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The International Chamber of Shipping (ICS) has produced guidance to assist shipping companies prepare for implementation of the 2020 IMO global sulphur cap for ships’ fuel oil. Click here to download.

The guidance has been prepared for the vast majority of ships that will comply after 1 January 2020 using fuel oils with a sulphur content of 0.50% m/m or less.

ICS Secretary General, Guy Platten, explained:

“Shipping companies may need to start ordering compliant fuels from as early as the middle of 2019, and they are strongly recommended to commence developing implementation plans as soon as possible.”

Apart from the significant additional cost of compliant fuel, ICS says that implementation of the global cap will be far more complex than for the previous introduction of Emission Control Areas.  This is because of the sheer magnitude of the switchover and the much larger quantities and different types of fuel involved, as well as continuing uncertainties about the availability, safety and compatibility of compliant fuels in every port worldwide.

ICS argues that if a ship – as now recommended by IMO – has a suitably developed implementation plan, then the ship’s crew should be in a better position to demonstrate to Port State Control that they have acted in ‘good faith’ and done everything that could be reasonably expected to achieve full compliance.

“This need to demonstrate good faith could be particularly important in the event that safe and compliant fuels are unavailable in some ports during the initial weeks of implementation” said Mr Platten. “And IMO has provisionally agreed that Port State Control authorities may take into account the ship’s implementation plan when verifying compliance with the 0.5% sulphur limit.”  

The new ICS guidance explains that the implementation process will need to address the possibility that some ships may need to carry and use more than one type of compliant fuel in order to operate globally.  This could introduce additional challenges such as compatibility between different available grades of fuel that could have significant implications for the safety of the ship as well as its commercial operation.

There is still time to sign up for the Baltic Exchange’s Freight & Commodities Forum in Copenhagen on 27 September. The event will feature a wide range of interesting speakers from Braemar ACM, Macquarie Group, Norvik Shipping, FIS, Paralos Fund, Norden, BIMCO and IHS Markit.

Click here for full details.

Covering FFAs, big data, liner shipping mergers and the implications for Europe of China’s One Belt and One Road, the Hamburg Maritime Management Symposium on 8 November is set to be a thought-provoking evening. Organised by the University of Hamburg and supported by the Baltic Exchange, this year’s line-up features an interesting range of speakers and topics. 

Speakers include:

• Prof. Nikos Nomikos, Cass Business School
• Prof. Qing Liu, Hamburg University
• Anthony Humberston, Senior Freight Analyst, Oldendorff Carriers
• Dr. Jan-Hendrik Hübner, Global Head of Shipping Advisory, DNV GL
• Thomas Mazur, Partner Restructuring Services, Deloitte
• Dr. Arnt Vespermann, CEO, Hamburg Süd

Click here for further details.

Baltic member Shearwater Shipping and Chartering has office space in its building available to rent.

The space is a modern, top floor office, freshly decorated and refurbished.  Other shipping companies are invited to take the space, which is available now, and located at: 43 Friends Road, Croydon, Surrey, CR0 1ED.

• Approx 1000 sq feet/93sq m.
• Very close to East Croydon station.
• Companies with less than 12 employees enjoy favourable council/business rates.
• 15 minutes from East Croydon station to London Bridge or Victoria.

Interested parties should contact David Beckett at Shearwater Shipping and Chartering.

Office: +44 (0) 20 8688 2020 / Mobile: +44 (0) 7831 235 001

Email: projects@shearwatershipping.co.uk

The problem started with fuel supplied in the US Gulf region, particularly in the Houston area, but the problems quickly spread to Panama. More recently, similar problems have been encountered with fuel supplies out of Singapore. Although the problem is now widespread, it is described in the industry as “the Houston problem”, Houston being the first location affected.

Industry commentators estimate that in excess of 200 vessels have been affected by quality-related issues following supplies of bunkers. By late August, the fuel testers FOBAS alone have confirmed that they are involved in 60 cases, of which 30 stemmed from supplies in Houston, 15 in Panama, and 5 in Singapore. It is widely expected that the problem will continue to grow.

The common problem arising out of the burning of the fuel involves the sticking and seizure of fuel-injection system components and the blocking of fuel filters. In many cases the damage to the engine and the cost of repair is modest. In other cases, the impact is far more dramatic. Press reports have identified a number of ships which suffered blackouts and groundings, allegedly as a result of bad bunkers.

The evidence coming to light suggests that the problem arises from the inclusion of adulterants and contaminants within the fuel of non-petroleum refining origin. Two different forms of contaminants appear common: some bad fuels show evidence of chemical waste related to bisphenol manufacturing operations, while others show evidence of bio-derived contaminants, including tall oil — a by-product from the timber industry.

The problem for shipowners

The overwhelming majority of bunkers are supplied under contracts, which stipulate that they will comply with the ISO 8217 parameters. Supplies are frequently tested immediately after delivery to ensure that the fuel complies with the “Table 2” test requirements within IS0 8217, which tests for water content, aluminium, sulphur, etc. The vast majority of the Houston Problem supplies are on specification for Table 2 parameters.

This has led to vessels consuming the fuel and only when engine damage occurs is the potential problem discovered.

The contaminants found in the Houston Problem bunkers can only be identified by advanced analytical techniques such as gas chromatography, combined with mass spectrometry (GC–MS), which go beyond the standard tests for Table 2 parameters. Few laboratories in the world have the ability to perform GC–MS testing and this has caused a major backlog in the delivery of results.  Few GC–MS tests were carried out at the time the problem began although this is changing.

The industry is now alive to the Houston Problem and prudent owners are insisting upon testing involving GC–MS techniques before fuels can be consumed. This remains the only safe way of ensuring the fuel will not have characteristics consistent with the Houston Problem.

If an owner, unfortunately, encounters bad fuel with the Houston characteristics then, depending on the extent of the contamination, it is likely that this fuel cannot be safely consumed and must be de-bunkered (although some vessels have consumed the fuel safely). The issue facing owners when suffering the Houston Problem is who is contractually obliged to de-bunker the vessel (with associated loss of time) and/or to compensate an owner for the consequences of burning the bad fuel. 

Where owners have chartered the vessel by way of a time-charter party, then the charterer is contractually obliged to supply fuel to the vessel and, in the absence of any special conditions, it is implied that such fuel will be fit for consumption by a reasonably well-maintained vessel. Fuel displaying the characteristics of Houston bunkers is likely to be in breach of this obligation. Further, many Time Charters impose obligations on the Time Charterers to supply fuel compliant with ISO 8217.

The start point when looking at whether the fuel is compliant with ISO 8217 is Clause 5 setting out the general requirements. Clause 5.1 requires the fuel to confirm to the characteristics and limits set out in Table 2. However, the remainder of Clause 5 requires the fuel to be:

• “A homogenous blend of hydro-carbons derived from petroleum refining”;

• “Free of inorganic acids and used lubricating oil”;

• “Free of any material that renders a fuel unacceptable for use in marine applications”; and

• “Not contain any additive at the concentration used in the fuel or any added substance of chemical waste that jeopardises the safety of the ship or adversely affects the performance of the machinery”.

If the result of the GC–MS testing is to identify chemical waste relating to the bisphenol manufacturing or bio derived contaminants (i.e., the Houston Problem) then it is likely that the fuel is in breach of some or all of the above Clause 5 obligations.

The immediate recourse action for any ship owner fearing or actually suffering engine damage through bad bunkers, is to pass liability to the Charterers and call upon them to de-bunker the vessel and compensate owners for such losses.

Where the owners themselves have purchased the fuel, the position is more complex.

Bunker supply contracts

The supply of bunkers is, in the absence of a bespoke contract, usually done on the physical supplier’s or trader’s terms and conditions of business. They are inevitably weighted in favour of the seller. These supply contracts invariably contain the following provisions:

• Short periods of time for notification of a quality claim. These range from as short as seven days up to 28 days but rarely, in the absence of any bespoke agreement, any longer. Given that in many cases the innocent buyer of the fuel will have no knowledge of the problem until the fuel is consumed (and quite often not until a large quantity is consumed weeks later), then many buyers are facing the problem of not knowing that they have a claim until after the notification period has expired. The enforceability, or otherwise, of these short time limits is the subject of current debate and, we anticipate, will inevitably be determined by the Courts in the near future. The start point though is that notification of a claim outside the time limit may result in the claim being waived — i.e., lost in its entirety;

• Clear requirements for only the Bunker Delivery Note samples to have any evidential value and so any ship samples will be disregarded for establishing the quality of the fuel;

• A waiver of all claims if the vessel co-mingles the fuel or fails to permit the Seller’s survey and access or fails to preserve any damaged parts; and

• Most bunker contracts contain caps on liability, whereby the seller can limit liability to the purchase price or less. They frequently contain exclusions of liability for consequential losses, loss of hire, loss of use, etc, and limit any recourse solely to physical damage. Many terms also will only pay a portion of the engine damage cost, applying depreciation calculations to limit liability still further. It is unlikely an Owner would recover his losses in full because of these limitation provisions.

How owners can protect themselves

The key to protecting the interest of the owners and their insurers is to take prudent steps to test fuel stemmed out of the Houston area or Singapore, including GC–MS testing before use. Where this is not possible, extreme care should be taken when consuming the fuel and regular checks on engine performance should be undertaken to monitor performance. 

Where the test results show the presence of contaminants consistent with the Houston Problem, then the fuel should not be consumed if at all possible and the Seller or Charterer should be put on immediate notice. If there is any doubt as to the quality of the fuel, an early notice within the time limit of the trader/supplier’s terms and conditions is prudent whether such notice would comply with the express terms of the supply contract, which usually requires a fully documented claim. An early dialogue should be initiated with the seller to prove the off-spec nature of the fuel and the damage, and to compel a prompt de-bunkering.

It is hoped that now the Houston Problem is well known that the contaminants will be removed from the supply chain. Only time will tell whether this problem will continue.

Andrew Preston and Mike Roderick are Partners at Clyde & Co. Contact Andrew on +44 (0) 20 7876 4740 or at andrew.preston@clydeco.com. Contact Mike on +44 (0) 20 7876 4534 or at mike.roderick@clydeco.com.

The Baltic Exchange will be holding a Young Baltic Association (YBA) event in Copenhagen on the evening of 26 September at the Ruby Bar. 

For more information, click here.

The first lecture of the new series of Baltic-Institute of Chartered Shipbrokers lectures, focusing on the IMO’s 2020 Sulphur Cap, takes place next week (Tuesday 25 September) in Singapore and in Shanghai, London and Athens on Wednesday 26 September.

Please note that due to surplus demand, registration for the London lecture is now closed.

Click below for full details:

Singapore, 25 September
Shanghai, 26 September
Athens, 26 September

The Baltic Exchange will be holding a Young Baltic Association (YBA) event in Shanghai on the evening of 20 September at The Cut Rooftop.

For more information, click here.

The Chairman of the Baltic Exchange would like to invite members to a charity pop-up curry night on the evening of Thursday 4 October.

The event will be held at The English Restaurant, Spitalfields, which is housed in a historic building dating back to the 1670s. 

For more information and to book your tickets, click here.

The Baltic Company Cup (13 September) was a closely fought affair reports James Pendered.

Held at the iconic Shire which was re-designed by the legendary Seve Ballesteros, the course was bathed in sunshine the whole day. After a last minute withdrawal by one team, there were 18 players competing over 18 holes of stableford with the highest total combined points of each two man team being the winner. The course has six holes each of Par 5, 4 & 3’s with a fair amount of water. Typically of Seve the course offers a lot of risk and reward. This was reflected in lower scoring and perhaps more lost balls than previous years, but the competition was tight.

The Baltic had also sponsored prizes for any holes in one on four of the Par 3’s with a car up for grabs on the fourth hole. Nobody managed to win the car. However, on the nearest the pin hole we very nearly experienced an ace by Joe Nathan of L.Dens who was inches away from a hole in one, sadly instead of a car he got a sleeve of Baltic balls and a shirt!

The longest drive was won by Owen Webb of Holman Fenwick Willan B, whilst the longest drive in the rough was won by Mitsuhiro Makino of Iino. Best score by a Young Baltic Association player was Henry Smith from MOL UK with 32 points.

For the Company Cup, there were three tied for third place, namely L Dens & Furness Withy & Baltic Exchange A all on 53 total points. In second place and regretting scoring no points on the final 18^th was the Baltic B of David Knights & Paul Farren on 59 points. The winners on 60 points were Holman Fenwick & Willan A team of Andrew Williams & Prahsant Kukadia: many congratulations to them for not only playing a solitary two ball at the end of the teams, but also to have stage managed such a close finish. This means HFW have won the Cup the last two times.

Thanks very much to all the players who took part, if anyone wishes to be part of next year’s Company Cup, or play in any other Baltic Golfing Society matches, please contact James Pendered (jpendered@balticexchange.com).

The inaugural Baltic Cup competition was played at Keppel Golf Course in Singapore on 13 September, writes Chris Jones. Keppel is the oldest golf course in Singapore, founded in 1904, during the days of the British Raj. It is a very narrow course and not terribly driver friendly, unless one is a very straight hitter.

The course is very picturesque, bounded on one side by the sea. Although not far away from the Central Business District, it boasts an abundance of mature trees, which can cause havoc with one’s game.

20 members turned up for an early lunch (at noon), with tee off time at 1p.m.. The weather was kind to us, following several days of rain, in fact too kind and quite a number of us were ‘glowing’ after 18 holes, in spite of the application of copious amounts of factor 30+.

Due to a wide variation of handicaps, it was decided that we should make the event a Texas Scramble, a team event which allows active participation from all team members, including high handicappers.

Post the game, we all gathered to re-hydrate and sort out the scoring, ably assisted by Chong Jin from SGX.

Baltic Exchange Chief Executive Mark Jackson was tasked with presenting the various prizes.

Andy Barker from Cargill won the longest drive with Carl Palmer from FMGL taking the prize for nearest the pin.

Chong Jin won our novelty prize of  ‘longest drive with a putter’  which we are reliably informed was a mighty effort!

The winning team however with a net score of 60 was George Draganoudis of Icap, Ben Prior of Howe Robinson, John Gibson of Brookes Bell and Chris Jones of the Baltic Exchange, Singapore.

A splendid day was had by one and all and we rather hope that this may lay the foundation to form a Baltic Golf Society in Singapore.

Anyone who is interested to participate, please contact Chris Jones on cjones@balticexchange.com.

The following company has applied for Corporate Membership:

The following individuals have applied for Membership under an existing member company:

Any comments should be passed to Karen Karanicholas by 26 September 2018.