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“Have we placed the mariner in a no-win situation?” asked Captain Anuj Chopra at yesterday’s Mare Forum conference in Washington, DC.  Chopra, the President of Anglo-Eastern LLC describes a frustrating situation unfolding offshore as mariners are drowning in a sea of paperwork.

Some call it a Regulatory Tsunami.

He notes that in a recent poll that 100% of the mariners polled agree that documentation is needed, however that same group also believe that this documentation needs to be simple, brief, and effective.  Which it currently isn’t.

Another issue is a lack of OPEX for training.  As new technologies and regulations are delivered to the ship, a mere 1 to 2 percent of a shipowner’s budget is allocated to training.  For many companies, the percentage is likely less than 1 percent.

From the mariner’s perspective, it’s easy to point fingers at “the office,” but what the mariners perhaps don’t see is the fact that most shipowners suffer from a serious lack of cash and are finding these issues equally difficult to deal with.  Adding more regulations such as Ballast Water Treatment and more stringent emissions standards is an incredibly expensive undertaking, in many cases the technology isn’t proven yet, and the enforcement of these rules is unclear.

The bottom line is, shipowners could be put at a serious competitive disadvantage by investing in new technology to meet requirements, while others could sneak by under the radar and cash in on the fact the issue of enforcement hasn’t been sorted out yet.

Putting this in perspective, retired USCG Rear Admiral Bob North commented in his presentation yesterday that it costs at least $1 million per ship to outfit it with ballast water treatment, and GENCO Shipping has 53 ships.  It’s a huge investment, but one that they are currently evaluating for their fleet.

Meeting air emissions requirements is another huge hurdle.

Kenneth Vareide, Director of Operations for DNV noted yesterday that Particulate Matter, SOx and NOx emissions from the maritime sector will become a much greater piece of the national emissions contribution from mobile sources over the next 20 years.  He referenced the following graphs from the Environmental Defense Fund.

The IMO has come down with extremely tight restrictions to be implemented over the next 7 years, ones that have their own host of significant issues and potential solutions including Ultra-Low Sulfur Fuel, LNG-newbuilding, LNG-conversion, scrubbers, and all the other factors to go along with this such as training, unit costs, maintenance, and enforcement.

Philip Brooks, Director of the EPA’s Air Enforcement Division commented yesterday that planes might even be used to fly through the plumes of smoke emitted from ships to determine the sulfur content of the fuel they were using as a method of enforcing standards inside Emissions Control Areas (ECAs).

And other non-GHG regulations are on the horizon notes Vareide such as hull biofouling, black carbon emissions, and underwater noise.

On top of all this, across many regions around the world, demand for oil is increasing faster than refineries can produce it according to Gary Morgan, Head Analyst at Clarkson’s.  With 84 percent of refinery expansion happening east of the Suez, this is driving prices for refined products higher and supporting the current newbuildings of product tankers, notes Morgan.

Higher fuel prices are clearly not good for shipowners however, and combined with low freight rates and new, costly regulations, many owners face the very real prospect of bankruptcy.

The good news is, we’re likely at the bottom of the cycle according to C.R. Weber’s Basil Mavrolean and 2014 looks to be a growth year for the dry cargo sector which has been hit extremely hard in recent years.

Regulatory compliance remains however, an extremely costly, and unavoidable issue, one that will likely only be solved by extraordinary cooperative efforts by owners, regulators, state and regional stakeholders, and environmental agencies.

Spot rates surged 47 percent this month to $70.86 a metric ton, according to the Baltic Exchange, the London-based publisher of shipping costs. The benchmark rate will set a new all-time high, Miguel de Potter, chief executive officer of Antwerp, Belgium-based Exmar, said by phone today.

Expanding natural-gas output in the U.S. is creating more LPG as a byproduct while shipments of the cooking and heating fuel to Latin America rise on winter demand, de Potter said. Congestion at Indian ports also is tying up ships for longer, leaving fewer available to compete for cargoes, he said. While rates rallied for one to three months around this time in the past three years, the current increase will probably last longer, he said.

“Some of my colleagues are more bullish this year because of the additional exports out of the U.S. and the additional imports into Latin America,” de Potter said. “It will definitely break the record.”

Rates reached $81.64 in July 2008, according to the exchange. The U.S. produced a record 29.8 trillion cubic feet of natural gas last year and exported 71.9 million barrels of LPG, according to Energy Department data. Shipments rose 15 percent to 5.9 million barrels in the year to February, the most recent data show.

- Isaac Arnsdorf, Copyright 2013 Bloomberg.

The vessel is scheduled for delivery in the first quarter of 2015.

Although the owner wasn’t mentioned in COSCO’s statement, reports indicate the owner is likely CNOOC Energy and Technology Services, however we were unable to independently confirm.

Rates for medium-range (MR) tankers for 37,000-tonne cargoes on the TC2 route from Rotterdam to New York were at W140.42, or $13,332 a day when translated into average earnings.

That compared with W141.00 or $13,647 a day on Friday and W165.42 or $19,061 a day last Monday. Earlier this month, earnings reached their highest since mid February, helped by firmer bookings for gasoline cargoes to the U.S. and product shipments to Argentina.

“The Continent market was under strong negative pressure as rising available positions against slower fresh demand caused a much greater supply/demand balance,” broker CR Weber said.

Earlier this year transatlantic earnings jumped to their highest in a year helped by gasoline arbitrage trading and firmer booking activity before a rally ran out of steam.

“Tonnage lists have been building in the UKC as a busy USG-UKC market brought more ships into the region. Most fixing has been transatlantic, with a few cargoes still moving to Argentina. TC2 rates slid and have seemingly bottomed around W140,” SSY said.

In April last year, rates reached their highest since 2008 on a jump in U.S. gasoline demand. Since then, average earnings have remained volatile.

Long Range 1 tankers, carrying 55,000-tonne loads from the Middle East Gulf (MEG) to Japan, were at W95.92 or $5,764 a day.

That compared with W96.32 or $6,457 a day on Friday and W99.54 or $6,629 a day last Monday.

“Rates for both LR2s and LR1s from the Middle East to Asia have continued to soften with limited enquiry and the position lists remain long well up to end-May,” SSY said.

“Pressure on LR2 rates will continue to mount with little disparity in LR1 and LR2.”

Larger Long Range 2 or LR2, 75,000-tonne shipments on the Middle East Gulf to Japan route were at W77.55 or $5,897 a day. That compared with W81.40 or $8,287 a day on Friday and W83.86 or $8,401 a day last Monday.

Late last year the volume of LR1 fixtures jumped to their highest in years, helped by healthy naphtha and jet fuel bookings to Asia, sending earnings to their highest since early October 2009. (Reporting by Jonathan Saul; editing by James Jukwey)

(c) 2013 Thomson Reuters, Click For Restrictions

The operator of 64 of the ships booked 6 percent less cargo than its capacity this year, keeping reserves that can be used once earnings rise, according to a May 15 statement. Norden’s strategy since 2010 was to book more than it could carry and hire extra vessels as rates dropped. Shares of the Hellerup, Denmark-based company will advance 9 percent in a year, the average of nine analyst estimates compiled by Bloomberg shows.

Expectations for a rebound are building after rates plunged 93 percent from a record five years ago and ship prices adjusted for inflation collapsed to an all-time low. Norden is adding $445 million of new vessels to its fleet. Greek shipping companies, the owners of one in six merchant vessels, ordered the most iron ore-carrying Capesizes since 2008. The Bloomberg Dry Ships Index of 12 companies rose 12 percent this year as equity investors also became more bullish.

“It’s a clear signal that Norden is expecting the market to turn around,” said Stig Frederiksen, an analyst at Carnegie Bank AS in Oslo, whose recommendations on shipping companies returned 9.7 percent in the past six months. “Switching to being long Panamaxes tells me there’s a market for Panamaxes this year.”

Expanding Faster

Rates for the 750-foot-long carriers averaged $7,583 a day this year, the worst start since 2002, according to data from the Baltic Exchange, a London-based publisher of maritime costs. Panamax capacity is expanding faster than any other part of the fleet after orders surged since 2007, when rates were as much as 12 times higher than now, according to data from the bourse and Clarkson Plc, the largest shipbroker.

Shares of Norden rose 16 percent to 189.70 kroner in Copenhagen trading this year. They will advance to 206.76 kroner in 12 months, according to the analysts’ forecasts. The company’s Panamaxes are part of its fleet of 218 vessels, some of them operated on behalf of other companies.

Norden’s so-called Panamax coverage ratio for 2013 is 94 percent, giving it spare capacity once rates rebound, the company said May 15. The average since the second quarter of 2010 was 120 percent, meaning it had fewer vessels than pre- booked cargoes. Rates plunged 67 percent since then, according to Baltic Exchange data.

“The market won’t get much worse,” Martin Badsted, an executive vice president responsible for market analysis, planning and risk management at Norden, said by phone May 15. “Medium term, rates and values will move higher.”

Freight Swaps

Panamaxes, each capable of hauling about 75,000 metric tons of cargo, will earn an average of $9,000 a day this year, according to nine analyst estimates compiled by Bloomberg. Freight swaps anticipate rates no higher than $7,332 until the end of the year.

Swaps traders are betting this year will be the worst since at least 1999. Rates will average about $6,400 for the remainder of the period, according to the Baltic Exchange’s assessments for the forward contracts. A typical Panamax needs about $10,300 a day to break even, estimates Arctic Securities ASA, an Oslo- based investment bank.

Supply and demand projections for this year suggest any rally may be limited. The Panamax fleet will expand 12 percent, according to Clarkson. The broker is anticipating growth of 5 percent in cargoes including coal, iron ore and grains.

Iron Ore

China’s economy will expand 8 percent this year, the second-weakest growth since 1999, according to the average of 52 economist estimates compiled by Bloomberg. The nation accounts for about 66 percent of all seaborne iron-ore trade and 18 percent of coal cargoes, according to Clarkson.

The glut in Panamaxes is being mirrored across the merchant fleet, with 20 percent more vessels than cargoes in March, the biggest imbalance since the early 1980s, Clarkson estimates. About 90 percent of world trade moves by sea, according to the Round Table of Shipping Associations.

Excess shipping capacity should start to diminish because the rout in rates curbed orders for new vessels. The total order book for dry-bulk ships now equates to 17 percent of the existing fleet, compared with as much as 74 percent in 2009, according to data from IHS Fairplay, a Redhill, England-based maritime research company.

The ratio for Panamaxes dropped to 23 percent, from 53 percent in 2010. The actual order book may be even lower because owners canceled some projects and that information has yet to be made public, according to Erik Nikolai Stavseth, an analyst at Arctic in Oslo.

Dry Ships

Ten of 12 companies in the Bloomberg Dry Ships Index will report net income or narrowed losses for next year, according to analyst forecasts compiled by Bloomberg. No projections were available for Oslo-based Belships ASA.

Pacific Basin Shipping Ltd., based in Hong Kong, has the biggest weighting in the gauge. It will return to a $36.9 million profit this year, according to the mean of 11 analyst predictions. Norden’s loss will narrow to $31.8 million in 2013, from $53.8 million last year, the estimates show. The company will return to profit next year, according to the projections.

Norden also said May 15 it was acquiring 17 new ships by either buying them or operating the vessels on long-term charters for other investors. The orders include dry-bulk carriers as well as tankers hauling refined oil products such as jet fuel.

“The cycle is turning upward,” said Frode Moerkedal, an analyst at RS Platou Markets AS in Oslo, whose recommendations on the shares of shipping companies returned 18 percent in the past year. “Rates will see a gradual improvement this year and accelerate toward 2015.”

- Rob Sheridan, Copyright 2013 Bloomberg.

Two quadcopters approach the Costa Concordia wreck site in this screengrab from the video below.

The Costa Concordia wreck site sets the backdrop for this quadcopter promotional video just posted to Youtube from a company called Team Black Sheep.

The video opens with the following message:

This video was shot at the location of a tragic accident. It is not our interest to gain attention on the backs of those who have lost loved ones. This video is supposed to be a showcase for possible UAV applications. Our goal is to display the stranded ship in a never-before seen way. Our thoughts and prayers go out to those who drowned on this day and we are hoping for a swift removal to reveal again the underlying beauty of Giglio Island, Italy.

Check it out…

The filmers of this particular video were apparently arrested for their work, since picture taking is banned at the site, but “[Team Black Sheep] does not approve of censorship and therefore will always ignore such rules.”

gCaptain Coverage: Costa Concordia Salvage

This isn’t the first amazing footage of a ship shot from a quadcopter either. You can view some previously posted quadcopter videos HERE.

Wage strikes are common in Argentina, where private economists clock annual consumer price inflation at about 25 percent. Most of the work stoppages are short-lived, but those that go on for days can impact the global flow of grains.

Argentina is also a major wheat supplier and the world’s No. 3 source of corn and soybeans. Workers whose job it is to secure ships at dock in the main Rosario ports San Martin and San Lorenzo are participating in the strike.

“Cargo ships cannot reach dock,” said Edgardo Quiroga, spokesman for Argentina’s General Workers Confederation (CGT).

Negotiations toward ending the strike were taking place on Monday, another union source said.

Argentina’s Capym port industry chamber issued a statement confirming that ships were not being docked due to the work stoppage.

The work stoppage comes at a sensitive time of year for Argentina, as farmers rush to bring in their corn and soybean harvests. Demand for Argentine crops has increased due to thin U.S. reserves after a severe 2012 drought in the Midwest farm belt. (Reporting by Maximilian Heath; Writing by Hugh Bronstein; Editing by Toni Reinhold)

(c) 2013 Thomson Reuters, Click For Restrictions

Eike Batista doesn’t have much to smile about these days. According to Forbes in March, Batista’s net worth dropped $19.4 billion compared to a year earlier.

London-based Kingfish Trading has cancelled an order for 11 tankers that were to be constructed at OSX Brasil’s Açu shipyard, OSX said in statement late Friday.

Kingfish ordered the 11 medium-range, 45,000 DWT tankers from OSX in March 2012 for $732 million. The vessels were to be built at OSX’s Açu port complex, which is under construction in  northern Rio de Janeiro state.

OSX Brasil is the shipyard and ship leasing company controlled by Brazilian billionaire Eike Batista.

OSX also announced Friday that it will scale back the construction of its shipyard at Açu. In the statement, OSX said it still plans to build the Açu shipyard to its original size and scope, but it would limit ongoing construction to that necessary for current orders. Future construction, it added, will be dictated by future demand.

In addition, OSX’s board has decided to exercise part of a put option that will trigger a payment of $120 million by its controlling shareholder and said it had approved a new business plan to boost cash-generating activities by its ship-leasing business.

The moves are the latest in an ongoing process by companies across Batista’s energy, logistics and mining empire to retrench after missed profit and production targets and a consequent selloff by shareholders in recent months.

Sergio Spagnuolo from Reuters contributed to this article.

Waves crash over the conical drilling unit Kulluk where it sat aground on the southeast side of Sitkalidak Island, Alaska, Jan. 1, 2013. U.S. Coast Guard photo by Petty Officer 3rd Class Jonathan Klingenberg.

The U.S. Coast Guard on Monday kicked off its formal marine casualty investigation hearing into the December 31 grounding of Shell’s Kulluk drilling rig on Sitkalidak Island.

The closed-door hearing, which is being held in Anchorage, Alaska, will look to examine the facts, circumstances, and causal factors involved in the Kulluk grounding.

The Kulluk, a conical drilling unit owned by Shell, was under tow by the M/V Aiviq from Dutch Harbor to Seattle when it ran into rough weather and broke free from its tow on December 27. The Kulluk grounded four days later in shallow water off Sitkalidak Island, near Kodiak Island, after several failed attempts to reconnect.

Commandor Joshua McTaggart from the Coast Guard Investigations National Center of Expertise is conducting the investigation with the assistance of technical advisors from Coast Guard Sector Anchorage and the Bureau of Safety and Environmental Enforcement. Representatives from the National Transportation Safety Board are also participating in the investigation.

Witnesses from the Coast Guard, Shell, Nobel, and other organizations, as identified, will be called to testify about the facts and circumstance surrounding the grounding of the Kulluk.

Once the investigation is completed, the investigating officer will submit a written report of investigation, which will include findings of facts, conclusions, and recommendations.

The Kulluk’s grounding capped a series of mishaps that have dogged Shell’s effort to tap Arctic oil, and eventually led the company to withdraw from its 2013 Arctic drilling program.

A full schedule of the hearing can be found HERE.