September 18, 2014

Bin the ISPS Code!

In the West, the domestic security implications of destabilising a country thousands of miles away after waging an illegal war against it are just sinking in. Amongst the concerns is what happens if the thousands of Western fighters that have joined in the meteoric rise of the self-styled Caliphate in Iraq return home?  Of lesser magnitude but similar in effect is the iffy war that was waged on Libya, a war that has left that country in anarchy and paved the way for the massive refugee crisis that Europe now faces; a crisis that has direct implications for shipping and ports.

Over the last few years, many of the tens of thousands of refugees that have left North African shores in rickety boats for Italy have percolated into Western Europe. I wrote about this in June (see Exodus without end). The situation three months later is this- hundreds of refugees have besieged the area of Calais in France. They live in shantytowns, in the woods- actually, anywhere. Every day, some of them try to cajole, bribe or threaten truckers making the trip across to the UK into taking them along. They try to sneak into any vehicle making the crossing. Some jump of bridges onto trucks that are heading for the Eurotunnel. Some have been discovered hanging onto the underside of caravans, and a woman discovered a man scrunched up on the floor at the back of her car after driving home from France to the UK. 

Earlier this month, the Port of Calais was put on high alert after two groups of at least 250 people tried to storm ferries bound for the UK. Crew had to use fire hoses to stop one group trying to run up the ramp of a P&O operated ferry. Police in Calais were out, armed with machine guns, before the situation was brought under control. Meanwhile, also in early September in the Mediterranean, a Maersk ship picked up 352 Syrian and African refugees off a sinking vessel near Crete: the ‘exodus without end’ continues.

The crisis is not just humanitarian or one of economic migration. This is a security crisis in general and a maritime security crisis in particular. Because many of the refugees come from war torn or unstable countries that have been major terrorist havens or terrorist training grounds; many are Egyptians, Syrians, Somalis, Afghans and Pakistanis.  And because of the nature of the beast- who really knows, in this chaos, whether a person is an economic migrant, a refugee, a criminal or a terrorist?

So my question is, how many terrorists have made it across to Europe already, hidden amongst the migrants crossing the Mediterranean?

My other point is actually a proposal to throw in the bin the grandly named International Ship and Port Facility Security Code that I was told by the IMO, long ago, was a “a comprehensive set of measures to enhance the security of ships and port facilities.”  That piece of hasty legislation was ineffectual and impractical at the start, and has shown time and again that it is impotently incapable of addressing any maritime security issue, including piracy, even remotely satisfactorily, leave alone comprehensively.  

If the crew of a ferry have to fight off a hundred or so illegals with fire hoses in one of the best known and most frequented ferry ports in developed Europe, it is because security systems have failed. More so because everybody knew the refugees were there, everybody knew where they wanted to go and everybody knew there were limited ways by which they could cross the English Channel.

Amongst these failed systems is the ISPS Code. A code that was always useless. A code that has done nothing except add another layer of paperwork and suspect duties on already fatigued crews while taking away, in its implementation, their right to go ashore.

The Calais incidents underline the fact that the ISPS Code is a lost cause; it is now hopeless and beyond repair. I am afraid that if one really wants a comprehensive set of measures to enhance the security of ships and port facilities, then one has to throw this Code away and start again from scratch. 


September 11, 2014

BDI- the forgotten Index

In the last month or so, the Baltic Dry Index has jumped by over 50 percent. There was a time, not all that long ago, when this would have got stockmarket analysts all excited- the BDI was seen as a bellwether for equity investors around the world for decades. The reasoning was that a mismatched demand vs supply (of tonnage) scenario heralded increased or decreased economic activity and forecast the kind of times that were coming.

Alas, no longer. The BDI- which measures shipping demand vs supply of dry cargo carriers-   jump today has gone almost unnoticed and uncommented upon. That index is no longer watched closely, it appears, except by a smallish segment of shipping folk. With good reason.

It is true that, at around 1100 levels, The BDI is a fraction of what it was in December 2008, when the bubble took it to almost 12,000 points. It would be easy to claim, therefore, that the reason nobody is excited at the 50% jump today is because present levels are hardly high, given this historical context. But the story is much more complicated than that. Importantly, also, the factors that have degraded the BDI’s ability to remain a bellwether for the global economy are here to stay. Note that stockmarket indices across the world have jumped well in advance of the BDI; markets have led the index this time, not the other way round. 

Amongst the bigger factors here is the fact that the service economy occupies a much larger space than it did when the BDI was at the peak of its relevance, and so an index that is linked to manufacturing will obviously become less connected to the overall markets. Another change lies within shipping itself, where business models have become more and more tilted towards asset plays rather than the operation of ships. The money sloshing around, thanks to the world printing more and more banknotes in response to the latest economic crisis, has found its way into shipping too, creating the sword of overtonnaging and underutilised tonnage that skews the BDI and increases volatility. The index was always somewhat volatile but was still trusted; no longer.

Today the BDI represents just one sector of shipping- and a sector that is of limited interest. The container segment of the industry has grown tremendously in the last couple of decades. The tanker market has grown and fragmented too, and some fragments- gas carriers, for example- will grow much faster than the traditional crude or product markets. Indices that reflect those segments- the HARPEX, for example, that tracks container markets- will become much more relevant to a much bigger slice of the industry.

The BDI will likely fall further in importance as a consequence of all this. It will tell us the conditions in a part of shipping, sure, but even the days when it was the main index to watch- as far as the shipping industry was concerned- are fading away. And, especially in an era where stockmarkets around the world are driven more and more by quicksilver sentiment and the supply of money rather than by fundamentals, the BDI’s halcyon bellwether days- when it indicated in advance what will happen to either to equity markets or the economy- have probably disappeared forever. 


September 04, 2014

Waving the flag

The self-congratulatory drum beating- as the Maritime Labour Convention passed its first anniversary date after coming into force last August- was expected; we in shipping love to declare victory while doing little to improve things. If you must know the truth, ask sailors whether their lives have improved noticeably in the last year; ask them if they are now being treated more fairly.

That said, the Australian Maritime Safety Authority’s recent decision to ban the containership Vega Auriga from Australian ports for three months for repeated breaches of seafarer welfare and ship maintenance issues is a clear positive. The German owned, Liberian Flagged and third party MSC operated vessel had been detained seven times in Australia (and once in Singapore) for maintenance, safety, wage, sanitary and other issues. Quite correctly, the General Manager of AMSA’s Ship Safety Division Allan Schwartz said vessels entering Australian ports must ensure they meet minimum international standards. “Vessels that do not meet such standards, including standards for the welfare and treatment of crew, pose an increased risk to seafarers, safe operations and the marine environment,” he said.

“Seafarer welfare is just as important as the proper maintenance of ship equipment, and an integral part of safe operations. A failure in either system could lead to serious accidents.”

Although I don’t like the word ‘welfare’- decent living and working conditions have been every sailor’s legal right long before the MLC was a gleam in somebody’s eye- I wish more regulators would link the two, as AMSA has done. It would change things much more quickly.

The ITF and other unions, with their own axes to grind, have gone to town about Flags of Convenience after the Vega Auriga ban. The former said, “ITF inspectors have seen environments aboard these flag-of-convenience ships, that are freely plying the Australian international shipping trade, that are not fit for human habitation”. 

That statement is rubbish. I have sailed on many FOC ships (well, mainly Panamanian and Liberian) that are decently maintained and ‘welfared,’ and I have sailed on many FOC ships that are not. I have sailed on many ships plying under national flags (including European open registries) where the conditions are as bad, if not worse, than aboard the worst FOC ships. Even today, for example, many Indian flagged ships have more maintenance and ‘welfare’ related issues- including non-payment or delayed payment of wages, unsanitary living conditions, insufficient food and water et al- than many FOC ships. Even today, many short haul European national registered ships have levels of manning that are downright unsafe, and where extreme fatigue is endemic. Remember that the Flag State has the responsibility for certification and safe operations of vessels under their flag, regardless of where the ship operates.

There is also a not-so subtle racism at play here. I once sailed on a European registered (and crewed by nationals of that European country) ship as an observer prior to that ship’s sale and change of crew; I was to take over as Master after the change. The ship was on a regular US run. She had no SOPEP, ISPS or safety manuals. No garbage segregation. No drills. The crew were drinking schnapps with every meal, whether in port or at sea. And she had no US Coast Guard inspection for the two and a half months or so that I was there.

We- Indians and Filipinos- took over in a US port, where the flag was changed to Panamanian. Within an hour, the US Coast Guard had descended on the ship, pointing out deficiencies including the fact that the lid of one brand new garbage can was awry. Same ship, different rules. Why? Because of the colour of the flag and the colour of our skins is why.

The fact is that substandard ships exist because substandard managers and owners do. Some of these substandard managers are even well established and well reputed; I have sailed with one or two of them. Where their ships are registered (or where their crews come from) is of far lesser significance than the owner’s or manager’s integrity. A flag does not cut corners, promote minimum maintenance or ill-treat crews; owners and managers do. And if you think only FOC’s permit an owner or manager to do these things, I am afraid you are far more na├»ve than you think.

Therefore, it is wrong to promote the arbitrary notion that a FOC equals substandard ships. It obfuscates the issue, promotes the unfair targeting of FOC ships and rejuvenates a lie that allows many shipmanagers to get away with murder.


August 28, 2014

The mercenary position

Private Maritime Security Companies- as middlemen using mercenaries for ship security are somewhat grandly called- are in bad financial shape; they are victims of their own success. Armed guards on ships have meant that Somali piracy has collapsed, even if temporarily, since many warn that pirates are biding their time until guards are taken off from ships leaving them defenceless once again. Anyway, since armed guards cannot be legally employed in much of the other piracy hotspot on the Western side of Africa- they are illegal in Nigeria- PMSC business has been drastically hit. The Gulf of Aden Group Transits, one of the largest PMSC operators, collapsed spectacularly a few weeks ago, leaving a million dollars in unpaid salaries and abandoning a hundred British and East European mercenaries on ships as if they were third world crew. (That somebody else is looking after these mercenaries now, repatriating and paying them, reinforces the value of the right skin colour). Other operators are also said to be in dire straits.

Unfortunately, the reality is that armed guards are the only proven way to protect ships from armed criminals of any hue- pirates, thieves, terrorists or whatever. The reality is, also, that attacks on ships are here to stay. The theatre may change; Somalia yesterday, West Africa and parts of South East Asia today and somewhere else tomorrow, but the play will remain the same. Ships are easy targets and the world is ill equipped to tackle attacks on ships; everybody knows that.

A shipowner’s default setting veers towards a ‘no armed guards’ scenario; the industry sees the high expense (a big multiple of the crew wages it loves to crib about) as justified only after an area has become very dangerous to sail through. Armed guards were put on ships around Somalia years after some of us were screaming about that being the only way. Hardnosed owners and insurers obviously do not want to pay thousands of dollars a day for armed guards unless they feel the risk-reward ratio justifies the large expense.

So the questions remain unanswered. How do PMSC’s survive when demand fluctuates wildly? Does the business model across industry factor in the use of armed guards in trouble spots, whether occasional or regular (on ships that spend most of their time in these war zones?). And of course, does shipping really want to protect their crews from armed criminals and terrorists by paying for mercenaries?

I only know the answer to the last of those questions- no. I can also see which way the answers to the others are likely to go. PMSC’s will have to make their business model more flexible; perhaps maritime security will be just one of a bouquet of security services they will offer to broader industry, pulling out people to place on ships when asked to do so. Or maybe by employing mercenaries only when and if required.

Shipowners and cargo interests will have to get used to putting armed guards on ships and offshore installations as a first or second resort, not the last. Their financial models will have to be tweaked accordingly. Maybe a time will even come, if this menace spreads or persists, when the industry and its regulators will consider arming crews instead. Maybe.

That is for the future. But even today, bodies like the IMO should be using their parent, the United Nations, to pressurise countries into accepting PMSC’s – and guns on ships- as a legitimate need essential to protecting the billions of dollars of ships and cargo that move across dangerous seas. We know that the alternative- refusing to sail ships off West Africa today, for example, or in other hotspots tomorrow- is just not going to happen.

Making maritime security financially, legally and operationally viable is something nobody is looking at, but that is exactly what needs to be done. Today.