ALMAC 2020 Souvenir Edition

ALMAC
2020
SOUVENIR
EDITION
Digitalization n Decarbonization n Supply Chain n P&I n COVID-19

CONTENTS
3
9
10
2 Comment
The future of maritime conferences
3 ALMAC 2020 review
The Asian Logistics, Maritima and
Aviation Conference 2020 captured the
maritime zeitgeist
5 Decarbonization
Emission-free fuels jostle for dominance
9 Digitalization
Leapfrogging shipping’s evolution
10 Supply chain
What to expect from RCEP
13 Seafarers’ welfare
A medic’s eye view
14 P&I
P&I largesse dries up, mostly
16 Containers
Inventory down, prices up
13
14 16
1

Comment
HONG KONG
PUTS ON A GRAND SHOW
Hong Kong’s maritime, logistics and aviation sectors have not
been cowed by the pandemic. With the able assistance of
eminent overseas industry leaders, the territory’s most notable local
professionals from all three sectors resorted to virtual technology to
let the world know that Hong Kong is a force to be reckoned with.
Through some very professionally arranged virtual platforms,
most notably the Asian Logistics, Maritime and Aviation Conference
(17-18 November), Hong Kong’s finest addressed urgent
issues facing the transport industry today, including carbon reduction,
digitalization, and of course, COVID-19. Regionally, the
Greater Bay Area was the big-ticket item at this year’s event. A
number of the conferences waved the flag for Hong Kong and its
predicted high-profile role in the GBA. Despite the turmoil the city
has experienced for over a year, new ship leasing tax concessions
have come into effect, similar tax breaks for marine and other insurance
will soon be a reality and Mainland China- Hong Kong
agreements will see the territory’s role as a dispute resolution and
legal services hub continue to burgeon.
It is hoped that by the time ALMAC comes around again on
2-3 November 2021, the world will be close to COVID-19 free.
But industry conferences may never be the way they were before
the pandemic. ALMAC 2020, by virtue of being virtual for the first
time, multiplied its participants five times, garnering an audience
of 10,000. What should be the way forward?
It is possible that ALMAC 2021 could revert to the old format
of a physical event only at the Hong Kong Convention and Exhibition
Centre. The numbers could revert to around 2,000 visitors.
But ticket prices could be increased accordingly, and Hong Kong’s
depleted economy would be boosted by the arrivals.
The obvious choice would seem to be a hybrid event (virtual
and physical). Autumn in Hong Kong, with its moderate temperature
and low humidity, has perennially been the favoured time
of year for overseas business personnel to catch up with their opposites
in the territory. We shall assume, for the purposes of this
exercise, that the pandemic is over this time next year. Even so,
it’s a fair bet that some businesses would have cut back severely
on overseas travel, either because of much increased flight costs,
or because it has been decided that proposed business meetings
can be done virtually.
Add to this conundrum the expected return of Hong Kong
Maritime Week 2021, (cancelled in 2020 because of the pandemic).
ALMAC has always been the flagship of HKMW. If the bijoux
events, organized by maritime SME’s are to have a chance to thrive,
it is essential that ALMAC has a physical presence.
In recognition and appreciation of the efforts of the Trade Development
Council and the Government of the Hong Kong SAR in
organizing ALMAC 2020, this issue devotes the lion’s share of the
content to the themes arising out of that outstanding conference.
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2

ALMAC 2020
SHIPPING REVOLUTION SURGES
AMIDST TOUGH ENVIRONMENT
The Asian Logistics, Maritime and Aviation Conference (ALMAC), aired globally
from Hong Kong captured the maritime zeitgeist perfectly
There was, perhaps, no better example of the rapidly changing
nature of how shipping is now doing business, than ALMAC
itself. No longer bound to a physical location, for the first time, the
conference was able to enter the homes and offices of more than
10,000 viewers across the globe, in real time.
Those participants, several thousands of miles from London
got their first up close and personal encounter with the Secretary-
General of the International Maritime Organization (IMO), Kitack
Lim, who set out much of the agenda of the day.
Mr Lim referred first to maritime’s most immediate challenge,
the pandemic, and its calamitous impact on seafarers’ ability to
embark and disembark ship, “I have been impressed with the level
of cooperation in the maritime sector during the pandemic. But we
have much work to do, and our focus must be on finding solutions
to respond to and overcome the pandemic,” he emphasised.
Decarbonizing the shipping industry
Describing decarbonization as “the battle of our time”, the
Secretary-General made clear that regulation will be just one of
the weapons in the armoury. A huge financial commitment as well
as technical expertise will be needed to complete the arsenal.
Mr Lim said the third challenge would be digitalization, with the
target being to use this technology, and artificial intelligence to
revolutionize the shipping industry.
In a late afternoon session, Esben Poulsson, Chairman of the
International Chamber of Shipping, described his organization’s
proposal to IMO, for a US$5bn decarbonization fund. The money
for the fund is to be raised through a marine fuel levy that will
contribute to research and development into carbon-free fuels and
enabling technology.
“We need new technology and new fuels for decarbonization
to work,” he said. “An entirely new global refuelling network
is needed, which is why the industry has come forward with its
R&D proposal to raise funds to catalyse this transformation,”
he insisted.
Chief Executive Officer of Ocean Logistics, AP Moller
Maersk, Vincent Clerc, highlighted a further driving force
behind the industry’s need to decarbonize, “We’re looking at a
lot of commitments that are guided by customer demand and
expectations, not rules.
“Customers need long supply chains, but they won’t accept
the environmental impact of those chains. Our customers have
changed, so we are upping our game.”
The estimated cost to decarbonize shipping by 2050, is around
US$1.6trn. The ICS US$5bn proposal is generally considered an
important first step.
Digitalization
Mr Poulsson, contributing to the digitalization debate, pointed
out that container shipping has made progress in digitizing its
processes. But the industry at large is playing catch up with other
industries.
“The supply chain should be looking horizontally rather than
vertically, he said, because we tend to think of it as linking ships,
“Decarbonization is the battle of
our time” Secretary-General of
IMO, Kitack Lim
3

ALMAC 2020
but the entire supply chain from top to bottom needs to be able to
communicate, so all the systems must be compatible,” he proposed.
Illustrating the advantages of digitalization in practice, Executive
Vice President of China COSCO Shipping Corporation Limited,
Huang Xiaowen said: “Digitizing the upstream and downstream
parts of the industry chain and building smart facilities has helped
ensure the smooth flow of shipments around the world and
provided a more secure industry supply chain.”
“COSCO opted for digitalization because of internal and
external driving forces, he said, it has become a mainstream trend.
“Resources are fragmented, making it difficult to meet customers’
needs for integrated services, but digitalization allows COSCO to
coordinate these fragmented resources, which is an important step
for high-quality development,” he concluded.
Next generation technology will require next generation talent
It is widely recognized that the younger generation’s greater
familiarity with cutting-edge technology will be sorely needed in
shipping, which will have compete strongly against other sectors for
upcoming talent. This point was raised by ICS’ Mr Poulsson.
“There is a risk that the existing staff are not equipped to adjust
to the new way of doing things and don’t have the operational
expertise to handle it. We need to make sure that we train people to
use the new equipment to be part of the process [of Digitalization].”
Training a new generation had resonance with a session on the
role of Hong Kong within the Greater Bay Area when Rosita Lau,
Partner at international law firm Ince, insisted on the importance of
developing talent both in Hong Kong and in the GBA.
The role of the younger generation in moving innovation and
technology in Hong Kong turned out to be one of the themes in the
annual policy address of the Hong Kong SAR’s chief executive just a
week after the conference.
Chief Executive, Carrie Lam proposed launching a global
STEM Professorship scheme to attract more I&T talents at a cost of
HK$2bn. In addition, Hong Kong intends to respond to large-scale
technology enterprises, in Shenzhen that have approached the HK
SAR, with employment opportunities for young Hong Kong people
in the I&T arena.
Hong Kong – playing to its strengths
While Hong Kong comes to terms with the brave new world of
innovation and technology it continues to rely on and augment its
dominance in the legal and financial sectors.
“Hong Kong can be the legal services [and arbitration] centre
[for the GBA] because it has the hardware and a good legal system
to provide independent arbitration, with specialists who know what
they are doing. Hong Kong has the talent,” said Ms Lau, “and it’s
truly a place where East meets West.”
“We are lucky in Hong Kong that we got to learn the
international legal system earlier than the rest of the GBA,” said
Kenneth Lam, Chairman and Chief Executive of Crédit Agricole
Asia Shipfinance Limited. “There’s a lot of beauty in the system,
Live from Hong Kong, left to right, Bjorn Hojgaard, Chairman of the Hong Kong
Shipowners Association, Hing Chao, Executive Director of Wah Kwong, Kenneth
Lam, Chairman and Chief Executive of Crédit Agricole Asia Shipfinance, Rosita
Lau, Partner, Ince
and shipping falls under common law. So we should focus on our
experience and show how we can grow together,” he added.
A string of government initiatives over the last 12 months
have helped cement Hong Kong’s position as the maritime law
jurisdiction of choice within the GBA and beyond. Chief among
them has been a pilot measures for Hong Kong and Macao legal
practitioners to obtain mainland practice qualifications and to
practise as lawyers in the nine Pearl River Delta municipalities in
the Guangdong-Hong Kong-Macao Greater Bay Area.
Also, a Pilot Scheme on Facilitation for Persons Participating in
Arbitral Proceedings in Hong Kong. The scheme offers facilitation
for eligible non-Hong Kong residents participating in arbitral
proceedings in Hong Kong on a short-term basis in order to
strengthen Hong Kong’s position as an international centre for legal
and dispute resolution services in the Asia-Pacific region. And be
in line with the Belt and Road Initiative as well as the Guangdong-
Hong Kong-Macao Greater Bay Area Development.
Mr Lam, took the opportunity to unveil Hong Kong’s most
newsworthy development, the new ship leasing regulation which
provides for significant tax concessions to ship lessors. The bill was
passed by the Legislative Council in June 2020.
On the wider implications of the bill, Mr Lam said: “The
opportunity is in place to combine Mainland China originated
financial initiatives such as Stock Connect (collaboration between
Hong Kong, Shanghai and Shenzhen stock exchanges, 2014); Bond
Connect: (a mutual market access scheme that allows investors from
Mainland China and overseas to trade in each other’s bonds market,
2017) and, Wealth Management Connect (Cross-boundary wealth
management connect scheme in the GBA, 2020) with ship leasing.
“These items are of strategic importance for the mainland to
open its finance sector to the outside world.”
The next ALMAC will be held in Hong Kong on 2-3 November 2021.
4

Decarbonization
IN ITS STRENGTHS LIES
IMO’S WEAKNESSES
The approach of nations and institutions to decarbonization is becoming increasingly
fragmented. Will IMO’s devotion to consensus win through?
There can be little doubt in the merit of the International
Maritime Organization’s contention that it should be the global
arbiter when it comes to regulating the international shipping
industry. But with the dire effects of climate chaos daily becoming
more apparent governments and other institutions are losing
patience with the delay in reaching consensus that comes with an
organization (IMO) with 174 members.
The biggest challenge to IMO’s mandate is the European
Parliament’s vote to include international and EU domestic shipping
trades into the Emission’s Trading System by 1 January 2022.
Minor irritant in comparison, is the Sea Cargo Charter. The SCC
is a global framework initiated by a group of the world’s largest
energy, agriculture, mining and commodity trading companies who
have agreed to assess and disclose the climate alignment of their
shipping activities. While the IMO has not commented publicly on
the SCC, the International Chamber of Shipping has questioned the
validity of the initiative because it is not aligned with requirements
to be agreed by the International Maritime Organization.
Meanwhile, it is yet to be seen if the world’s second largest fleet
(China) will be impacted by the nation’s drive to become carbon
neutral by 2060, a far more ambitious target than that set by IMO
of a fall in emissions of 50% by 2050 compared to 2008.
MEPC meeting
Back at IMO, and the recent Marine Environment Protection
Committee meeting held virtually on 17 November, where a
proposal by eight of the largest industry associations to impose a
levy of US$2 per tonne of fuel, aims to raise US$5bn over 10 years
to finance research and development. The fund will be overseen
by the International Maritime Research and Development Fund
(IMRB).
Industry observers have set the cost of reaching the IMO targets
at around US$1.3trn, which makes the US$5bn fund a drop in the
ocean. But as ICS chairman Esben Poullson noted at the recent
Asian Logistics, Maritime an Aviation Conference in Hong Kong,
“it’s a step forward.” However, some IMO delegates, covetous of
the Organization’s role, questioned how an autonomous IMRB
would operate from a legal perspective and in practice. And, why
should it be autonomous (and out of the reach of the IMO) in the
first place?
Nations divided
Those nations under the more immediate threat of submersion, as
a result of climate change, wanted part of the revenues raised to
be used to support small island developing states. Other nations
suggested that the levy was a market-based measure or tax by
stealth. Market-based measures continue to divide the members of
IMO with many not willing to give such options the time of day.
The US, as is its wont these days, said it had substantial
concerns about the mandatory levy and could not support such a
funding obligation through the IMO. Alternative funding options
must be sought, it concluded.
ICS intends to set up the IMRB by 2023 and if indeed it will be
an autonomous body, it should go ahead. The alternative will be
interminable negotiation.
Concurrently, the same MEPC meeting proposed short-term
efficiency measures that many member nations found disappointing,
rendered environmental activists apoplectic, and which the world’s
largest shipping company, Maersk, has outright rejected as it
simultaneously raised the need to start negotiating the oft abjured
market-based measures.
Stop pussyfooting
International Chamber
of Shipping chairman,
Esben Poullson. The ICS
has been pushing an R&D
Fund for decarbonization.
What the proceedings at the IMO last week showed is that there is
still little willingness to confront its own carbon reduction targets
head on. The failure to do so could incur further unilateral action by
rogue nations and institutions, rendering IMO’s role obsolete.
5

Decarbonization
No problems for the power
plant carrying MV Karedeniz
EMISSIONS-FREE FUELS
JOSTLE FOR A LEAD
A bewildering number of fuels are being promoted as the answer to shipping’s
emissions-free future
In a recent survey, energy giant Shell asked shipowners what their
alternative fuel preferences were.
Looking at environmentally friendly fuels being proposed, the
only fuel currently available in sufficient volumes is LNG. LNG
is 20 to 25% less carbon intensive than heavy fuel oil and scores
well with less NOx and Sox. But while it fails to eliminate carbon
emissions it fails the ultimate test and can only be considered as a
transition fuel to 2030.
Lack of energy a problem
Neither hydrogen nor ammonia are currently viable fuel
options. But they are considered by many to be promising future
alternatives. Low energy density and, in the case of hydrogen, the
need for ultra-low cryogenic conditions to maintain its liquid state
under pressure will add extra costs. Both fuels would require much
greater storage capacity than HFO. Some shipowners are betting
on fuel cell technology to replace internal combustion engines,
which would go some way to combat the storage difficulties for
these fuels. Others consider fuel cell technology as too immature
for ocean-going vessels.
Biofuels could be permanently out to grass
The possible use of biofuels has been lurking offstage for a number
of years. But given the vast volumes of the fuel needed for the
industry and the land and biomass required to produce it, members
of the shipping community have questioned the likelihood that
biofuels would be available in sufficient quantities.
Flat batteries
Coming in last is the use if batteries. As one executive from a cruise
company expressed it: “Electrifying small ships is great, but most
emissions come from deed-sea shipping, and there are no viable
options to address that with batteries.”
Nuclear tipped to boom
Finally, some US-based operators suggested that, “nuclear is really
the only solution that exists today that could be implemented
relatively quickly.” Further endorsing that point, one European
operator suggested that, “if climate change accelerates, the negative
connotations of nuclear will be secondary to global warming.”
The points of view of many in the shipping sector, meanwhile,
could either be characterized as more pragmatic; or some would
say cynical. On one thing there is a virtual consensus. The range of
fuels under consideration is too broad. This will result in effort and
investment being spread too thin and challenges efforts to coalesce
around a viable solution in time to meet targets.
Tried and trusted but not the answer
If the truth be told, many energy providers would like to stick to
what they are good at. As far as the industry is concerned. The
Shell study found: HFO, shipping’s primary energy carrier today,
is cheap, energy-dense and has well-established supply chains.
As a by-product of the refining process, it is used by few other
industries which creates more certainty around cost and supply. As
one executive from an Asia-based tanker operator put it, “shipping
uses the lowest quality fuel from refineries, which means it’s cheap
and no one else wants it.” As a result, new fuels will likely cost
more and will require the industry to compete for supply with other
industries.
Without a stronger commercial or regulatory incentive,
operators are sceptical about their ability to find a fuel that is a
viable alternative to HFO. They indicate that many stakeholders will
need to play a part to develop and commercialise new technology.
If a viable alternative is not found, various forms of carbon offsets
will be required to reduce net emissions to levels that support the
sector’s ambition.
6

Decarbonization
NEW ATOMIC ENERGY TECHNOLOGY
MAY BE KEY TO MEETING IMO EMISSION
REDUCTION TARGETS
What was once thought unthinkable is back on the drawing board
Finding a ‘magic bullet’ that will provide shipping with
dramatically reduced GHG and CO2 emissions, looks like a
long and tortuous road, as pressure increases from governments
and environmental groups. The International Maritime Organisation
(IMO) has a mandate from 174 countries that shipping must reduce
emissions by 50% of the 2008 total, before 2050. This means an
actual emission reduction of almost 90%, by 2050.
The ‘seascape’ is that there are some 60,000 cargo ships plying
their trade on the oceans of the world, so how will we achieve the
necessary changes to ensure that shipping reaches those targets
within the mandated timeframe? New ships are now designed as
‘carbon neutral’, but what are the energy sources that will deliver
those reduced emissions? We are simply pushing emissions from
sea to land.
The reality is that the only viable technology which can deliver
a durable combination of close-to-zero emissions, marine-level
reliability, walk-away safety and competitive economics, is atomic
energy.
Not ‘old nuclear’, like the technology that is used on naval
submarines, aircraft carriers and ice breakers which is totally
unsuited to commercial shipping, but new advanced ‘atomic
battery’ technology.
Mikal Bøe, chief
executive officer,
Core Power
New era in green shipping
Now, interest is building in shipping at the development of
‘Atomic Batteries’ for marine propulsion. These mass-manufactured
power units based on marine Molten Salt Reactors (m-MSRs) will
deliver ample, reliable energy for fully electric large ships with no
refuelling needed for up to 30 years. Zero emissions would come as
standard.
Core-Power, based in London, is working with consortium
partner TerraPower to build advanced m-MSR ‘atomic batteries’
suitable for electric propulsion in very large ships, delivering 100%
green, electric power and industrial heat for cheap and rapid massproduction
of synthetic electro-fuels such as green ammonia for
smaller ships.
“By installing m-MSRs on floating production vessels for making
synthetic green fuels for smaller ships, we could produce fuel where
it is needed and substantially reduce, even eliminate those trillions
of dollars we would have to spend on infrastructure if super-low
density solar and wind was chosen instead,” says Mikal Bøe, chief
executive officer for Core Power.
No refuelling
For shipping, there would be no refuelling or handling of spent
fuels and no practical proliferation of atomic material. That level of
passive, walk-away safety is unprecedented.
With cheap long-term energy produced by m-MSR battery
packs, the opportunity arises for reverse cold-ironing in ports,
whereby energy from the ship is used to power port equipment and
machinery while the ship is at berth.
Providing electric power to ports, reducing pollution and noise
as well as the potential for processing of commodities at sea, can be
a game changer for the whole industry.
No energy price volatility
While volatility in the cost of bunker fuel has bedevilled ship
operators and shippers alike, m-MSR batteries deliver zero volatility
in the cost of propulsion, enabling longer-term cargo contracts
without BAFs or rate adjustments, leading to profit visibility and
better financing of ships.
Using super-efficient modern nuclear technology; natural
materials like uranium and thorium, which are plentiful, could run
the world entirely on nuclear for over 4,000 years.
7

Decarbonization
A leasing model for m-MSR batteries
would be similar to those for aircraft engines
with through-life maintenance and ‘battery’
monitoring provided from remote, minimising
running costs for vessel owners and
charterers.
Nuclear Reactor
The tide is turning
The tide is turning, more people around the
world are now making the positive case for
clean, durable modern atomic power. Proven
scientific facts about nuclear energy are now
understood. In order solve climate change,
we need more energy-density, not less.
That density comes from atomic power, not
sunshine and wind.
While the debate continues about which
fuels or energy sources should be developed for shipping’s greener
future, the m-MSR ‘atomic batteries’ ticks all of the boxes. Faster,
cheaper, clean electric ships, is a game changer for ocean transport.
Is the world ready for atomic shipping?
A recent report from international law firm, Holman Fenwick
(HFW) led by senior partner, Christopher Chan, ponders whether,
despite ticking all the boxes, atomic powered vessels can get over
the hurdles. Below, Mr Chan outlines a possible scenario.
The nuclear option, being carbon-free and having been
implemented in the other sectors for some time, no doubt deserves
the attention. Bill Gates’ recent venture with Core Power should
also be read together with his continuous support on nuclear energy
since TerraPower.
Proof of concept stage still to be gained
As concluded by the International Chamber of Shipping in a
November 2020 report, a large amount of R&D is still required
before any of the presently available options could become viable.
Meanwhile, one should not omit the fact that the commercialised
design of Core Power’s molten salt reactor (MSR) is still at the proofof-concept
stage. If the design proves to be viable, it will still have
a long way ahead. As recognised by Core Power themselves, their
nuclear propulsion technology will face a series of political and
regulatory challenges over an extended period of time.
As we understand from the limited information published
by Core Power, they claim that this new design is not prone to
explosion or even proliferation when operating in good order.
However, as we all know, the sea can be treacherous and collisions
are not rare. Even without something as visual as an explosion, the
simple leakage of radioactive substances into the sea will still be
catastrophic. The industry should be careful not to elect another
form of harm when combatting greenhouse gases.
Currently, Chapter VIII of the International Convention for the
Safety of Life at Sea 1974 (SOLAS) and the IMO Resolution A.
491(XII) of 1981 do provide some regulations on the general safety
standards of nuclear ships. There is presently no information as
to whether these general regulations are sufficient to cover Core
Power’s new MSR design. From Core Power’s website, they are
clearly aware of the time lapse since these general regulations came
to be and are calling for an update.
Cost remains unknown
Core Power’s MSR design is still in development without any
published data on costs of installation on board. Costs of installing
the MSR on board are apparently lower than the traditional nuclear
plant which requires high pressure, but as accepted by Core Power,
it may be uneconomical for some older or smaller vessels to retrofit
for MSR. This means that shipowners may be looking at the costs of
constructing new vessels instead of a mere retrofitting operation.
However, one may readily expect the nuclear propulsion
technology to encounter an additional obstacle that other forms of
zero-carbon/low-carbon propulsion (e.g. ammonia, hydrogen etc.)
will not be facing: public perception. If the public remain cautious
about nuclear power, port facilities and docks may have to be
constructed in remote areas, leading to extra costs.
If Core Power can prove to the world that their new design is
as safe and reliable as claimed, we are certainly optimistic about
its future in the long run. Widespread adoption of this form of
power will take a long time. Governments and the public will be
sceptical due to past experiences with nuclear merchant vessels.
The shipping sector, especially the stakeholders who are heavily
invested in the supply of oil and other fuels, may also be reluctant
to adopt the new power. However, these obstacles will likely be
surmountable if this technology breakthrough proves its worth in
the coming decades. A successful outcome will be desirable to our
environment, and to the shipping sector as a sustainable industry if
we are sufficiently well-prepared to adopt the inevitable change.
8

Digitalization
COVID-19
LEAPFROGGING SHIPPING’S DIGITAL EVOLUTION
Shipping has been slow to embrace new digital technologies and solutions. Given
COVID-19 and the pressures on shipping businesses to rapidly adapt, digital scepticism
could become a thing of the past, Lars Fischer, managing director, Softship Data Processing
Worldwide, companies are relying on telecommuting, to
reducing reliance on physical processes and significantly
adapt their way of working by adopting digital solutions.
For many shipping companies, this requirement to rapidly
adapt laid bare the many failings in the administration of their
business and highlighted how important IT infrastructure and
communications capabilities are to the resiliency of their operations.
With glimmers of hope on the horizon in the handling of the
pandemic, we must not forget lessons that have been learnt. The
shipping industry must now adopt future-proof IT solutions and
invest in building digital foundations to provide them with greater
resilience in the long-term.
Parting with the patchwork approach
It has been argued for many years that container lines, liner agents
and port agents ought to regard their IT infrastructure as a vital –
and valuable – asset. So many shipping businesses ‘make do’ by
working with a patchwork of software, tools and applications built
for very different purposes and around which they end up having
to shoehorn their operations. COVID-19, and the pressures it is
placing on shipping supply chains to adjust to unprecedented
changes in ways of working is proving that this approach does not
work when the majority of the workforce is confined to the backbedroom
or kitchen table. It leaves businesses and operations
exceptionally exposed, and incredibly inefficient.
A good software suite designed to accommodate the
requirements of liner shipping or port agency operations, in
comparison, will connect and integrate all activities from sales to
customer service through to documentation and invoicing, and
allow all personnel to work from a single and comprehensive
software suite. By fully integrating – creating automated processes
and syncing programmes – software solutions developed to cater
to liner and port agency operations can reduce risk by providing
intuitive, automated and networked processes that simplify all
administrative requirements, and adapt in real-time.
Levelling the playing field for port agents
For port agents, who are crucial to every shipping supply chain,
working from a software suite that enables them to work from
anywhere and at any time must now become the norm. Independent
ship agency businesses and smaller owners and operators unable
able to invest in bespoke IT systems were left exceptionally exposed
this year. Many of these companies are not digitally equipped
to operate remotely and safely for a prolonged period. For these
companies, an ‘off-the-shelf’ cloud-based software solution designed
specifically for port agents, such as Softship’s SAPAS solution can
enable them to compete in a way they couldn’t before – everyone is
a remote operator now, so some earlier impediments to competing
with larger providers have been blown away.
The web-based platform encompasses every administrative
task, and reduces paper-based administration, meaning every
team within the company has the capability to work remotely.
Automatic syncing of information, automation of data flows and
standardisation of processes remove a significant amount of human
error and provide a greater level of foresight and control. In the
cloud, the company only pays for what it uses, capacity – and
therefore fees – can be adjusted to suit the highs and lows of the
business, which is critical as operating margins will be pressured for
some time to come.
This is an important point. We
are unlikely to just go back to ‘the
way things were’ pre-COVID, as
the industry has seen the benefits
new ways of working can bring.
Companies not equipped with the
right IT infrastructure will suffer in
the long term, so, now is the time
for companies to invest in flexible IT
solutions that will fortify their business
for the future.
Lars Fischer, managing
director, Softship Data
Processing
9

Supply chain
WHAT TO EXPECT
FROM RCEP
Container lines, ports and logistics firms are set to a see a $500 billion a year
surge in trade volumes as a result of Asia’s Regional Comprehensive Partnership
Agreement, writes Keith Wallis
Asia’s Regional Comprehensive Partnership Agreement,
signed by 15 countries on November 15 after eight years of
negotiations, is the largest plurilateral trade agreement in the world.
Signatories include China, all 10 members of the Association of
South East Asian Nations (ASEAN) and Australia.
The Brookings Institution public policy think-tank estimates
RCEP could add $500bn to world trade by 2030 and $209bn a
year to GDP for the three largest signatories - China, Japan and
South Korea.
Intra-Asia container volumes to be early RCEP
beneficiary
The agreement, which is expected to be ratified next year, is
expected to boost intra-Asia container volumes as tariffs are
either cut or eliminated. Intra-Asia is already the biggest container
shipping market in the world, growing from 31.6m teu in 2014 to
42.7m teu in 2019.
Harmonisation of rules of origin regulations, which will
effectively make RCEP members a single customs area, are set to
spur growth in cross-border trucking, particularly between China
and ASEAN members.
“A key takeaway is the potential benefit for reefer trades: there
will likely be boosts to trade for certain agricultural products, which
is a key source of growth within intra-Asia container business,”
says Daniel Richards, senior analyst at Maritime Strategies
International.
“China in particular has committed to cut many of its current
import tariffs on ASEAN agricultural goods to zero from about 10-
15% in general in the first year of the agreement,” Mr Richards
adds.
Textiles, garments, chemicals, plastics, processed foods and
auto-parts are also among the products that are likely to grow in
volume due to cuts in tariffs and the harmonisation of rules of
origin.
Highlighting the positive impact on tariffs, Fung Business
Intelligence in a RCEP research report published in mid-
November says: “China will eliminate tariffs on over 100 lines for
Japanese fibres, fabrics and yarn in the first year when the RCEP
comes into force.”
The report adds that Vietnam will gradually reduce tariffs on
fibres, fabrics and yarn imported from China while Japan will
steadily phase out tariffs on almost all textiles and apparel exported
by other RCEP members.
Focus on China-Japan trade
“The focus on China-Japan trade could very well create an
immediate jump in box volumes between the two countries given
the absence of an existing trade agreement between China and
Japan,” says Jonathan Mummery, maritime analyst at Dynamar.
Taking into account the positive impact from the synchronisation
of rules of origin the overall result the Fung report says is “RCEP,
once ratified and implemented, will boost intra-regional trade of
textiles and apparel and strengthen the regional textile and apparel
supply chains”.
The focus on China-Japan trade
could very well create an immediate
jump in box volumes between the
two countries given the absence of
an existing trade agreement between
China and Japan
10

Supply chain
The agreement, which is expected
to be ratified next year, is
expected to boost intra-Asia
container volumes as tariffs are
either cut or eliminated
These views were echoed by maritime analysts. MSI’s Mr
Richards says: “The greater clarity and harmonisation in regulations
around rules of origin could facilitate increased cross-border flows
within specific supply chains, which would be to the benefit of
short-sea and feeder container operators in Asia.”
Dynamar’s Mr Mummery, adds: “Changes to the Rules of
Origin regulations, for example, could lead to the development
of more integrated supply chains and higher volumes of semifinished
products moving between Asian economies and
manufacturing hubs.
“With the ROO regulations dependent on the location of
manufacturing, rather than the location of the headquarters, it could
draw in other international enterprises seeking to make use of the
agreement’s provisions,” Mummery added.
Easier road haulage
The easing of border controls harmonisation is expected to facilitate
easier regional road haulage. Regine Picard, senior vice president
global freight management at LF Logistics, says: “With the removal
of trade barriers, simplified customs procedures and investment
in infrastructure we expect increased demand for cross-border
trucking between south east Asia and China and within intra-south
east Asia.”
The growth of cross-border trucking together with existing
ocean and airfreight options means logistics companies will be able
to offer truly multi-model transport options to customers, she adds.
Ms Picard points out that RCEP, through easier cross border
trade flows, will only reinforce the shift of manufacturing out of
China or the development of alternative manufacturing centres in
addition to China to lower cost bases such as Vietnam, Thailand,
Cambodia and Myanmar.
“We see that over time manufacturers will reduce their overreliance
on China and create resilience in their supply chain
operations. At the same time, the China domestic market will
create new export opportunities for other Asian countries,” Ms
Picard suggests.
These developments will increase the value of logistics firms
having operating hubs for both consolidation and transit cargo to
support B2B and B2C orders. Among the likely hubs are Shenzhen,
Hong Kong, Shanghai, Singapore and Ho Chi Minh City, she says.
“While RCEP is expected to boost intra-Asia box volumes
quantifying the actual increase may be difficult to assess given the
underlying growth in volumes,” Dynamar’s Mr Mummery says.
But he adds: “The enhanced level of trade facilitation and the
pathway it opens up for greater regional cooperation further down
the line will certainly act as an enabler of greater regional volumes.”
The growth of regional sourcing and manufacturing at the
expense of transoceanic trade may even result in a decline in
intercontinental volumes, Mr Mummery suggests.
RCEP forecasts muddied by uncertain China-US relations
But he cautions: “The current uncertainty makes any forecast
difficult and the likely shift in US relations with Asia, including
the possibility of a resumption of TPP negotiations involving the US
could skew the picture somewhat in the coming years.
“The China-centric nature of the new agreement, alongside
provisions aimed at enhancing Asian competitiveness, multinational
supply chains and other items such as e-commerce would make the
wider international impact more dependent on how the agreement
will link to others, including a possible China-EU investment treaty
and further ASEAN-EU cooperation.”
While, longer term, the growth in volumes could also spur
investment in port infrastructure, maritime analysts say. Even as
some ports, notably Bangkok and Chittagong, struggle with terminal
and berth congestion especially as carriers introduce larger 6,600
teu ships, there is adequate capacity overall in the region.
Andy Lane, partner in Singapore’s CTI Consultancy, says: “I
do think that the ports both have sufficient capacity and have the
ability to grow and quickly. We do not need to pass through 10 year
environmental studies to build capacity and that can be scaled to
meet demand fairly quickly.”
Dynamar’s Mr Mummery adds: “In recent years, the need
for improved infrastructure has become evident in any case and
while the agreement would likely impact longer-term strategic
development plans and port and terminal master plans with a
longer time-horizon, the immediate concerns regarding congestion
and the need for improved infrastructure will likely remain relatively
stable. A significant amount of capacity still remains available for
utilisation in the region.”
11

Supply chain
THREE TENETS TO SURVIVING DISRUPTION:
PEOPLE, DATA AND TECHNOLOGY
As Hong Kong businesses continue to navigate under the new norm, one thing has
become clear. Customer experience reigns supreme, writes Joseph Lim, sales director,
APAC at BluJay
The last six months has demonstrated that the industry needs to be
better prepared to improve supply chain capability for delivering
an enhanced customer experience. It’s not only a key driver but
being successful in this requires supply chains to rely on and invest
in people, data and technology.
Build a team of people you trust
Leveraging the expertise and knowledge of your people provides
a leg up in adjusting effectively to new roadblocks. Experienced
supply chain experts have seen disruption before and know how to
push through it. The next generation of supply chain professionals
may bring new ideas to navigate disruptions. Collaboratively, it’s the
people making critical decisions backed by data that can enable
companies to view and respond to disturbance as an opportunity to
innovate rather than a setback.
Look to data for answers you don’t have
Data itself is just great information, but it doesn’t necessarily tell
you anything until you turn it into sets of analytics and trends. The
pandemic has brought on changes that are not always as intuitive
as one might think. Data is the key to understanding what has
happened in the past, what is happening currently, and what could
happen in the future.
Whether it’s having insight into transport KPIs such as market
rates, routing guide compliance, or on-time performance, data
context is crucial to decision-making. For example, by looking at
the same data, a food and beverage supplier may have different
takeaways to a clothing retailer, but both businesses need to analyse
the data and prepare for future disruption. By having all the data
readily available, businesses are able to make informed decisions to
navigate disruption and build a richer customer experience.
It’s also important for companies to look at data from a
broader industry perspective, not just for their business. It
allows organisations to understand how they’re performing
against other companies of similar size and structure;
benchmarking successes and looking for areas of improvement.
Additionally, in the experience economy, supply chain partner
connectivity is a must and requires collaboration between
everyone to deliver exceptional customer experiences. We can
multiply success by not just exploiting our own organisation’s
data but also tapping access to your supply chain network data
through connectivity.
Use technology as a tool to absorb the shock of
disruption
The flexibility afforded by technology can be the difference in
surviving disruption. In the context of COVID-19, technology
has provided vital solutions to what would otherwise have been
devastating problems. From tech as basic as communication and
video platforms, to the applications that run supply chain execution,
these solutions made it possible to keep many businesses operating
smoothly – something that would not have been possible in the notso-distant
past.
The pandemic disruption has underscored the value of cloudbased
technology. For example, the benefit of accessing a TMS
from anywhere, anytime to manage freight, kept essential products
moving through the supply chain. Operators could move to a
remote environment in hours and days, without disruption. Think
of how easily some providers and companies shifted entire supply
chains to be contactless in a matter of weeks.
Each pillar supports the others
Once you’ve prioritised these three pillars
in your business, true success comes
from leveraging each to support the
other. Technology in itself is not
a sliver bullet. The key to success
to organisations is the ability and
willingness to hunker down and
collaborate internally to determine what
end result they want. In these current
times where the “I want it now”
culture reigns and customer
experience plays such an
important differentiating role,
the ability to deliver fast and
staying flexible is paramount to
success.
Joseph Lim, Sales Director,
APAC at BluJay
12

Seafarers welfare
A MEDIC’S EYE VIEW OF
THE SEAFARER CRISIS
The world’s negligence with regard to seafarers’ welfare and status as
essential workers will not be forgotten
Belatedly, there has been action by a few
nations to ease the crew change crisis,
which at its peak left up to 400,000 seafarers
stranded at sea for months beyond the
standard 11-month contract, with a similar
number left at home unable to earn a living.
However, the position remains critical.
Patrick Wong, business development
director, maritime, Asia at Medsea Asia
Limited has found in the course of his work,
a higher number of cases with mental issues
reported to his platform, with a record high
in May and June. Today, a higher anxiety
level is observed among crew members
suffering with illness and injury.
The longer separation from family, uncertainty around crew
change, lack of shore leave, the accessibility to shoreside medical
support, and the threat of COVID are factors contributing to the
deteriorating conditions.
“We have received reports of COVID-19 positive cases and
transmission on ships. But in most of the cases the patients
do recover after either onboard isolation or onshore treatment,”
he said.
Mental stress, a real issue
The incidents have created both emotional issues and operational
challenges. In some cases, the owner has had to replace the entire
crew due to such incidents of stress related to the COVID-19 threat
amongst the crew.
Different ports are imposing different levels of quarantine
requirements and restrictions for the offboarding of crew, based
on the national anti-pandemic regimes. This has affected the
shoreside medical arrangement for non-emergency health
problems.
In terms of numbers, the percentage of cases having to be
managed or resolved onboard has risen from close to 50% of
total cases, to 70% this year. The average length of live medical
cases has been greatly extended, with some cases still open after
2 months.
There have also been numerous cases where crews have been
stranded ashore for months before they could be repatriated due
to quarantine requirements and flight
availability.
“This may be a cause of additional
stress, requiring the ship operator and
MedSea to continue to support the crew for
extended periods before the crew can get
home,” Mr Wong noted.
Waiting for the vaccines
There are currently 10 vaccines in Phase
III trials with a number of manufacturers
claiming over 90% effectiveness. There
will still be tremendous delivery and
logistical issues. There will also be
additional questions as to who gets the
vaccine first and how many people will refuse to take it. Other
hurdles include the need for refrigeration and storage, and
perhaps something as simple as needle and syringe access. Some
vaccines will require two injections. This is why there would be a
lot of interest in Vaxart’s oral vaccine, awaiting reports on Phase I
trials.
For the seafaring community, COVID 19 testing, used to
facilitate crew deployment and stop the transmission to ships, will
be the priority. Together with other measures, ship operators are
urged to arrange COVID 19 tests in the seafarers’ home country as
well as pre-boarding. However, COVID test ability and capacity
varies from port to port.
In order to assist ship operators, Future Care and International SOS
have expanded their global testing network by adding prequalified
test centres close to 108 major ports. These test centres cover all
major continents such as North America, South America, Asia,
Australia, Europe, and Africa. To ensure the quality of these testing
centres, has assigned a dedicated team with multi-language capability
to check the testing centres’ accreditation such as ISO15189.
“Besides the shoreside testing, the companies have partnered
with a leading US testing company to offer saliva based COVID19
tests to our shipowner, ship manager and crewmembers traveling to
US ports,” says Mr Wong.
“The digital immunity passport, AOK Pass has been launched
with our test network, offering the highest standard on both
sensitive data protection and certificate authentication.”
13

P&I
The cost of oil spill
claims have risen
MOST P&I CLUB MEMBERS
TO PAY MORE FROM 2021
The days of wine and roses and returned premium capital
will not be on offer at 2021 renewal
Global shipping has suffered myriad issues, many with a
hefty fee attached, such as the need to install ballast water
management systems. And the mandatory switch to low carbon
fuels or scrubber installations since 1 January 2020. One thing
they could be confident of was a stable cost of P&I. With only
one or two exceptions this will not be the case at renewal 2021
on 20 February, where general increases will be the rule rather
than the exception.
The exceptions to the rule are Gard and Britannia P&I. In the
case of Gard, the Club has introduced a new premium policy
with the introduction of a General Discount of 5%.
The discount will be deducted as a percentage of the
estimated total call premium for the following policy year.
This new discount is in addition to the 5% reduction in the
last instalment of the ETC for the 2019 policy announced on 6
November, and that, instead of a general increase, individual
members rates will be adjusted to reflect their risk profile and
claims record.
Britannia P&I is the only Club this year to continue the brief
tradition of offering yet another capital distribution to P&I mutual
members - US$10m.
Two Clubs, Standard and London Club are at the other end
of the scale, both introducing 10% general increases while the
remainder are introducing general increases of between 5% and
7.5%.
Despite the broad spread in imposed general increases, nearly
all Clubs are witnessing less than desirable combined ratios: in
the case of London Club a bruising 137%, while even Gard is
labouring under a combined ratio net of 116%.
In their defence, all of the Clubs are citing historically high
Pool claims for the more conservative approach this year. And in
Despite the broad spread in
imposed general increases all Clubs
are combined ratios over 100%
a perfect storm investment return has been unexciting in general.
Steamship Mutual reported a return if invest of 2% this year.
Steamship Mutual, which aims to impose a 5% general
increase next year, summed the wait and see approach regarding
COVID-19 of the remaining Clubs.
“The managers have been working closely with the members
in. connection with COVID-19 issues – notably those which
have affected crew. COVID-19 related liabilities are expected to
increase claims this year but are not projected to have a significant
impact in future years.” Steamship Mutual, being a favourite
among cruise and ferry operators (12% of entered tonnage) bears
the greatest exposure, not least from depleted premiums while
cruise sector laid up.
Earlier this month Asia Maritime spoke to Standard Club chief
executive officer Jeremy Grosse about why the Club has chosen to
up premiums by 10%, and get some insight on the challenges to
the industry.
International Group Clubs are divided on the decision to impose
a general increase, and its relative magnitude in 2021. Is this
purely down to the financial position of the individual Clubs or
also strategic?
JG The financial challenges for all clubs are broadly similar in terms
of addressing the current level of underrating. Those clubs moving
away from publishing a general increase are still targeting premium
14

P&I
The Standard Club has a history of long term
highly successful innovative collaborations;
for example, working with Tokio Marine and
Nichido Fire in Japan, and more recently in
Korea with the Korean P&I club and with Ping
An in China
Jeremy Grosse, CEO,
Standard Club
rises and those clubs maintaining a general increase will continue
to analyse every members’ claims performance and current rating
level to determine an appropriate adjustment for the future.
Despite having received a great deal of attention from P&I Clubs
and the collective might of the International Union of Marine
Insurance over the last couple of years, there seems to be no sign
of a decline in onboard containership fires. How can the clubs
play a more definitive part in combatting this?
JG The International Group of P&I Clubs is working together
with various industry organisations such as ‘Container Incident
Notification System’ to produce guidance to the container industry
on this topic.
Specific guidance has been published about the carriage of
calcium hypochlorite and activated charcoal, two of the cargoes
most frequently a cause of fire on board. The Standard Club
separately published ‘better box booking’ publication which
provides guidance on the booking process of container operators,
a process where frequently mis-declared cargoes manage to slip
through the safety net and end up on board ships.
Technical underwriting results last year averaged 111% with
most Clubs relying on a weakening investment return to get
them across the line. Does this indicate slack underwriting
discipline?
JG P&I club’s never overreact to one year of heavy claims as
reserves are there to smooth the occasional loss making year,
and as we are owned by our members, we look to smooth out
the insurance cycle as far as possible. The market is now clearly
underrated, and most clubs have experienced three years of
underwriting losses, so clubs are focussed on correcting that
position over the next few years.
At Standard Club, how has line diversification benefited you, and
do you envisage any further diversification? (In its last quirky
P&I Report insurance broker, Tyser characterised Standard as an
octopus with the tag “too many arms can get it into trouble).
JG The Standard Club has a history of long term highly successful
innovative collaborations; for example, working with Tokio Marine
and Nichido Fire in Japan, and more recently in Korea with the
Korean P&I club and with Ping An in China. Also, the Strike
and Delay product has been brought into the Standard Club to
complement our core P&I offering, these and several others, are
making a positive contribution to the club.
Not everything works though, and regrettably the Lloyd’s
syndicate was not successful. Despite that though, we have
drawn a line under this and sold the syndicate and the managing
agency, which means that the club has no involvement beyond the
2019/20 financial year and we are in a strong position to move
forward.
Is there any evidence that the crew change restrictions as a
result of the coronavirus is translating into more incidents/
and or claims? Do you envisage that this will be the case as the
restrictions continue?
JG Seafarers worldwide are going through very hard times.
Contracts are being extended as crew changes are difficult due
to local requirements; manning levels on board are reduced;
communication with the family at home is often restricted and
seafarers on board are unable to assist their loved ones as they are
stuck on board.
We are of the opinion this is taking a heavy toll on the mental
and overall wellbeing of seafarers on board. It is highly likely that
crew will become depressed or stressed and this may cause their
focus and concentration on work to degrade. At first this may
result in small items like a bypassed safety device, or reduced
maintenance, but it could similarly lead to navigational errors and
grounding or collision. Though we have as such not yet seen claims
arising out of this, we are concerned with this and would urge all
involved parties to ensure crew changes are being affected soonest.
15

Containers
ARE RECORD FREIGHT RATES
FOR LINER BUSINESS HERE TO STAY?
As governments kick back against record container freight rates, what will be
carriers’ next move?
At a session of the Asian Logistics, Maritime and Aviation
Conference, aired online from Hong Kong on 17-18
November, Ocean Network Express’ CEO, Jeremy Nixon, bewailed
the extraordinary congestion at ports across the globe, sparked by
an unprecedented surge in demand after China demonstrated an
unexpected agility in getting production up and running after its
brief but brutal experience of COVID-19.
16
Analyst, Drewy, in its latest examination of the container
market, echoes Mr Nixon, by describing the current situation as “one
of dysfunction, bordering on chaos.” Perhaps more cynically it then
questions just how much carriers want to go back to the bad old
days of low freight rates.
“The industry has to be commended for coping as well as it
has with the unexpected demand surge, but the trade-off has been
longer lead-times and massively inflated freight rates as everyone
scrambles for the few available containers, which have become
a precious commodity, says Simon Heaney, senior manager
container research.
Mr Heaney insists that the current gridlock is less to do with a
lack of ships (or to a greater extent containers) rather an inability
to get them where they are needed. Carriers have been throwing
capacity back into the market but landside bottlenecks and long
queues outside of ports all pint to an infrastructure that cannot cope
with sudden peaks in activity.
Here we come to the nub of Mr Heaney’s analysis: “Amid the
numerous bottlenecks, carriers are doing very nicely. The only
impediment to further freight rate inflation right now appears to be
fear of regulatory retribution. Conditions are ripe for further gains,
but twice recently carriers have cancelled planned GRIs (general
rate increases) in the high-flying Transpacific market.”
Governments might have the power to suppress pricing and
dictate operational decisions, but they cannot force carriers to
invest. Even if there is now an unofficial ceiling for freight rates,
lines will still be very profitable at the current levels and would like
them to remain so for as long as possible.
Mr Heaney imagines the container lines are now stuck between
a rock and a hard place when it comes to a strategy. That is: Invest
heavily in new ships and equipment - this will improve operational
efficiency, but carries a high likelihood that the market will ‘reward’
you with lower freight rates. Or, freeze investment – this will most
likely further disrupt supply chains and lead to more animosity with
customers, but will save money and increase the probability of
sustained highly profitable freight rates.
When setting these dual options, Mr Heaney assumes
that the barriers to market entry are too high for a new entrant
(Amazon?) to emerge with new investment and capacity, which
would change the dynamics.
Mr Heaney concludes: “From a shippers’ perspective, you have
to ask yourself if you think the current situation is temporary or
permanent. If the former, you will just have to sit out a few more
months of disruption and high prices before the situation normalises
and the underlying supply-demand fundamentals pop the bubble.
If you are inclined to believe that high volatility will linger and
become more frequent, it will require a deep rethink for planning
and budgeting.
“Right now, carriers do not have much incentive to take the
altruistic decision. To build a more resilient supply chain that can
weather extreme volatility will require a paradigm shift so that
investing in a safety stock of surplus of capacity/infrastructure is not
jumped on as an opportunity to drive down rates.”