April 26, 2012

The CDC- automatically, please

A recent conversation with a youngster and the discovery that yet another foreign setup is selling CDC's made me want to write about the racket, my experience and why Indian authorities can't make the process simpler.

Then I discovered that I had something to say about it two years ago. Here it is: Information or confusion?

Bawtum line- I should be given an Indian CDC if I am an Indian national and a seaman. Automatically, please, and without any fuss.

Sick of the Titanic

Dunno about you, but I have had it to about here with the Titanic.

Two things stand out in my mind from the time when, thirty-five years ago, I was selected for pre-sea training aboard the 'Training Ship Rajendra'- the successor to the 'Dufferin'. The first: my mother and I went to see 'The Poseidon Adventure' at the Sterling cinema in Bombay around then. I don't remember much about the movie except that it was about a passenger ship that went upside down in a tsunami. I do remember, however, the storm the movie created at home, with my mother spearheading the clamour that I dump the idea of becoming a sailor once and for all. And oh, I remember Stella Stevens in the movie too, but that may be because a certain kind of blonde is always more fun to a seventeen year old. Or even a fifty year old, actually, but I digress.

The second thing I remember is my sister running around the house screaming impolitely, with a kind of backhanded joy at my selection, that the "Duffer was in!"

'The Poseidon Adventure' is what I recall when I think of a sea-disaster movie. The Titanic, on the other hand, has become something that is associated, in my mind, more with hype than with anything to do with the sea. So much so that I even walked out of James Cameron's movie a few years ago (and waited for the rest of my engrossed-in-the-movie family in the lounge of the movie hall, much to their amusement.)

The commotion is at a different level today, the hundredth year of the sinking. I honestly do not know any longer if the dream merchants are commemorating the disaster or celebrating it. Every rivet of the Titanic has been dissected, every officer and passenger endoscopically probed. A 82-page Swedish study has gone viral on the internet, claiming, with published percentage figures allegedly accurate to a decimal point, the chances of survival of men, women, children and crews (they don't belong to the other categories, you see) when a ship sinks. The study claims that the 'every man for himself' philosophy is what prevails on sinking ships, not the chivalrous 'women and children first' humbug that we are led to believe. Crews apparently have much better chances of survival than the passengers do. Women are doomed, of course.

From Nova Scotia to Southampton, titanically inane trivia about a hundred year old accident is being stuffed down our throats. Pedantic analyses fail to hide the fact that commerce is obviously the driving force behind the contrived stories that pander to stereotypes (the gallant Captain Smith, the evil rich passenger, for a start). These stories have been told a hundred times before; many are inaccurate and some are plain wrong. Having depleted the stock of tales-to-tell, journalists are marketers are now making it up as they go along. Having succeeded- years ago- in convincing the public that the Titanic is something they cannot ignore, the centenary of its sinking is the perfect opportunity to sell everything from a magazine to memorabilia to kitschy knick-knacks, beer mugs and t-shirts. The perfect time to laugh all the way to the bank.

Cities are cashing in too, no doubt excited at the commercial possibilities. We have had a nationally televised choral requiem in Belfast, where the Titanic was built. In Southampton, an orchestra played 'The Sinking of the Titanic.' From Las Vegas to Singapore, 'Titanic' exhibitions are cashing in, selling everything from perfumes to porcelain dishes. The cruise ship 'Balmoral' holds two ceremonies at the site of the sinking off Newfoundland- one at the exact time when the ship hit the iceberg, the other at the exact time it sank. When not contributing directly to the hoopla, passengers- dressed in period costumes and eating a meal identical to the Titanic's 'last supper' will be bombarded with the 'history' of the doomed ship that has become a pain in the unmentionables for me.

Like the cacophonic crescendo of a bad rock band, the Titanic rubbish has gotten too loud to be ignored, though- believe me- I have tried. I was doing quite well up until yesterday, actually, when my wife and daughter told me one evening that they were going to see a movie. Which one? 'Titanic 3D,' of course. After I almost threw up and after they left, it occurred to me that they had not even bothered to ask me if I was interested in coming along.

I must be doing something right.


April 19, 2012

Giant ships- Too big to sail?

The biggest producer of iron ore in the world- that controls a quarter of the seaborne trade in iron ore all on  its own- can afford to ride through economic and operational problems in connection with its massive Valemax (Chinamax, when other owners buy) ships and survive. However, my guess is that the giant's difficulties will have a downstream effect that will kill off quite a few pygmies and bring some other carriers to the verge of bankruptcy.

Last week, Bloomberg reported that Vale has idled two of its 400,000-ton vessels- Vale China and Vale Brazil- at Subic Bay in the Philippines after they completed discharging ore. Vale declined to comment, but it is no secret that the carrier is suffering from the combined effect of the economic downturn, a drop in Chinese demand, structural issues with one of its ships (Vale Beijing's ballast tanks cracked while loading its first cargo) and developments in China that have ended in a ban on the entry of Chinamax vessels into that country, and Vale having to now tranship ore in the Philippines. This compulsion has undoubtedly hit the company's transportation costs, which were slated to drop by twenty-five percent or so post Valemax entry.  

After its original business model took a hit thanks to the ban, Vale modified its strategy somewhat. Committed to spending $8 billion on 35 of these vessels- eight of which have been delivered so far- to push economies of scale on ore carriage between Brazil and China, Vale ran into a brick wall after the Chinese development. Although environmental concerns were cited as the reason for the ban, it is an open secret that a fear that Vale would control the ore freight market prompted the move. A little less than half of Vale's ore business is with China; consequently, Brazil’s first-quarter ore exports have plunged 27 percent after the ban was enforced. 

Rumours say that Vale wants to sell or lease its Valemaxes to Chinese shipping companies long-term to circumvent the ban. Meanwhile and unsurprisingly, it is now reported that Vale is delaying the delivery of two Valemaxes that are being built at China's Rongsheng yard. Even so, Chinamaxes will clean up- as a sponge- long haul routes if all new build orders finally fructify. Giant ships have giant issues when their business models run into trouble. With daily operating costs for Chinamaxes running between 35 and 40 thousand dollars- fuel and loan repayments included- shipowners who have these ships on order must be getting the jitters today.

Vale's stated objective is to hammer down transportation costs; unstated is the desire to have a near monopoly on the iron ore trade, from production to the supply chain running all the way to Asia, allowing it to compete robustly with Australia that has the advantage of being geographically closer to China. Vale has made a statement that it sees a hundred Valemaxes out at sea in future; whether this is bravado or a case of a conglomerate ready to sink billions to control freight rates and kill the competition is anybody's guess.

In addition to Vale's own order book, Chinese and South Korean yards are believed to have contracts for building approximately twenty more Chinamaxes for other shipowners. These are to be chartered to Vale long term. Unless things are slowed down, almost three dozen Valemaxes/Chinamaxes will be out there by the end of next year. What cargo will they carry? Will the demand projections of approximately 100 million metric tons a year of new iron ore hold? Will there be too many Chinamaxes on offer in a market that may shrink? 

Even before the Chinese port ban, Vale's decision to build or promote so many of these giant bulk carriers was received with dismay by many. Some of the fears have come true already; although it is difficult to gauge by how much, the Valemax entry has certainly driven down freight rates (that are down 80% since 2008). Gloomier long-term predictions say rates will eventually be hammered down to 1977 levels once the full Chinamax order book is delivered. BIMCO's CEO reportedly went on record to say that the Valemax ships could 'displace' up to 168 Capesize bulk carriers- around 15 % of the fleet- from long haul voyages. Vale is not a traditional ship operator, but it can kill off many who are. There is never free or fair competition when a giant is involved; there is only dominance and the big squeeze.

The same fate that has befallen, even if temporarily, Chinamaxes may befall other trades where giant ships are being built. This is because the philosophy that drives economies of scale also exposes shipowners to greater risks during a downturn- when cargo volumes shrink and draft and other operational restrictions mean that alternative options are limited. The giant containerships on order by Maersk and other biggies, for example, may well suffer similar- almost ignominious-fortunes in future. In any case, the entry of giant vessels of any kind, usually owned by monopolistic companies in sometimes-cartelised industry segments, will tend to drive many traditional shipowners out of business; they simply cannot compete if they cannot match Vale's deep pockets.

 That, coupled with the rising trend of bankers calling the shots in the maritime industry, means that we may be looking at a future where massive ships are being run by accountants or commodity companies who have little idea about what ship owning and ship operations actually involves. 

Synchronised with falling officer standards, the poor calibre of fresh blood in the industry, often chronically fatigued crews and a poorly regulated industry will mean that navigational, operational and environmental safety will become a much bigger interrogation point than it is today.  I foresee that more and more nations will start questioning officer quality after each (almost inevitable) environmental incident. More regulation will be rolled out, putting greater financial burden on shipowners. The costs for cheap, substandard and short manned crews- and giant ships chasing the economies of scale dream- will be paid by the shipowner- albeit under a different accounting head.

If all this happens in bad economic times like those seen today- amidst falling rates, tonnage overcapacity and a global meltdown that has a way to go before it expels its last sigh- the industry may well find that the idea of giants ships is just a little bit too risky. Some shipowners may well reach the conclusion that some of these ships are actually too big to sail profitably, and that the gamble is not worth the reward. 

Postscript, April 22: Three days after publication of this piece, agency reports say, " Vale has refused to take delivery on three completed very large ore carriers (VLOCs) it ordered from China Rongsheng Heavy Industrial Group Holdings Ltd, the country's second largest shipbuilder.

Vale has refused to take over the carriers partly because it wants to prompt the Chinese government to allow the vessels to dock at Chinese ports. Also, the move will delay payment and put pressure on Chinese shipbuilders to reduce their prices, according to marine industry experts".

All kinds of stuff comes out of the woodwork when one isn't making money- or as much of it as forecast.



April 12, 2012

Piracy (not again!) and the Kaifi Azmi option

Over the years, the lethargic and mechanical response to piracy has numbed all of us in shipping to a point when it appears that it every attack is just history repeating itself; our zombied Pavlovian reactions mirror the anaemic  actions that our Governments have taken- or, more accurately, not taken- over the years to come to terms with the scourge. Even so, it astonishes me that the industry seems incapable of analysing, predicting or anticipating where the excreta is going to hit the fan next. But perhaps I am being uncharitable; perhaps the industry simply does not care. Or perhaps I expect too much from an industry whose managers are- barring few exceptions- either bean counters, out of touch with reality or living in the Stone Age.

Some of us could see, three years ago, that the criminals in the Niger Delta would learn from those in the Horn of Africa (see The Niger Delta-the next Somalia? published here sometime in 2009), but the industry and governments were incapable of doing so. Today similar predictions are being made about Senegal, where European, Russian and Chinese owned trawlers are overfishing and decimating the livelihoods of thousands of locals. And, although I dispute the notion that overfishing was the prime reason for Somali piracy, my contention will not matter if criminals or terrorists take to boats off Senegal and target passing ships in the future, seeking justification or legitimacy for their crimes by using overfishing as a pretext.  There are already reports that one foreign trawler Captain was "beat around the balls" by local fishermen, who claim that their nets are being regularly destroyed and that catches have plummeted over the last decade due to overfishing.

Greenpeace says that there are many foreign 'super trawlers' operating off Senegal, including the largest one in the world. "This is overcapacity on an obscene scale. The European fleet is unfairly competing with local fishermen. It would take 56 traditional fishing pirogues (local canoes) one year to catch as much fish as one super-trawler can capture and process in a single day," it says. The organisation claims that "€142.7 million of European taxpayers’ money was paid to enable these vessels to fish Mauritanian and Moroccan waters between 2006 and 2012".

Which brings me to the R word.

Like it or not, Western racism (and I do not use the word lightly) has a lot to do with the tolerance-and consequent spread -of piracy. Whether it is overfishing off Africa (let the EU try this in Europe even for a day), making billions annually from the blood of mainly Asian mariner hostages of ignoring the torture and execution of these hostages, racism subtly and not so subtly drives the non-response to piracy. The recent condemnation of European and NATO forces that left 63 sub Saharan African migrants to die of thirst and hunger after drifting for two weeks in the Mediterranean last year only confirms my thinking. 

According to The Guardian, the report says it is "a dark day for Europe," and that this ghastly incident happened "even though their (refugee) boat had been located by European authorities and emergency distress calls had been issued to all other ships in the area". It claims that NATO, its warships, EU States-particularly Spain- and the Italians are to blame for the deaths. The report's author, Tineke Strik, said, "There is no doubt that if more evidence is gathered the question may arise about whether a crime has been committed here". 

I hope you are not going to ask me what this has to do with piracy and the protection of mainly Third World crews. (Pardon me for using the politically incorrect term, but at least I am not leaving nationals of 'developing countries' to die because I do not much care for their skin colour). This, my fellow Asian sailors, is part of the circus that says that it will protect you from pirates.

Meanwhile, India is playing its usual confusing game, capitulation one day, tough action the next. A report says that the Asphalt Venture Indian hostages (taken on Somali land after that ship was released last year, with one or two reported dead subsequently) will be swapped for Somali pirates held in Indian jails. On the flip side, the international community is all praise for Indian naval actions in driving away pirate mother boats from the coast last year, to the point where merchant ships are today hugging the Indian coastline in a 'safe corridor' created by these actions, giving rise, no doubt, to the Prabhu Daya and Enrica Lexie kind of incidents thanks to the massive increase in merchant traffic near the coast. 

"Ships would drive down the Indian coast if they had wheels," said a speaker at a conference (obviously held in Europe) last month. "No attacks off the Indian coast for more than a year," said the IMBs Pottengal Mukundan at that jamboree, adding that the Indian navy's action "does send the right message to pirates." In typical bureaucratese- he could have learnt this from the best of Indian babus- Mukundan added that "casualties have occurred on both sides" during those same naval actions, with both pirates and crewmembers killed. I presume he is talking of the reported indiscriminate shelling or raking by gunfire of mother ships- trawlers or dhows, usually- with crew and pirates jumping in the water or being shot or drowned or all of the above. 

I guess the 'right' message went out to mother ship crews as well. You are dispensable; you are collateral damage. We have been ordered to shoot to kill since the insurance companies have put the Indian coast in the war zone. We are trigger-happy; we don't give a rat's ass about any vessel or its crew. 

By the way, in case the naive reader believes that Somali piracy is well under control, listen to this: Risk mitigation company AKE  (although I haven't checked, I will bet my last soiled shirt that this will turn out to be a Western company) said last week, "More vessels were hijacked by Somali pirates in March (this year) than in any other month since late 2010", and that pirate activity is likely to increase, thanks to the weather, because the pirates will be encouraged by recent successes and because four of the hijacked vessels have been converted into mother ships. AKE says that attacks will also increase off Nigeria and Benin. (Run for your lives, crews of those converted mother ships. The 'right signals' from the international community are coming your way.)

The charade plays on. The world modifies tactics but continues to have no strategy in place to fight piracy. Somalia, Nigeria, Benin have no solutions, apparently- and do not forget the generally 'safer' pirates of South East Asia that have been around for decades. Where is the next hotspot? Senegal, as some are saying? Some troubled country in Latin America or Africa? The northeastern 'Maoist' coast of India?

The world does not even bother to hide the fact that it doesn't care about the safety of merchant ship crews anymore. Some countries have threatened to make illegal the payment of ransoms. Mukundan like statements are becoming more commonplace. Uncaring actions continue to speak louder than words. The hapless sailor is powerless in this game; He has little choice; all he can do is hope like hell he will not become the next hostage or the next casualty. 

Of course, he has a devil's alternative open to him. He can, if he wants instead, sit back at sea with a drink (and to hell with the D and A policy!) and quote Kaifi Azmi's urdu couplet philosophically:

"Belche laao, kholo zamin ki tahein   
Main kahaan dafan huun, kuchh pataa to chale"

(Bring out the spades; dig up the bowels of the earth.
Let us find out where I am buried, at least)


April 05, 2012

The Mozambique mystique

Mozambique is one of the poorest countries in the world. The World Bank ranks it 204th out of 215 on per capita income (Just $900 in 2008). And, although the country's GDP growth has been impressive since peace broke out there in the early 90's, three quarters of its people live in numbing poverty on small parcels of agricultural land, while a few get rich. An old African story.

And now, Mozambique- thanks to the discovery of gas reserves off its coast that will very likely prove larger than Kuwait's- is nonetheless about to get rich- maybe even one of the richest countries in Africa. So, to a lesser extent, is Tanzania, its neighbour to the north. 

A huge offshore gas discovery by Statoil- at least 142 billion cubic metres (cm) of 'gas in place'- has generated renewed interest in international companies after similar earlier finds. East Africa- also a piracy hotspot- is being described as the 'most promising' new frontier for gas today and "the gas industry's hottest real estate". The find is “fantastic,” says Tim Dodson, Statoil’s head of exploration. “Our biggest ever discovery outside Norway.”  

“With gas exploration you have to find an elephant field to make it worthwhile,” says Simon Ashby-Rudd, an oil investment banker at Standard Bank. “They didn’t just find one elephant – they found a herd of them.”  

The Economist Intelligence Unit says that Mozambique is at the heart of a rush for East African gas. Everybody wants a piece of the pie. Smaller companies are selling and the giants are moving in. Including Royal Dutch Shell, the Thai PTT Exploration and Indian Public sector GAIL and ONGC, who have shown an interest in bidding in the Cove Energy sale there. Petrobras and Exxon Mobil are in Tanzania, and Eni- the excited discoverer of earlier large gas reserves in the country- is in Mozambique. Anadarko has proposed building a US $25 billion LNG plant in the country- it will be worth more than twice Mozambique's GDP. 

A big reason for the excitement is that East Africa is still somewhat unexplored virgin territory: Less than 500 wells have been drilled there so far, a twentieth of the number drilled in North or West Africa. Oil companies are smelling money; Morgan Stanley says that the number of wells that will be drilled between the Kenya and Mozambique coast will be double the number last year. The game will only escalate and will be complemented by the recent heightened interest in LNG as a substitute fuel for everything, including ships.

Along with the transformation of the Mozambique economy, a Tanzanian windfall and knock down advantages to nations up and down the East African coast, the Mozambique gas boom will bring into much sharper focus the world's fight against Somali piracy. Nothing- absolutely nothing- brings the Western nations to a fight faster than oil and gas. From Saudi Arabia to Iran and from Libya to Venezuela, the greed for oil has determined foreign policies and spurred military conflicts or regime change dreams. The gas fields off Mozambique will do no different.

I am not talking simply about protection of the East African fields- that is happening already, with citadels or 'lockdown facilities' in place on rigs, armed private patrol boats or naval boats (or a combination of both) and, I am willing to bet, well armed and trained personnel available round the clock. You can be sure workers on those East African rigs will be guarded much better than seamen passing through the same Somali pirate zone.

No, I am talking of something else that will happen. I suspect we will soon see, finally, some aggressive determination from the international community in the war against piracy on that coast. Some of this has been visible in recent months after the Kenyan tourist kidnappings and the universal acceptance- and about bleeping time too- of the links between Al Qaeda's franchise Al Shabaab in Somalia and the country's pirates. 

Mozambique's gas will harden this determination. I predict we will soon see overwhelming force being used to protect gas fields off Mozambique and even Tanzania or Kenya to the north.  The Mozambique Channel and its approaches will be controlled or guarded like Fort Knox, putting paid to recent South African fears that Somali piracy is moving south.  Mozambique, Tanzania and South Africa have allied for more than a year to fight piracy with assets, logistics and Special Forces as part of “Operation Copper”; they will now see more Western navies assisting them in making the southern half of the east African coastline safe.

I am less confident in predicting that the Mozambique affair will make the Indian Ocean- or even its Western shores- safe for mariners again.  You can rest assured that protection of the gas will be given priority, not the lives of seamen. Then, will a greater international armed presence South of Somalia mean- along with the existing focus on the Gulf of Aden- that pirates will be channelled eastwards away from Somalia, resulting in more attacks mid ocean or near India? Pirates have shown remarkable initiative, adaptability and resilience thus far, attacking as far away as the southern Red Sea, the Straits of Hormuz and close to the Indian coast. Will this change? 

The short answer to those questions is that I simply do not know. However, I do know this- countries across the world will show far more determination in protecting energy resources than they have shown in protecting their seafarers' lives. This will continue. Meanwhile, leaders of nations- East or West- will continue to mouth the right things and make the right noises towards seamen, but nothing will really change there. Nothing substantial will actually be done, because, like Mozambique, those leaders are full of gas.