Shipping industry optimistic about rebound in freight rates this year, BUT oversupply, geopolitics may play spoilsport:

Shipping companies are expecting a sooner-than-expected rebound in the freight markets this year on the back of increasing demand for commodities, especially from China. The optimism is, however, tempered by fears that continued over supply of ships and geopolitical risks, such as the current stand-off between Russia and Ukraine, may tame demand and pull back rates.

Cold weather across much of the West lifted global tanker rates (due to increased oil imports) in the last three months. Although both the tanker and dry bulk freight rates have retreated since the highs of December, the shipping industry, which has been battling a tepid freight market over the last five years, feels that the worst is over and that increased demand from China will help sustain the market.

The biggest worry for ship owners is that supply of new ships to the existing global fleet may continue to offset the blips and spikes in the freight market. Last year saw about 80 million dead weight tonnage of ships in the dry bulk category alone, growing six per cent over 2012.

India, Bangladesh to enhance biz relations via water route

India and Bangladesh are keen to increase business relations by setting inland waterways for hassle-free movement of cargo between the two countries. The proposal is to set up IWT (Inland Waterways Transport) from Kolkata in West Bengal to Ashuganj in Bangladesh which can be further extended.

Standing Committee on Transport, Tourism and Culture in 2013 had said a lot of time and resources are being wasted in transporting oversized cargo to the North-East. Waterways provide a hassle-free movement of such cargo.

1. News Update 2. Photo of the month 3. Timber Transportation 4. Back to Basics

VOLUME 2 MARCH 2014

MARINE NEWSLINK

PHOTO OF THE MONTH – Ship Scrap Yard

Vessel beached on Shore for Scrap Bulbous bow of vessel cut and sold as scrap

Tankers being pulled up for beaching on shore Aft section of the vessel remains in scrap yard in Alang

Laborers clearing up scrap on the mud beaches in Bangladesh, of the largest Scrap yard for ships.

Timber transport provides the link between the forest harvesting and the mill. This operation is of great economic importance, in the northern hemisphere as it accounts for 40 to 60% of the total wood procurement cost at the mill and in the tropics the proportion is even higher. The basic factors affecting timber transport include: the size of the operation; the geographic locations of the

forest and the mill as well as the distance between them; the assortment of timber for which the mill is designed;

and the kinds of transportation that are available and suitable. The main timber assortments are full trees with

branches, delimbed tree lengths, long logs (typically 10 to 16m in length), short wood (typically 2 to 6m logs),

chips and hog fuel. Transportation can be by road, rail, and ship, floating down a waterway or, depending on the

geography and the distance, various combinations of these.

Water Transport: The use of waterways for timber transport has been declining as road transport has been

increasing, but it still remains important in Canada, the United States, Finland and Russia in the northern

hemisphere, in the watersheds of the Amazon, Paraguay and Parana rivers in Latin America, in many rivers and

lakes in Western Africa and in most countries in Southeast Asia. Ocean-going ships play a large role in the

international timber trade.

Timber cargo loaded on deck Timber cargo loaded on deck Timber cargo loaded on deck

Specialized timber carriers, and sometimes ordinary bulk carriers, carry timber and its by-products such as logs,

pit-props, sawn timber, pulpwood and wood chips, etc. The requirements for the carriage of timber are different

from other bulk cargoes because the ships may carry most of the timber cargoes within the cargo holds in

addition to the carriage on deck. However, where they are carried on deck, the requirements of the IMO's `Code

of Safe Practice for Ships Carrying Timber Deck Cargoes' need to be complied with.

Timber in packaged form is usually loaded and discharged by crane. The larger size of logs can cause a severe problem as they must be manhandled into position. A risk assessment of each type of timber cargo should be undertaken to identify hazards and ensure control measures. Vessels designed to carry timber deck cargoes have timber load lines that provides for a smaller freeboard as the deck cargo provides additional stability. According to the `Code of Safe Practice for Ships Carrying Timber Deck Cargoes', ships should maintain adequate stability during loading, discharging and during passage at sea. Special precautions need to be taken when navigating the ship when timber is loaded on deck.

TRANSPORTATION OF TIMBER

TRANSPORTATION OF TIMBER

Points to be considered when loading Timber cargo and hazards ships are subject to due to the nature of the cargo.

Stowage factors: Typical values for density and stowage factors are given for different types of timber deck cargoes. The weight of timber and logs may change during a voyage due to loss or absorption of water. Timber and logs stowed under deck may lose weight whereas timber and logs stowed on deck may gain weight by absorption of water. Particular attention should be given to the impact that these and other changing conditions have on stability throughout a voyage.

Improper Stowage Cargo covered with Tarpaulin Height of stowage to be limited.

Friction factors: Cargo in rest is prevented from sliding by static friction. When movement has been initiated the resistance in the material contact is reduced and sliding is counteracted by dynamic friction instead. The static friction may be determined by an inclination test. The angle ρ is measured when the timber cargo starts to slide. The friction of the cargo depends upon various factors such as temperature in which it is loaded, type of log etc.

Plastic Covers: Plastic sheeting is often used on packages of sawn timber to protect the cargo. High friction coatings can be incorporated into plastic sheeting as an important means of improving the safe transport of these cargoes. Special precautions should be taken to prevent slippery plastic from becoming a danger.

Package Weight Marking: All packages over 1 metric ton should be clearly marked with the weight of the package. The marking should be clearly visible on the top of the package as well as both long sides.

Water Absorption: Sea spray may increase the weight of the timber deck cargo and thus influence on the stability. The weight increase of the timber varies with time of exposure and type of timber. The value of increased weight of timber deck cargo due to water absorption should be taken according to the Intact Stability Code. A value of weight increase that is less than the above mentioned may be used if the value could be proven by practical tests accepted by the administration.

Rigging hog wires for deck-stowed log cargo The correct use of wiggle-wires through snatch blocks

Weight of Ice: During cold weather conditions ice may form from sea spray and the stability may be affected as the ice can add weight rapidly. Increasing of the weight due to icing should be taken according to the Intact Stability Code.

Rigidity of Timber Packages: The Racking Strength, RS, of a timber package is defined as the horizontal force that a package can withstand without collapsing or deforming more than 10% of its width, B, or a maximum of 100 mm. Racking strength measurements will have to be carried out by the shipper and the information should be supplied to the master as one of the required cargo information mentioned in SOLAS chapter VI.

Casualties in timber trade

In the Casualties observed in recent years, the transverse movement of cargo was the relevant cause involving ships carrying packaged timber deck cargoes. It is not surprising that transverse movement typically takes place in heavy weather when the cargo stow is subject to wave impacts and extreme accelerations due to the ship’s motions.

The typical scenario observed involves an easing of the lashing tension, so that upper layers of cargo stow start to move, putting timber packages below under high racking loads which will collapse and consequently destroy the compact stowage of deck cargo. The Timber Code outlines recommendations and guidelines for how to stow and secure timber deck cargo.

Cargo, poorly stowed, improperly secured, widespread gaps in cargo. Total collapse of stowage, 50% deck cargo bundles lost overboard, widespread structural damage to vessel

Following should be kept in mind when underwriting timber cargo.

For Timber carriage the structural strength and stability of the vessel is of prime importance and hence the vessel should be checked for its condition. The ships which are used in this trade are most of the time rust buckets or operated by fly by night operators due to which there can be a number of claims.

In older tonnage with ship value being lesser than the cargo values in most cases, Cargo Underwriters end up paying huge sums towards PA damage as well as GA / Salvage contributions much more than Hull Underwriters because of their respective values.

TRANSPORTATION OF TIMBER

This month’s question-

List out the top 3 reasons, why marine cargo rates in India are not improving.

Right answers get a mention in the next issue.

Answer to last month’s question:

The transit would end once the cargo on the trailer enters the bonded warehouse. It will be hit by 8.1.3 of the Duration

clause which spells out when the transit would end:

“ when the Assured or their employees elect to use any carrying vehicle or other conveyance or any container for

storage other than in the ordinary course of transit”.

Unfortunately no correct answers this time.

BACK TO BASICS

If you have any comments / feedback please send it to

R. Balasundaram Harshad Patwardhan Vice President - Marine Marine Loss Control Engineering - India r.balasundaram@tata-aig.com harshad.patwardhan@tata-aig.com CONTACT US

Tata-Aig General Insurance Company Limited, Peninsula Business Park, Tower A, 15th Floor G.K.Marg, Lower Parel, Mumbai 400013. TEL: 022 66699697, FAX: 66546464. www.tataaiginsurance.in

DISCLAIMER

The publication is for private circulation only. It is for internal additional information of employees and

associates. Views expressed in the article are personal views of author and the publisher, editor does not own any

responsibility legally or otherwise. Though due care is taken to give accurate information, the readers are advised

to verify independently the correctness of the information given.

DEEP THOUGHTS

Change is the law of life. And those who look only to the past or present are

certain to miss the future. - John F. Kennedy

Wall Street is the only place that people ride to in a Rolls Royce to get advice

from those who take the subway. - Warren Buffett