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01/25/2024 13:17:14

Tr ade

Overboard: balancing supply and demand in global maritime trade

While seaborne trade may have risen, an oversupply of vessels continues to hurt operators’ earnings. Such a stark gap between supply and demand must not grow any wider if the industry is to remain competitive, as Ross Davies reports

Let’s start with the good news.

In its latest review on the maritime transport sector, the United Nations Conference on Trade and Development (UNCTAD) notes that seaborne trade rallied in 2016.

Having slumped to a year-on-year growth rate of 1.8% in 2015, global maritime shipping hit 10.3 billion tons, representing year-on-year growth of 2.6%.

But that’s where the recovery ends – for now at least. Demand for shipping is still behind the traditional average point of 3%. Worse still, UNCTAD’s report, which was released in October, highlights a glaring gap between supply and demand in the sector.

In 2016, the container shipping market ramped up its carrying capacity by 3.2%, reaching 1.86 billion deadweight tonnage. This oversupply of vessels hurt the collective bottom line of the sector, which recorded an operating loss of $3.5bn.

In its report, UNCTAD suggests three solutions to remedy the imbalance: a cut-down in shipbuilding projects, the scrapping of ships, and a wider adoption of capacity-sharing systems to help operators reduce their costs and improve economies of scale.

To the scrapheap: avoiding the costs of retrofitting

It is up to the International Maritime Organization (IMO) to determine the technical conditions under which commercial ships can trade on a global scale, explains Shamika Sirimanne, director of UNCTAD's technology and logistics division.

“More stringent technical conditions would increase the incentive for individual owners to sell their ships for scrap,” she says.

Sirimanne cites the IMO’s introduction of ballast water management standards, which came into effect in September. The new criteria require ships using ballast water in international trade to be retrofitted with a ballast water treatment system.

Given that such modifications can cost anywhere between $1m and $5m, according to shipping broker Barry Rogliano Salles, shipowners may instead be inclined to “increase scrapping of their old tonnage with low earnings potential, instead of incurring the additional cost”.

The new criteria require ships using ballast water in international trade to be retrofitted with a ballast water treatment system

Image courtesy of

Svein Kleven is senior vice president of engineering and technology for Rolls-Royce. Image courtesy of Rolls-Royce

Maritime monopolies: the dangers of shipping alliances

UNCTAD’s suggestion for cargo pooling among operators is an altogether trickier prospect – especially in light of the recent spate of mergers, acquisitions and alliances within the container segment.

As of the end of 2017, there are three global alliances – Ocean Alliance, The Alliance, and 2M Alliance. According to the Baltic and International Maritime Council, the three coalitions – comprised of the world’s top ten carriers – collectively control 77% of the container shipping market.

Crucially, the triumvirate’s monopoly includes 92% of all East-West trade, according to freight specialists MDS Transmodal. This would suggest further market concentration could well hinder competition across the shipping industry.

“Consolidation has reached levels that merit a renewed look at its implications and possible policy responses,” says Sirimanne.

“We are observing a growing number of routes where the process of concentration has led to oligopolistic or even monopolistic markets. We estimate that more than one quarter of countries today are serviced by only one to four container carriers.”

The number of operators providing services in and out of China dropped by 6% between 2016 and 2017

If an oligopoly, as Sirimanne puts it, is to persist, it is developing countries that will lose out the most. For example, in 2004 Tonga had seven shipping companies on its books; as of last year, there was just one.

For smaller countries, such low shipping connectivity can undermine access to global markets. Larger economies aren’t exempt either – according to UNCTAD, the number of operators providing services in and out of China dropped by 6% between 2016 and 2017.

Furthermore, the current mantra of “bigger is better” among today’s shipbuilders is not helping the situation, says Sirimanne.

“We have a concern with the ever-larger ships,” she says. “While they may help achieve savings through economies of scale and improved energy efficiency at sea, the moment the vessels reach a port, the impact of ever-larger ships on total logistics costs may actually be negative.”

Image courtesy of

Intervention needed: new regulations could create fairer competition

So what can be done? UNCTAD has called for greater intervention from regulators to monitor the impact of shipping mergers and alliances to create a better balance of interests among shippers, ports and carriers.

“Ministries of transport and planning, and maritime and port authorities need to understand the determinants of maritime transport connectivity, as well as the associated opportunities and risks, to ensure informed policy and decision-making processes and adequate investment plans in shipping, ports and their hinterland connections,” concludes the body’s report.

UNCTAD has called for greater intervention from regulators to monitor the impact of shipping mergers and alliances

In July, UNCTAD, which is based out of Geneva, will address these issues when it hosts an intergovernmental group of experts on competition law and policy in the maritime transport sector.

There are also incentives for the shipping industry to moderate the current supply of vessels. The compound annual growth for global seaborne trade between 2017 and 2022 is projected to be 3.2%, indicative of a sector that’s far from being on its knees.

In fact, over 80% of global trade by volume is carried by sea, estimates UNCTAD; more than 70% of its value is carried onboard ships and handled by seaports.

But if maritime transport is to remain the backbone of international trade and the global economy, freight rates and earnings cannot remain as low as they are currently.

01/25/2024 12:51:50

Compa ny Insight

Communicating safety

Ports and the shipping industry should be aware, that when fenders fail or do not work properly due to incorrect designs or a wrong safety factor, the risk of accidents during the berthing process and the resulting costs to the port in terms of repair and downtime are tremendous. These risks are by no means worth saving on safety.

SPC Cone Fender System | Ferry Terminal | Sweden

The primary purpose of marine fender systems is to enable vessels to safely berth against a structure under a predicted set of operational conditions, without any damage to the structure, the vessel, or the people working aboard and ashore.

The overall philosophy is simple: the fender’s capacity to absorb the energy of a vessel should be greater than the energy required to bring the vessel to a complete halt during berthing. The engineering around fender designs has been described as “part science – part art” in that it requires comprehensive experience to fully understand how to provide a good balance between performance, functionality and cost.

CSS Cell Fender System | Bulk & Aggregate Jetty | Oman

The question is how can ports ensure to provide safe operations for the shipping industry? The safest option is consult with at least one experienced and successful fender manufacturer. Nevertheless it is a great advantage for ports to have a basic understanding of berthing processes oneself. Being one of the leading fender specialists, ShibataFenderTeam sees it as their responsibility to pass their extensive knowledge and experience on, to not only design engineers but as well to end users. By focusing on the science and engineering aspects, creating awareness and understanding for safety critical products, is an important concern for ShibataFenderTeam.

Therefore, we would like to emphasize the basic fendering concept in simple steps below:

Step 1 – Stop the vessel

Berthing Energy is a function of kinetic energy, which we derive through the formula E = ½ m * v². During the design of berths, which happens long before the fender selection, it is important to know the details of all of the vessels that will, or in the future be using the berth. The mass or displacement tonnage of the vessel is the mass used to determine the Normal Berthing Energy (E_N) and as you would expect, the larger the mass, the larger the berthing energy, under the assumption of the same speed.

Secondly, the berthing velocity needs to be estimated for each vessel. This will depend on variables such as the location of the structure, environmental and navigational conditions and whether the vessel will be tug assisted or not.

Once all of the data has been obtained, the Normal Berthing Energy (E_N) for each vessel can be calculated.

Step 2 – On the safe side

A Factor of Safety (FOS) is applied to the Normal Berthing Energy such that the fender system will be capable of absorbing reasonable abnormal impacts, which may be caused by mishandling, malfunction, adverse wind and current or a combination of all.

Consideration in selection of an appropriate Factor of Safety should be given to:

Consequence of failure (high cost / lost revenue)
Frequency of use of berth / design life
Load sensitive structures
Range of vessels using the berth
Hazardous cargoes (environmental damage)

Once the appropriate Factor of Safety has been determined, the Abnormal Energy (EA) can be established which is calculated by E_A = E_N x FOS .

It is important to know, however, that calculation of Normal and Abnormal Berthing Energy is based on experience, while the actual berthing energy can vary substantially each time the vessel berths.

The calculation of the berthing energy should be done by skilled and certified engineers, as it is their expertise that can make the difference between safety and failure.

FE Element Fender System | Ferry & RoRo Terminal | Germany

Step 3 – Engineering excellence

Once the Abnormal Energy has been calculated, designers can look at suitable fender systems. The best calculations and safety factors, however, have limited impact when the chosen fender supplier lacks experience, resulting in incorrect designs and an increased risk of accidents.

Creating and protecting values is the principle at ShibataFenderTeam. Engineering excellence of a safety critical fender system means to furthermore take into account the following aspects:

Energy Capacity
Height requirements (which can be minimum or maximum)
Reaction Force limitations of the structure

The strict compliance with industry guidelines for the design of fender systems and the respective testing procedures of samples and finished products, is another factor which accounts for a credible and reliable manufacturer. This alone, however, does not guarantee the performance of the final product.

To ensure safety in berthing operations, ports and the shipping industry should rely on:

Excellent design of fender systems by certified, experienced professionals
Experienced manufacturer exceeding industry standards
Extensive proven track record of the supplier

The entire process is summarized in the graph below, where the probability of exceedance (ie the chance that the vessel will exceed the capacity of the fender) is minimized.

Engineering to ensure a safe environment for ports and the shipping industry

POOR PLANNING AND OVERCONFIDENCE: THE MAIB’S MAIN FINDINGS

If there is one takeaway point from the inquiry it is that poor planning was at play.

Investigators discovered the lead pilot had not informed the bridge team of his plan for the turn around Bramble Bank. There was an “absence of a shared understanding of the pilot’s intentions for passing other vessels or for making the critical turns during the passage”.

Elsewhere, the master and port pilots were blamed for “complacency and a degree of over-confidence”.

There was an “absence of a shared understanding of the pilot’s intentions”

CMA CGM, which took delivery of the Vasco de Gama in July 2015, has acknowledged MAIB’s findings, and claims to be addressing the aforementioned issues raised in the report.

“Following this grounding, CMA CGM and ABP [Associated British Ports] Southampton have been working together,” said a spokesperson for the company in an email.

“As mentioned in the MAIB official report, CMA CGM has already taken measures to prevent this type of incident to happen again. CMA CGM is strongly committed to ensuring the safety of its operations and its crews in accordance with local and international regulations.”

All straight-bat stuff. ABP could not be reached for comment.

Unavoidable inquiry: why the MAIB inquiry needed to happen

Simon Boxall, a maritime expert from the University of Southampton, believes MAIB’s findings to be fair, despite Bramble Bank’s reputation as “a navigation hazard” due to it susceptibility to “slight movement after major storms”.

“Looking through the report there was no evidence of unforeseen mechanical failure on the ship, nor of abnormal weather conditions,” he says.

“On that basis, the two pilots and the ship’s master should have been in a position to safely navigate the vessel into port. It would appear to be user error – which is what the report says in so many words.

Introducing ways of reducing user error can only be seen as a good move

“In light of this, introducing ways of reducing user error can only be seen as a good move.”

Boxall also acknowledges things could have been a lot worse. As the Vasco de Gama was re-floated relatively quickly, the port didn’t suffer any kind of blockage – which, given the vessel’s size, would have brought Southampton to “a standstill”.

Neither did the vessel endure any serious damage. Nonetheless, an investigation was still necessary.

“If reports such as this are not produced then the safe navigation of shipping is not improved,” says Boxall.

“In the same way an airline near-miss is thoroughly investigated, it is important that the same is done for shipping – not as a witch hunt, but as a fact finding investigation to improve safety.”

Svein Kleven is senior vice president of engineering and technology for Rolls-Royce. Image courtesy of Rolls-Royce