- Message from the Chairman
It will come as little surprise to many of you, but I must formally and most regretfully announce that this year’s Baltic Chairman’s Cocktail Party, scheduled for 13 May in London, has been cancelled.
I have enjoyed attending many previous Chairman’s parties as a guest, meeting industry leaders, speaking with politicians, and chatting with both our trade and national press. However, what I find most enjoyable about the evening, is the special opportunity it provides for Baltic members from across the globe to come together, to network and to socialise. Of course, it’s disappointing to cancel this year’s event, but we will return next year larger, stronger and in style.
Being forced to cancel the event just reminds us of the importance of face-to-face connections our industry is so good at. Today’s communication platforms and screen based information have made it easier to adapt to remote work stations, but the shipping industry thrives when we meet in person and take the time to understand each other’s business interests, personality and culture that make up our rich tapestry. These are life changing times for everyone, but I am proud of the way Baltic members have adapted, applying their skills in dealing with the unexpected, and continued to work servicing the world at a time of turmoil.
It is important that we still come together, but for now, for many of us it will have to be remotely by phone or video conferencing.
From everyone at the Baltic Exchange, our hearts and thoughts are with all the people who have been affected by this completely unforeseen event. We continue to thank all of those who are involved in this COVID-19 fight, healthcare professionals, support groups, and governments for their tireless work keeping essential services going.
We will return to normality over time, but until then, please, continue to stay safe.
Chairman, the Baltic Exchange
- Free access to the Baltic Exchange App to all members
Given the current disruption we have decided to provide free access to the Baltic App to employees of every member company, regardless of whether the individual employee is a member or not. During this difficult time, we want to ensure members are still able to access market information while so many of us are working away from our offices.
For those unfamiliar with it, the Baltic App is designed for both Android and iOS operating systems. The app provides instant access to a wide range of Baltic information including rates, fixtures, member contacts, news and much more.
Key features include:
- Live market data, including all historical Baltic indices & assessments and charts
- Live and historical FFA data, including forward assessments and volumes
- Push notifications for all Baltic spot data upon publication
- Member search facility. All company and individual contact details easily accessible
- Market intelligence including daily & historical fixtures, market reports, circulars and news
- Listings of all Baltic Exchange meetings, social and educational activities
Users can customise data notifications to receive the information they need as it’s published.
To take advantage of this opportunity, sign up here.
- Ticket refunds for the Baltic Exchange Chairman’s Cocktail Party
In view of the continuing COVID-19 coronavirus situation, we have decided to take additional precautionary measures to safeguard the well-being of our employees and guests and have unfortunately decided to cancel the Baltic Exchange Chairman’s Cocktail Party that was set to take place on 13 May 2020 at Christ Church Spitalfields. We are sorry for any inconvenience this may cause and thank you for your cooperation in keeping our events a safe place for all.
Over the coming days we will process refunds for all tickets purchased, if you have any queries, please email firstname.lastname@example.org.
- BOPEX counts the costs
The Baltic Exchange is helping shipping investors with their financial modelling, allowing them to calculate Net Present Value (NPV) more accurately than ever before with a new index. The quarterly Operating Expense Index (BOPEX) is based on assessments made by a panel of some of the industry’s biggest and best third-party ship managers. BOPEX provides much needed transparency when tracking vessel running costs.
Using the full suite of independent Baltic Exchange indices, investors are now able to benchmark daily vessel earnings, running costs, sale & purchase and recycling prices. The same vessel descriptions are used across the datasets.
For the dry market, BOPEX-D covers capesize, panamax, supramax and handysize vessel types. The Baltic is also currently in the process of developing a set of tanker and gas carrier assessments which are expected to be launched in the next months. These will complement the existing dirty, clean, LNG and LPG freight indices.
Third-party managers key
According to Baltic Exchange member Philip Bacon, a highly experienced ex-operations director at dry bulk owner AM Nomikos who led the project to set up the new index, the role of third-party managers is critical to its success: it sets BOPEX apart from other assessments.
“This is a current and realistic assessment made by people who quote ‘OpEx Budgets’ for owners’ business on a daily basis. It’s not a backward-looking assessment or an assessment by the owner’s accounts department: everything is included.”
Around 15% of the dry bulk fleet is estimated to be managed by third-party managers and the three managers which currently make the assessments (Anglo-Eastern, Columbia Shipmanagement and Fleet Management) collectively provide technical management services to a fleet of around 600 bulk carriers. They also manage a broad range of other vessel types which adds context to their assessments.
The fact that the index is audited by the Baltic Exchange and falls under its strict criteria for benchmark production adds further credibility to the figures.
Ajay Hazari, Chief Risk Officer at Anglo-Eastern, says that a team of four at the company contribute to BOPEX-D. He reveals that for Anglo-Eastern, benchmarking itself against its peers was an important reason to become part of the panel. He also notes that becoming a member of the panel is good for the company’s exposure to the investment community.
He says: “We hope that people using the index will ultimately approach us for our management services.”
Panellist Vikras Greval, head of Fleet Management’s business development division, shares FLEET’s reason to join the benchmarking exercise:
“There are a couple of existing OpEx benchmarking platforms that FLEET contributes to. What made this new project particularly interesting is that it would be the first platform to provide our existing and prospective clients with a complete ship lifecycle cost – sale & purchase, freight and OpEx. And that’s a real value add.” he comments.
Making an assessment
Of course, when it comes to making an assessment on the cost of dry docking, crew, insurance, technical management, there are many variables. The first task for the panellists to agree on were the definitions. What nationality should the crew be? How do you factor for a well-maintained vessel’s drydock costs compared with a vessel which has been pushed hard for five years?
When the project was first trialled, there were concerns that there could be a large variance in the assessments submitted by the rival ship managers. According to Philip Bacon, the returns have all been very close.
The biggest cost included in BOPEX-D is crew. The drydocking costs are assessed but not included within BOPEX-D.
Thanks partially to the strength of the U.S. dollar, crewing costs have not increased significantly in recent years. Crew costs for a capesize vessel were assessed at $2,850 per day in January 2020, which is over half of the daily total of $5,026 of the total BOPEX-D for this asset class.
Deciding on the nationality of the crew for BOPEX-D was not easy. There are currently around 0.5m Chinese, 0.4m Filipino, 0.3m East European and 0.2m Indian seafarers serving aboard the world’s merchant fleet.
In the end the panellists settled on using Indian or Eastern European officers with ratings from the Philippines. The crew assessments also assume that there are no cadets aboard, but that there is an in-lieu training contribution embedded in the crew cost. For capesize and panamax vessels, there is an assumption of 19 crew, but 20 aboard supramax and handysize ships which accounts for the employment of an electrician, required to service the onboard cranes.
The drydocking assessment does not contribute to the BOPEX-D headline figure, but is published separately as a lumpsum and based on a five year drydocking in China. Of the 12 days spent at the yard, five are deemed to be spent in drydock. The assessment assumes that the vessel has been well maintained and ready to sell so that no steel exchange, full blasting of the hull, or cargo hold upgrade are required.
Insurance costs assume that the ship’s P&I cover is provided by an International Group Club, that its Hull & Machinery insurance are first class H&M, that it is classed with a member of the International Association of Classification Societies. It also assumes that there have been no breaches of Institute Warranties Limits or Additional War Risks covered.
The Baltic Exchange welcomes additional third-party ship managers who wish to join the panel. For further details contact Philip Bacon. Email: email@example.com
BOPEX-D is published on a quarterly basis (January, April, July, October). Please visit www.balticexchange.com for further details.
Capesize: 180,000 mt dwt built in “first class competitive yard”, 199,000cbm grain, LOA 290m, beam 45m, draft 18.2m SSW. Not ice classed, not scrubber fitted, five years old and special survey passed.
Panamax: 82,500 mt dwt built in “first class competitive yard”, 97,000cbm grain, LOA 229m, draft 14.43m. Not ice classed, not scrubber fitted, five years old and special survey passed.
Supramax: 58,328 mt dwt on 12.80m draft SSW built in “first class competitive yard”. LOA 189.99m, Beam 32.26m, 72,360 cbm grain, five holds/hatches, 4 x 30mt cranes with 4 x 12cbm grabs. Not ice classed, not scrubber fitted, five years old and special survey passed.
Handysize: 38,200mt dwt at draft 10.538m SSW, built in “first class competitive yard”, 47,125cbm grain, LOA 180m, beam 29.8m, five holds, five hatches, 4 x 30mt cranes. Not ice classed, not scrubber fitted, five years old and special survey passed.
- Crew (USD per day, including all fees)
- Technical (USD per day, including all fees)
- Insurance (USD per day, including all fees and rebates)
The fourth, an assessment of a five year drydock cost, will be amortised over five years to give a USD/day price, but is published separately and does not contribute to BOPEX-D.
- Baltic Exchange III aids merchant vessel
The volunteer crew of the RNLI Salcombe all-weather lifeboat (ALB) launched on Tuesday 27 February to a 100m merchant vessel with an injured crew member on-board.
The vessel was reported to be 15nm South of Salcombe with a Coastguard Rescue helicopter on scene and their paramedic winchman having been lowered to tend the casualty.
With the casualty refusing to be transported by helicopter to hospital for further treatment the lifeboat was readied to receive and transfer him, once alongside both the casualty and winchman were transferred via the pilot ladder.
The lifeboat crew returned to Salcombe and transferred the casualty to a waiting ambulance for the onward journey to hospital. On what was a bitterly cold day our crew, who are well trained and ready to launch in all conditions to help save lives at sea once again showed their professionalism.
The crew then returned to station, washed the lifeboat down and prepared for service.
- Member Update: 1 April
The following individuals have applied for membership of an existing Member Company:
Individual Company Miss S Tan Anglo American Shipping Pte Ltd
Mr K Wee Mr B Gilliard Chevron Products Company (A Division of Chevron USA Inc) Miss S Tan Exxon Mobil Corporation Mr J Dicastiglione Fearnleys A/S
Mr P O’Sullivan Miss A Keegan Grange Resources (Tasmania) Pty Ltd Mr K Okazaki MC Shipping Ltd (Singapore Branch) Mr A Aseeri The Air Charter Association Ltd Mr D Weiss Vale SA
Any comments should be passed to Karen Karanicholas by 8 April 2020 – email: firstname.lastname@example.org
- Sailors’ Society launches COVID-19 resources and appeal
International maritime welfare charity Sailors’ Society has launched a suite of practical resources including advice, contacts and podcasts to help seafarers during the coronavirus crisis.
The organisation, which has stood beside seafarers through many dark times during its 202-year history, including two world wars, has also set up an appeal to fund urgent support for our key workers of the sea.
In the past few days, seafarers from all over the world have joined a special Facebook group set up by the charity to share news, tips and words of encouragement.
Shipping companies have also contacted Sailors’ Society, known globally for its award-winning wellness at sea programme, asking for help in supporting crews through the pandemic.
Sandra Welch, the charity’s COO and director of programme, said: “We may not be able to greet seafarers in port right now, but we are here for them and their families as we always have been. Seafarers are deeply worried like everyone else and far from home and loved ones; many do not now know when or how they will get home again. While the rest of us struggle with suddenly only being able to see our family and friends on a video call, this is the reality for seafarers every day. And images of empty supermarket shelves are a stark reminder of how vital these men and women are to our supply chains, bringing almost everything we need by sea.
“Now they need support from us. Please share our resources with crews, partner with us to support seafarers through these turbulent months or give to our appeal enabling us to divert the full resources of the charity to help seafarers who are under immense mental and emotional strain, sick or, with many ports on lockdown, unsure when they will next work.
“We all rely on seafarers. Now, more than ever, they rely on us.”
Two weeks ago, the charity announced it has rolled out virtual chaplaincy to seafarers, with chaplains available to seafarers over the phone or on social media, after it had to suspend port activity in response to the virus.
To talk about partnering with us to help your crews email fundraising@sailors-society.
- Farce majeure… or simple frustration?
Force majeure clauses are fairly common in commercial contracts but there is no standalone concept of ‘force majeure’ under the laws of England & Wales. Accordingly, such clauses are creatures of the contracts in which they appear, and their scope and effect will depend on the wording in question.
That said, typically a force majeure clause excuses or delays the performance of contractual obligations upon the occurrence of an event outside the reasonable control of the party alleging the force majeure event.
When force majeure is asserted there are a number of considerations for both parties.
Is there actually a force majeure event?
The event in question must fall within the contractual definition of circumstances or occurrences capable of triggering the force majeure clause. The list of events in the contract is exhaustive and the court will look at the natural meaning of the words used and whether the present circumstances were intended to fall within them. The courts will assume that the parties only intended to grant relief where the event was outside of their control, as anything else may lead to an unjust result.
Typical force majeure events are war, revolution, drastic government interventions and ‘acts of God’, among others. ‘Acts of God’ typically connote natural events which cannot be prevented against, such as earthquakes, tsunamis, floods, etc. Whether a virus pandemic amounts to an ‘act of God’ will depend on a number of factors, such as whether the phrase is defined under the contract, whether the clause defining ‘force majeure’ otherwise includes specific references to pandemics or epidemics that would support a noscitur all approach to construction, and the governing law of the contract (in contrast to England and Wales, ‘Act of God’ is a recognised legal concept in some jurisdictions).
However, general ‘sweep up’ provisions in force majeure clauses that attempt to cover off any deficiencies in the drafting will be interpreted narrowly. Consequently, they will not assist a party who seeks to rely on such provisions where the event in question has no connection with those which are expressly listed.
Has the party’s ability to perform its contractual obligations been prevented, impeded or hindered by the event?
The exact requirements will depend on the contractual wording but all clauses require the party alleging force majeure to show a causal link between the event and its inability to perform the contract. In more lenient contracts the event may only need to have hindered a party rather than prevented it altogether.
Either way, the event must be the only cause of the failure/under-performance in question.
Has the party alleging force majeure taken all reasonable steps to try to avoid or mitigate the event or its consequences?
Even if there is a force majeure event, the alleging party cannot rely on it if in fact performance under the contract would have been possible via another reasonable course of action. It is no good to invoke force majeure and then ‘sit on your hands’.
Effect of a force majeure event
Typically a valid force majeure event will have one of two outcomes depending on the drafting of the contract:
- Mutually suspend all obligations under the contract – obligations resume when the specified event ends; or
- Be an event of termination – typically a notice must be served on the other party and all thereafter liability for non-performance (other than for prior breaches) will ordinarily be extinguished because there is no longer a valid contract.
Practical considerations – getting it right
Check your contract carefully! Those wishing to invoke a force majeure clause must assess carefully whether the requirements are met. Where one party wrongfully seeks to terminate on the basis of a force majeure event, the other party may in turn rely upon such a wrongful termination as a repudiatory breach entitling it to terminate. Both parties may be better served by opening a dialogue in order to find consensus on whether there has indeed been a force majeure event.
It is important, as ever to follow the notification provisions of the contract, including requirements for written notice and specified time periods.
Parties notified of a counterpart’s intention to invoke force majeure should consider checking their insurance arrangements and assessing any impacts that the force majeure event will have on fulfilling their own obligations under onward contracts. It may be worth checking the force majeure provisions of those agreements in case of any misalignment between the definitions of ‘force majeure’.
As far as possible, we recommend obtaining legal advice specific to both the circumstances in question and the wording of the particular force majeure clause.
Although ‘force majeure’ is not a recognised legal concept under the laws of England and Wales, the doctrine of frustration is a not-so-distant relative. Frustration applies where a significant change of circumstances renders performance of a contract radically different from the obligations that were originally undertaken. Such a change must result from an outside event or change of situation occurring independently from the party seeking to rely on it.
Where frustration applies, the parties are excused from all further performance and are not liable for damages for non-performance. The contract is permanently set aside.
Relying on frustration is only possible in circumstances where the contract does not already include an express provision catering to the particular force majeure situations. Moreover, it is a rare beast because of the courts’ general reluctance to hold that a contract has been frustrated. It is very much a place of last resort (much like self-isolation).
Final word of warning
The English approach to force majeure is much more restrictive than the approach to force majeure taken under Civil law systems. Therefore you should be alert to the fact that if you have force majeure issues being negotiated with Civil law counterparts or determined by Civil law arbitrators, even if the contract is governed by English law, they are likely to start from the position that if a force majeure event has been established, performance has been prevented under the entirety of the contract. In other words, in those circumstances, there is a higher likelihood that force majeure will be relied upon as a defence to a claim for performance.
- A Mother’s Day miracle
The Lymington Inshore Lifeboat David Bradley (funded by Baltic Exchange members and the Exchange) saved a yachtsman’s life last Mothering Sunday. The lifeboat is named in memory of David Bradley, the former Head of the Baltic’s Freight Department who sadly passed away in 2008 .
The RNLI’s Lymington’s Atlantic 85 inshore lifeboat David Bradley, launched to assist a man in his 60’s who was injured and trapped on his vessel. The weather conditions were good and there was a fresh NE breeze force five.
The yacht was moored to the north of Berthon in Lymington River and the lifeboat was launched quickly. It was understood the casualty was below deck and therefore it was important to identify the vessel as soon as possible.
Further information came through to the crew to help identify the yacht and they were able to locate it on one of the moorings. It was essential they located the yachtsman quickly who was alone on the yacht at the time of the accident.
The lifeboat moored alongside the vessel and three crew members went onboard and found the casualty wedged upside down in the lazarette (a storage locker used for gear and equipment); he had fallen into it whilst working on this yacht.
The lifeboat crew members assessed the man to ensure he was in a stable condition before trying to move him. It took the three lifeboat members to support and lift him onto the deck of the yacht. Care was administered on the yacht and once stable he was transferred to the lifeboat and then into care of the ambulance crew who were waiting on Lymington Town Quay.
Helm Phil Baker said: “The casualty was very lucky and he did the right thing by having a phone on his person, so he was able to contact HM Coastguard for help. It was a very unique shout which I haven’t seen in my 30 years of service.”
Later the rescued yachtsman later contacted members of the lifeboat crew, saying: “I don’t think I would have survived much longer and will be forever in your debt.”
The lifeboat returned to the station and was ready for service again that afternoon.