feed the beast, because they make money by lending money and the more money they lend, the more ships get built”, with individual bankers “feathering their own nests by lending to any cockamamie outfit you could imagine”.

On the equity side, Maitland cited the recurring appearance and ultimately destructive role of speculators, whom he described as “the cowboys, the riverboat gamblers, the guys from Las Vegas, the ones who believe ‘the streets will be paved with gold and we’re going to get rich’”.

Bugbee also emphasised undisciplined behaviour on the part of equity investors, citing the case of “shareholders with big positions in Scorpio Tankers who were funding start-ups ordering the very same ships they were investing in with Scorpio Tankers, for their own reasons”.

In each of these examples, the reason for the lack of discipline is that the allegedly undisciplined decision is actually believed by the individual decision-maker to be in his or her best financial interest, at least in the short term. In reality, it’s not a lack of discipline, it’s a conflict of interest. And that individual decision, in combination with all the other individual decisions that surround it, add up to a net result that is ultimately a negative for the broader market.
In other words, this is a textbook case of the famous economic theory called ‘the tragedy of the commons’, which refers to the failure of a shared-resource system due to individual participants acting in their own self-interest as opposed to the common good, depleting shared resources through collective decisions.

This also explains why ‘learn from history’ wisdom carries little weight in shipping. The reason is that lessons learned apply at the industry level, not necessarily at the individual decision-maker level.
This doesn’t mean that the lessons of shipping history are valueless. Far from it. The value in knowing these lessons is obtained from gauging the extent to which individual stakeholders ignore them, which provides an important indicator of where shipping is in the cycle, which in turn provides you with valuable information on how you should make your own business decisions.

Is shipping doomed to repeat its historical pattern ad infinitum? Not necessarily, but the cards remain stacked against change.

The tragedy of the commons theory is used to refer to situations in which government is better suited than the private sector to perform a certain task (examples include environmental regulation, public safety, and national defence). Because shipping is international in nature, individual governments have limited ability to counter shipping’s tragedy of the commons problem. But they are not entirely powerless. Recently instituted European Union banking restrictions have had a major impact on shipping by enforcing discipline among European banks, decreasing their ability to repeat past mistakes.

Beyond that, it comes down to a question of how commoditised shipping will remain. In a commoditised business, players compete on price, not uniqueness or brand. To the extent shipping remains commoditised, the only way to instil discipline on stakeholders is consolidation, a shift on the perfect-competition-to-monopoly spectrum towards monopoly. Bulk shipping has been largely resistant to consolidation, but Bugbee believes a combination of capital-access scale economies and advancing technology could finally make it happen.

Another way to enforce more discipline on shipping equity, debt, and management is for the industry to evolve away from commoditisation towards a non-commoditised model based on brand value and uniqueness. It is easy to replicate the business model of a commoditised business if you have enough money and if that industry is not too consolidated – which is exactly why shipping continually goes from boom to bust. In contrast, it is very difficult to replicate a successful business in a non-commoditised arena, regardless of your bankroll.

The only realistic path for bulk shipowners to become less commoditised is based upon much stronger, more integrated ties with cargo interests, a direction advocated by Slater. I believe the only way this will happen is if technology advances to the extent that a more integrated relationship makes sense for cargo interests, a change that seems likely to be years away.

Which leads to the next lesson: Monitor future trends towards consolidation and away from commoditisation. If both fail to materialise, expect no change in shipping’s historical pattern, and plan your business accordingly, by pulling back when market discipline vanishes and jumping back in if and when it reappears.

Tony Watson, Risk Assessor at UK P&I Club in conjunction with Burgoyne’s, highlights the risk and impact of engine room fires onboard ships, and recommends steps to prevent and supress fires.

Research coordinated by IMO has indicated that between 30 and 50% of all fires in merchant ships originate in the engine room and 70% of those fires are caused by oil leaks from pressurised systems. Following a major engine room fire it is rare that a ship is able to proceed under her own power. This leads to expensive costs of salvage, towage, repairs, downtime, and cancellation of cruises, which can typically run into millions of dollars.

Oil fires are the most serious category of engine room fires, and usually occur when oil from a large leak or a smaller but persistent leak comes into contact with a nearby hot surface at a temperature that exceeds the ‘minimum auto ignition temperature’ (MAIT) of the oil. Oil fires often develop and spread quickly, compromising the safety of engine room personnel and, in the case of generators, damaging associated main electrical cabling feeding the switchboard which can lead to a loss of electrical power.

It is essential to employ good maintenance systems and engineering principles in order to reduce the risk of oil leaks. This includes attending to minor leaks without delay, tightening connections to fuel injectors and fuel injection pumps to the correct torque to prevent leakage, and maintaining oil leak detection and alarm equipment that can warn of the presence of oil leaks in concealed areas.

While engine room fires are one of the most common fires on ships, an extended period of time onboard a ship without a fire incident can lead to complacency and a failure to prioritise fire prevention measures and simulated fire incident practices. Crew members must ensure that machinery and emergency control equipment are installed and operating in accordance with SOLAS Regulations and IMO Guidelines, and that frequent fire prevention and firefighting training is undertaken.

UK P&I shares top tips on how to reduce the risk of a fire in an engine room:

Do
• Ensure oil leaks are attended to promptly by affecting permanent repairs and that oil leak alarms on generators are in good operating order
• Where required by SOLAS II-2, make sure oil pipes are sleeved, pipe joints are shielded, and that all oil pipework is supported in correct fitting pipe clamps
• Carry out routine temperature measurements of shielded or clad hot surfaces to ensure that even small parts are not exposed. This can be achieved by using an Infra-red temperature gun
• Keep engine room stores and workshops tidy and that packaging material is not close to light fittings
• Ensure that drain lines in oil tank save-alls are clear and the save-alls are kept clean and free of solid materials such as cotton waste or rags
• Check the oil tank gauge glass self-closing cocks are unrestricted and that oil tank quick closing valves are properly armed and tested regularly
• Ensure that fire detection equipment is properly maintained and operable
• Ensure that automatic closing mechanisms on all fire doors within and at the boundaries of the engine room are working correctly
• Check that ventilation closures are operable, are visually free of corrosion and provide a reasonable seal
• Ensure that portable fire-fighting appliances are correctly positioned and serviced and that fire-fighting installations are properly maintained and armed
• Carry out routine fire drills to address different simulated fire incidents in various parts of the engine room

Don’t
• Allow smoking in the engine room
• Make temporary repairs to oil containing pipe work
• Work on pressurised fuel systems
• Secure open self-closing oil tank gauge glasses
• Secure open by external means oil tank quick closing valves
• Secure open fire doors within and at the boundaries of the engine room
• Carry out hot-work in the engine room without a correctly completed, properly considered permit to work and until all necessary hot work precautions are in place