October 28, 2010

Clash of the Titans

The currency wars, now well underway, may have started by being a predominantly US vs. China spat, but it has now sucked in far too much of both the developing and the developed world into the battlefield to be written off as just that. Outcomes are impossible to predict at this stage, although experts are going to town with their pet theories as usual. Regardless, I only know this: The importance of the US dollar will decline sooner than we think. And that shipping will be at particular risk, given the inevitable instability that the currency markets are likely to see for some time, not to speak of the direct economic fallout of this squabble. We are an international industry dependent on trade; the dollar is the currency we deal in. We carry commodities that are traded in the US dollar on ships that are paid and hired with the dollar- a currency whose stability has been taken for granted so far, even if concerns were periodically raised about the quantum of the staggering US debt. That, we assumed, was a long-term problem. Well, long term may be here and the US dollar domination of global trade may be slowly- we hope slowly- ending.

All these years, the hubris of the US financial markets extended to its satellite thinkers across the world. Their flawed reasoning was this: China has a huge trade surplus with the US. Therefore, what will happen is that China will be awash with dollars, which it will naturally spend, thereby making its own currency stronger. When it does this, what it sells will automatically become more expensive; therefore, Americans will buy fewer Chinese goods and so the trade imbalance will correct. Voila. Economics 101 through a narrow prism.

What people forgot was this: The driving imperative of China is to be a dominant global superpower, not just a rich one. Therefore, with calculation, it simply did not spend the billions of dollars it accumulated, thus short-circuiting that logical chain. When it did spend, it did not spend enough. Totalitarian China kept its own currency artificially cheap and bought US debt like there was no tomorrow. China did not want its exports to dwindle because of two main reasons: One, as said, it wanted to replace the US as King of the Economic Hill, which I would argue is a mission now accomplished. Two, it faced huge labour unrest at home, if its manufacturing driven exports screeched to a halt. And so we are where we are today.

Today, two years after the economic collapse, the US, along with many other nations, is still printing money like there is no tomorrow. This money is sloshing around world bond and stock markets, driving up stock prices in India and Brazil and elsewhere- and, inevitably, creating bubbles in markets across the world. The high inflation figures in India today, and the obvious unwillingness of banks to raise interest rates, are direct fallout of this crisis.

Countries are worried: Brazil has doubled taxes on foreign purchases of its bonds, South Korea, Japan, Peru and Thailand are taking similar measures or threatening to- in fact, Japan and S Korea seem to having a mini sideshow spat of their own. Britain and the US are keeping their interest rates abnormally low in a desperate attempt to boost jobs and exports- thus, effectively, devaluing their currencies. (The UK will also lay off half a million people and cutback heavily on defence). The US is screaming, long after the horse has bolted, that China is growing at their expense. Meanwhile, China is sitting on US$ 2450 billion in reserves, 30 percent of the world’s total. That a currency war is on is now well accepted; I hope sense prevails and a full-blown trade war does not follow. Unfortunately, the US- and Europe, what with its own crisis (witness the French strikes and unrest) and with the future of the Euro looking wobbly- are running out of options at this stage.

Shipping will have to, at the very minimum, learn to manage currency volatility; chances of the dollar- and other Western currencies- getting devalued further seem to be more than slim. And, although our industry may be global, its players are often not: they live in Greece or Japan or India or Taiwan, paying taxes and making profits in one currency or the other. The figures in balance sheets may well become skewed because of this. The Indian Rupee, for example, has appreciated nicely against the US dollar in recent months. If I were an Indian ship-owner (or exporter) getting paid hire in dollars, I might find that my profit, in rupee terms, has been impacted significantly just because of the changed exchange rate. A worse scenario is that a trade war erupts: the industry will obviously be hit much harder; it is hardly out of the woods as it is.

It is quite likely that we will see, in the coming years, a gradual shift away from the US dollar that is now the reserve currency of the world, and the currency against which almost everything in shipping is often benchmarked: commodity prices, freight, hire, bunkers, insurance, acquisition and crew costs included. Also, trade may likely increase in some cases without any dollar exchange or pegging: India and China may see a marked increase in the Rupee-Yuan trade, for example. We did go the Rupeer-Rouble route for a long time.

Even without this possibility, the maritime industries may well see a basket of currencies, or an SDR like mechanism, slowly replacing the dollar internationally. I am sure many ship-owners and traders are already seriously increasing their currency hedges, or starting new long term ones. Also hoping, along with the rest of the world, that the devaluation of the US dollar is gradual, that the Yuan is finally allowed to appreciate, and some normalcy is restored in the global financial system. Uncertainty usually hits markets harder than bad news.

The overriding prayer, however, will not be that one. The first hope will be that the two behemoths that triggered this war come to their senses and stop battling. Because it is in neither the US’ nor the Chinese interest to deepen or prolong the skirmish. Also because, as they say in Africa, it is the grass that is trampled when two elephants fight.

(Postscript: In the time between the publication and writing of this article, the G20 - 19 industrial and emerging nations and the EU- said they would "move towards market-determined exchange rates and refrain from competitive currency devaluation". A statement of hopeful intent meant to calm everybody down more than a certainty, methinks. In the absence of monetary targets, the whens and the hows of how this is to be done is unclear. )

October 21, 2010

Basic Instinct

Any navigator worth more than a pinch of salt should know that GPS uses the WGS84 Datum, which often requires GPS positions to be corrected before they can be plotted on charts in use. All paper charts so effected will have printed, in the General Notes, something like “Positions obtained from satellite navigation systems are referred to the WGS datum; such positions should be movedx.09 minutes SOUTHWARD and 0.06 minutes WESTWARD to agree with this chart”. Pretty simple, right?

Then why is it that in my experience, few watchkeepers actually make this correction? Some assume it is small, and some simply do not know that it exists. I remember a Second Mate being flummoxed, a few miles off Kaohsiung breakwater in Taiwan a few years ago, at the almost half mile difference between his GPS position and my radar fix. He was, pardon the sarcasm, completely at sea about the correction.

The London P & I Club said last week that an unnamed containership on a regular schedule ran aground because the officer on watch “commenced a significant alteration of course about half a mile before it was due.” The reason he did so was that he was “wholly unaware” that a significant correction had to be applied before GPS positions could be plotted on the chart. The Club appears to recommend that proper passage planning would have eliminated this dangerous navigational illiteracy.

I beg to differ with the passage-planning bit. It is the responsibility of maritime schools and examination systems – not a ship Captain’s- to ensure that an officer is educated in the basics. ‘Proper passage planning’ should not have to include a course for certified officers in basics of chart reading, limitations of equipment or accurate position fixing. But then, we seem to have become terribly fond of finding complex reasons- after often uselessly elaborate risk analysis- for tardy watchkeeping: the fact is that sometimes an officer’s certificate is not worth the paper it is written on, and no amount of on-board training will change that. If one cannot put down even a GPS position accurately- something I could teach a ten year old to do in an hour or less-then one has no business being a navigational watchkeeper at sea.

Equally worrying is the fact that the industry seems to have accepted as fait accompli the notion that electronic navigational instruments (and, with ECDIS and Integrated Bridge consoles, entire navigational systems) should replace traditional navigation, and even overcome such navigational blunders as shown in the incident above. Witness reports of the main reasons for the Shen Neng 1 grounding in the Great Barrier Reef earlier this year: besides fatigue, the fact that a changed waypoint was not entered in the GPS (which meant that alarms did not sound on the GPS or the Radar when the ship was off course) is seen as material. Of course, it is, but overstressing this fact also tells me that many seem to have accepted that traditional navigation was superfluous; are we determined to navigate only if an alarm sounds somewhere? If so, it is another dangerous sign. Old fashioned navigation- visual or radar fixes, being aware of and monitoring electronic aids to navigation (not for nothing are they called navaids, you know), being aware of the limitations of equipment, parallel indexing, following the COLREGS, and simply looking out of the bridge porthole for quick situational awareness- are enough to avert many accidents. Do we even need to say this?

Overreliance on navigational aids is a long held and universally acknowledged bad practice. Why are we then promoting this? My uncharitable view, not fully formed yet, is that the industry is also using these gizmos to justify lower manning levels. I therefore wonder: are electronic systems like the ECDIS being mandated at least partly for the wrong reasons?

Stating the obvious, electronic navigational systems are not a panacea. They are excellent tools provided one understands their limitations and verifies what they are telling you periodically. They will, however, not be able- or should be expected to- cover up for inadequate education and training, poor certification or, simply, lousy watchkeeping. Before asking navigators to be aware of GPS corrections, we should be asking them to use basic watchkeeping skills.

Another grounding a few years ago saw a ship equipped with ECDIS and two GPS receivers go off course after the GPS connected to the ECDIS malfunctioned and switched to Dead Reckoning mode soon after an alteration of course. An alarm sounded when this happened, but was switched off by the OOW; no action was taken. Amazingly, the ship sailed this way for over thirty hours before running aground, often coming close enough to land for navigators on the bridge to have noticed that fact visually or on the radar. Twice in this thirty-hour period, positions were ‘checked’ by navigators with radar fixes and nothing found awry. A thirty-hour period would have seen the entire navigating team on watch at one point or another- none of them realised that the ship was sailing on DR and drifting to danger. Nobody verified position with the other GPS, which, given the bridge team’s incomprehensibly awkward proficiency with radar fixes, should have been mandatory. When, finally, islands were seen on the radar fine on the bow where they should not have been seen, the OOW thought they were bands of rain. Inevitably, the ship ran over some rocks thereafter.

By the way, North Korea is rumoured to have developed the ability to block GPS receivers, with South Korea saying that signals were intermittently jammed over many days in August this year. The possibility of countries blocking GPS signals- or feeding errors into them- have always has been a risk to navigation. With the advent of the ECDIS, however, the consequences of GPS failure have escalated. So have the chances that a downloaded virus will play sudden havoc with IBS or ECDIS systems that are run by inexperienced or incompetent officers. (I get livid when, in the event of a sudden and short blackout at sea, many officers run to the GPS to see if it is working when they should be switching over to manual steering and more concerned about the gyrocompass instead. Their actions tell me that GPS is their God; they also tell me that these officers are somewhat less than competent.)

Therefore, training, situational awareness, basic watchkeeping and position fixing skills must be strengthened and refreshed, not weakened and cast aside. If we do not do this, we will go the sextant way- we know that a large majority of present day watchkeepers are not proficient in either taking or working out sights. This is a sign of professional incompetence born out of lack of practice, besides being a pity. A ten-year-old schoolchild can read a GPS readout; navigators should be able to do more. Will we see, in the future, officers at sea who cannot fix a position, either visually or by radar, if the GPS or ECDIS malfunctions? What about a Gyro malfunction, which will obviously throw all synchronised displays out of whack? Will we see industry still looking at solving these issues using jargon and tools of risk analysis, examining root causes and auditing elaborate systems when the truth is much simpler?

The projected shortage of officers will, inevitably, translate to quicker promotions and relatively inexperienced watchkeepers at sea. ECDIS systems will soon be everywhere. Elaborate courses will be designed, mandated and undertaken across the world; many already are. Generic and equipment specific training will be given to people, some of whom display unshakeable faith in anything showing a Lat/Long readout. ISM and SMS systems will continue to be hammered into officers, many of whom will continue to have problems even understanding the language in which their manuals are written. ECDIS systems will probably be used as tools in what the experts will call, pompously and ominously, fatigue management.

Hold on to that jargon and that training for a bit, is my opinion. Address basic competency skills first, before it is too late. Make existing navigating officers prove their basic watchkeeping instincts are correct. or mandate training that ensures this.

Walk before you try to run.


October 14, 2010

Snake Eyes

(‘Snake eyes’- two pips on the dice- is the lowest score a gambler can roll in a game of craps. A loser’s roll, obviously)

If the IMO, like its parent the UN, represents the will of the international community, then I have to say that where there is no will there is no way.

On the first of this month, the IMO’s Marine Environmental Protection Committee met, deliberated and failed to reach any consensus on proposals to cut emissions from new ships. Shipping is not covered by the Kyoto Protocol and is said to be responsible for 3 percent of global CO2 emissions. The meet threw up, once again, the huge chasm between the developing and developed countries that seems to be the norm on environmental issues these days.

Around the same time, the BBC reported that Russia is planning to float the first of eight floating nuclear power stations in 2012: Part ship, part platform, these vessels will be positioned in the Arctic circle to take care of the energy needs of a country that is increasingly targeting the exploitation of natural resources in the frigid Arctic. “The territory includes an underwater mountain range called the Lomonosov ridge, an area which some Russian scientists claim could hold 75 billion barrels of oil. This is more than the country's current proven reserves,” the Beeb says. Each Arctic nuclear station can stay twelve years onsite (what? no dry-docking?) without maintenance, and supports power needs for exploration and for 45000 people, the Russians claim.

Other recent events- the Norwegian/Russian deal on the Arctic, Russia accelerating the promotion of the northern route as an alternate (with Russian icebreaker assistance) to the eastern passage to China or Japan, the discovery of new gas and oil reserves off Greenland and the continuing mad race by some Western nations to exploit the Arctic- confirm my suspicions that activity around the North Pole will escalate exponentially, and very soon.

That, with its inevitable consequences on climate change, is bad enough. What is worse is that I see no regulatory body on the horizon that will moderate this change, make operations safer or mitigate environmental risks. Worst of all, I do not think we even know what we are letting ourselves in for in the Arctic. We sure as hell don’t know enough about the weather, or the impact of extreme conditions on men and machinery, or the devastation that would surely ensue if there is, say, a Deep Water Horizon incident out there. Besides the fact that there are extremely limited facilities for refuge in emergency, the race for the Arctic assumes, fallaciously as usual, that proper regulation and procedures will be in place. As things stand, they will not. We are ‘lassoing’ the ice using tugs and moving it away from platforms out there right now: we do not even know what impact this will have on the delicate polar ecology and whether the lasso will turn out to be a noose around our necks later.

It is clear to me that a) the maritime industries, with their abysmal record of self regulation, are hardly going to start properly regulating their operations in the North voluntarily anytime soon; b) The IMO, with its equally abysmal record of reacting to events (using the permanent out it has, like the UN, with its hand-wringing claims that it only represents collective will of member states and is thus hamstrung) , its snail-like speed of action and its general inability to actually solve problems, is the wrong horse for this course; c) The rift between the developing and developed world will widen- shipbuilding and ownership in the latter is growing, and fears that regulation on shipping will become a one sided affair impacting largely the developed countries are not unfounded and d) the oil industry, as the Deep Water Horizon incident has shown, controls governments, including those of some of the most powerful nations in the world today. Their gung-ho operations will continue as usual with the thin veneer of regulation that pretends to be workable.

Unfortunately, it is hugely naive to expect that shipping, or the oil industry- with the public perception of a dirty business run by shady operators- will see the opening of the Arctic as an excellent opportunity to clean up its act and turn perception on its head. To be fair, though, these are far from the only industries that pay lip service to environmental issues while continuing down risky, unethical –or illegal- courses, cutting safety corners and exposing the environment to potential catastrophe. But that is neither here nor there. What we need is this: We need an international body to regulate these international businesses, we need the regulations to be placed before we put even one more sailboat in the Arctic, and we need this body to be proactive and control safety and environmental issues as its only priority. The IMO is, right now, the only game in town, but it is a rigged game played by unwilling players with loaded dice. The game’s final score, to me, is inevitable. Snake eyes.

As for those Russian plans, I cannot help but recall Chernobyl, parts of which were kept running for sixteen years after the worst nuclear accident in history devastated the immediate area when four hundred times Hiroshima’s radioactive material was released into the atmosphere. Radiation levels rose across almost entire Europe. Thousands of children and adolescents have been reported with thyroid cancer in Ukraine and Russia since then. The full environmental impact of this disaster- a quarter of a century later- is still not known.

That was a nuclear power plant too.

Maybe it will take a Chernobyl in the Arctic before sense prevails; maybe we can step back from the abyss once again. Maybe we should get some workable rules in place. If we cannot, we should stop playing the game.


October 07, 2010

Tangled Web

I am quite sure that for most of us internet connectivity is far more important than the phone or television- or even a car. I know that is what I would choose if I were told that I could have just one of these round the clock. I am quite sure, too, that most of us reading this are not seventeen or eighteen year olds deciding what we want to do with our lives. If I were from that generation, grown up on those seemingly reflexive and annoying texting habits or twittering like Shashi Tharoor almost before I could think, I might well shoot down shipping as a career choice because of one reason alone: limited or no web accessibility for months on end.

I am also quite sure that, sooner rather than later, round the clock broadband (or, as some say in India because the speeds are so slow, fraudband) availability for crew will become the norm on most ships on the high seas. At sea internet costs are coming down, commercial uses are multiplying, and more and more crew will soon be asking this question of managers: does the ship have internet? In return, more and more managers will, in turn, be tom-tomming ‘unlimited web accessibility’ to attract crews, especially youngsters. Everybody wins. No more problems.

Well, not quite, because we better start thinking of what this will do to operations on board. There will be new problems instead of the old ones.

The first question, of course, is access. Does unlimited mean that I can spend any time I get between work to hit the web and land up bleary eyed for watch? What happens to STCW mandated rest periods if they are abused? Who monitors this, the Captain? If so, that policeman’s job is all he will be doing.

Then, do we want everything on the ship to be emailed or blogged or broadcast on Twitter or Facebook -or other similarly (and euphemistically) called ‘social networking sites’ - in real time? (‘This is a rust bucket. See the attached photograph of the starboard lifeboat’). Is the Master ready for incoming emails from, say, a Cadet’s parents? (Dear Captain, please sign off the apple of my eye before Friday so he can attend his second cousin’s third engagement).

Which reminds me. Can I use Skype to ask that girl out? You know, the one I met in the bar on our last call to our next port?

What if confidential documents are scanned and uploaded by a disgruntled miscreant? Or morphed photographs? (An Indian shipping company is fighting a case in court where a whistleblower employee allegedly sent morphed photographs to authorities to claim pollution by the vessel he was on, though not through the internet, I think)

What about YouTube? (Possible titles: “Video of lousy food on MV Rustbucket” or “See Chief Engineer panicking while bunkering” or “Movie shot by Second Officer while on watch in the Singapore Straits”). For more, use your imagination. The possibilities are endless.

The possibilities for good are endless, too. Imagine the access to technical information that an engineer could use, or the ability to contact manufacturers directly with photographs and other details of defective equipment. Imagine improved navigation with direct access to real time weather related satellite imagery. Imagine a hundred other ways officers and crew could use the internet to better themselves professionally.

We can choose to imagine that. Or we can choose to imagine crews spending all their free time downloading porn, and viruses with it for free.

What is clear to me, at least, is that every company operating ships will need a clear internet policy, and a workable one at that. This needs to be done before internet installation; making the rules up as we go along is a bad idea, for obvious reasons. Moreover, policing is not possible: Masters and officers have enough to do already without an additional headache. So, perhaps some urls may have to be blocked instead, firewalls and antivirus software robustly installed and systems administrator training given to a crewmember- or, better still, outsourced to a port of call. Certain equipment- like the GMDSS and ECDIS- will have to be protected; there has already been at least one case of an ECDIS crashing because watchkeepers were using the dedicated internet connection (meant to download or upgrade ECDIS charts) to browse the web. Obviously, the safety implications of this kind of behaviour- in critical equipment failure and distracted watchkeeping- are huge.

However, if we take a step back and think a bit, this conversation has long been in progress in offices ashore. Office workers in almost every setup regularly use official time and resources for ‘personal use’. To some extent, this is an extension of the fact that the line between work and non-work life is even otherwise blurred nowadays. Nonetheless, even after so many years, statistics are published regularly across the world about how much productive time is lost because of internet misuse ashore, or how many trillions a country loses in GDP because of this. The same scenario will play out at sea, too. The only (and, admittedly, big) difference is that a guy ashore cannot kill somebody easily if he is browsing the internet during working time, or if he is tired as a result of too much time on the computer the previous night.

You know, maybe there is no solution to this problem. Maybe we have to put good systems in place, accept that the good outweighs the bad, trust our crews as we trust them with many more important things, and leave it at that.


October 01, 2010

Quiet damnation

Stena lines, the cross Channel ferry operator, brewed a mini storm in a small British teacup recently: Director Pim de Lange said it was hard to find British seafarers “unless you want types with fat bellies and covered with tattoos”. De Lange was happy with Filipinos, who he said were “jumping after a two month holiday to work again for six months.” (I suspect his joy had more to do with the 2.2 GBP an hour wage that the Filipinos are apparently being paid.)

Nautilus, the British maritime union, reacted angrily to de Lange’s comments on British seafarers, calling them slanderous and a “disgrace to the hard working men and women who go to sea.” Many days later, the Stena Director expressed regret for any offence caused. Regret, not apology, and he has not retracted his statement so far.

Well, shipping is not booming today, so maybe de Lange thought he could get away with his tirade. But it was certainly booming about two and a half years ago when a very senior manager in an international ship management company (one that still has a large recruitment presence in India and the Philippines loves to pretend that the organisation is all one big happy family) was reported to have compared seafarers publicly to whores, saying, “if seafarers behaved liked mercenaries and prostitutes, that is how they themselves would be treated.” There was no public outrage in India or elsewhere over this scurrilous denunciation, perhaps because he was talking about seafarers from the developing world.

Do we really expect things to be different in India? A country where the shipping ministry is sometimes used as an economic pay-off for political support? Where the shipping administrations are headed by bureaucratic appointees that will change every couple of years? Where ship managers, with rare exception, can barely hide their disdain for seafarers in stray conversation? A country that has much substandard, poorly maintained and crewed tonnage? Where corruption in the new-entrant recruitment business has reached a stage where it is hard to get a training berth without paying off touts? When little can be done in government ports or with connected authorities without bribery? Where the industry motto seems to be as on a sinking ship, where every rat should be for himself?

I don’t know about you, but I sure as hell do not expect much different, and I suspect neither do most Indian seafarers who are still out at sea. I do not expect much better from other countries either, if that is any consolation. Or from self-serving international institutions that are meant to promote safety but end up adding to mariner problems instead. With stray exceptions, a huge part of our industry is not part of any solution, and, unless mentalities change, never will be.

I suspect change, if and when it comes, will come from commercial pressures alone. It will come from quality owners who are unable to find enough quality seamen. It will come from far thinking managers who will see the commercial advantages in retaining good employees (and letting go the bad ones). It will come from a gradually changing mindset that realises that the dying breed of mariners who choose the career as a first option (and not the last, as too often happens today) and for the right reasons (which are to do with more than just dollars and cents) needs industry support. I can risk saying that this change should be inevitable, because, as far as I can see, shipping is not shutting up shop and going away: it therefore needs quality mariners as much as mariners need quality ships.

But I am not too sanguine about this change happing easily: somehow, I cannot see Chinese or Indian ship owners- as just two examples of countries where tonnage is likely to grow rapidly- losing too much sleep over quality just yet. I am more confident of Western ship owners spearheading change, also because their national regulations are tougher, environmental and safety requirements more robust and administrations cleaner. Tougher implementation of laws means a greater demand for quality seafarers.

Not everything is very clean in the West, though, as evidenced by the recent MAIB UK report on the fishing vessel Olivia Jean. Amongst an assemblage of findings to do with poor stability criteria, maintenance, documentation and equipment, the vessel was carrying up to 15 crewmembers at a time when restricted to six, the Latvians and Ghanaians were working long hours without rest, and the owner “was showing a total disregard for the safety and welfare of his employees.” The fishing industry in the UK, Scotland and Ireland has been accused in the past of ‘slavery of Indonesian and Filipino fishermen’ – not enough has changed, judging by more recent reports.

An aside: Lloyds recently carried an article that said, “A significant number of UK officer cadets are so short of money that they are taking second jobs to make ends meet during their training.” Flipping hamburgers at MacDonald’s was mentioned. Dignity of labour banalities aside, is this the state of affairs that we want to see in the industry? Do we expect people to take pride in a profession when they cannot make ends meet pursuing it?

As for the present sorry state of affairs in India, the more I think about it, the more I reach the conclusion that the few remaining Indian mariners who expect the country or their peers to come up with ideas to address their issues (and obviously connected, problems of the recruitment business) bang their unprotected heads against a brick wall. Which is why few sailors actually expect anything out of the country in general and their colleagues ashore in particular. Ask them. All they want to do is to come home in one piece with their wages paid, without facing a major incident at sea or being taken hostage- on one pretext or the other- by the likes of either illegal Somali pirates or properly authorised thugs of legal governments.

Much as I hate to say this, I think they are right in their low- nearing zero- expectations from the industry. I think it is people ashore that make a big noise- and only a big noise- about the need to improve the seafarer’s lot everywhere. The average sailor, however, has given up expecting anything from anybody in the business ashore. He is getting on with his life anyway.

If you ask me, this stoical acceptance of neglect by our seamen is the biggest condemnation of all.