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June 13, 2023

China’s push into deepwater drilling is aimed at reducing its reliance on imported oil and securing its energy needs. With more than 70% of its oil supply coming from overseas, China is investing heavily in offshore drilling technology. Cnooc, China’s exclusive offshore oil producer, is leading the way in developing deepwater drilling capabilities and expanding its offshore oil fields.

However, its ambitions have also brought it into conflict with the US government, resulting in blacklisting. Despite geopolitical challenges and technical complexities, China sees significant untapped volumes offshore and expects domestic offshore barrels to drive growth in the coming decade. The development of advanced technology has made previously uneconomic offshore fields viable for exploration. China is catching up to oil majors like Chevron and Shell in deepwater drilling capabilities and is actively participating in global projects.

Bangladesh, one of the world’s top shipbreaking nations, has announced its intention to ratify the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships. This move is aimed at improving safety standards and reducing environmental risks associated with ship dismantling.

The Hong Kong Convention covers the entire process of ship recycling, from design and construction to operation and enforcement mechanisms. Prior to Bangladesh’s decision, the convention had been ratified by 20 nations, and this step brings it closer to the entry into force threshold. The International Chamber of Shipping praised Bangladesh’s commitment and emphasized the importance of a global system for effective ship recycling governance. As the shipping industry focuses on net zero emissions, responsible ship recycling becomes crucial, making compliance with the Hong Kong Convention essential for securing market share in the future.

Grains merchant Bunge and Glencore-backed Viterra have announced their merger to form an agricultural trading giant worth approximately $34 billion, including debt. This deal positions the combined company as a major player in the global agricultural trading market, competing with industry leaders like Archer-Daniels-Midland and Cargill. Bunge shareholders will own about 70% of the new company, which will enhance Bunge’s grain exporting and oilseed processing businesses. While the deal is expected to face regulatory scrutiny due to its impact on competition, Bunge’s management team is optimistic about the merger’s potential for generating operational synergies. The combined company’s increased compliance with the Hong Kong Convention for ship recycling adds to its market appeal and aligns with growing demands for responsible and sustainable practices in the industry.

The Port of Savannah is set to thrive as a cargo destination due to a convergence of factors, both domestic and international. The Southeast region of the United States is experiencing significant population growth and attracting manufacturers, while global sourcing shifts toward countries favoring delivery through Savannah, such as India and Vietnam. The lower operating costs, expanding population base, and logistical advantages of the region make it an attractive market for producers. Additionally, congestion and labor disruptions on the West Coast have led to a growing percentage of inbound cargo shifting to the Port of Savannah. The Georgia Ports Authority reports an increasing share of the US container market, reaching a record 11.4% in recent years. The establishment of Hyundai Metaplant in the region further reinforces the port’s prospects, driving cargo through Georgia’s deepwater facilities.

A recent study from Chalmers University of Technology in Sweden has highlighted the severe damage caused by scrubbers to the world’s oceans. The study, focusing on four ports, found that more than 90% of contaminants in water samples originated from scrubber discharge. The contaminants include sulphur, heavy metals, and toxic organic compounds. Despite the traditional approach of assessing emissions from shipping one source at a time, researchers emphasized the need to consider cumulative environmental risks in ports. The study revealed that the cumulative risk levels in the ports were significantly higher than the acceptable limit. To address this issue, stricter regulations for scrubber discharge water are essential to prevent further deterioration of the marine environment.

The global offshore drilling market is experiencing a significant rebound, according to a recent report by Wood Mackenzie. Rig utilization has returned to pre-pandemic levels, leading to a 40% increase in rates over the past year. The report also forecasts a further 20% surge in demand from 2024 to 2025. Rising oil prices have been a catalyst for this recovery, supporting deepwater development and exploration. Wood Mackenzie predicts that the “Golden Triangle” regions, including Latin America, North America, Africa, and parts of the Mediterranean, will account for 75% of global floating rig demand through 2027. The anticipated increase in demand has already resulted in higher rates, with day rates for top-tier floaters doubling in the past two years. Rates for highly sought-after ultra-deepwater rigs are expected to reach $500,000 per day or higher by the end of the year.

Dutch shipowner Vroon has successfully completed its financial restructuring and will move forward under new management. Martijn Schouten will join as the new chief executive officer starting June 15. Schouten brings extensive experience in international board, commercial, and mergers and acquisitions roles. Vroon plans to announce further management changes in the coming weeks, including the appointment of a new CFO. The majority ownership of the company has been transferred to its lenders, while the Vroon family, which established the company in 1890, will retain a small interest. Moving forward, Vroon will focus on livestock carriers, product tankers, high-heat tankers, and emergency response and rescue vessels. The company is also exploring options to wind down its fleet of 40 offshore support vessels.

A breakdown in negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) has led to a heated exchange and work disruptions at U.S. West Coast ports. The PMA, representing terminal operators, accuses the ILWU of withholding labor at the ports of Los Angeles and Long Beach, resulting in missed ship departures. The ILWU denies these claims and asserts that West Coast ports are operating normally. The negotiations for a new collective bargaining agreement cover over 22,000 longshore workers at 29 West Coast ports and began in May 2022. Tensions have been escalating, with disruptions and complete shutdowns at various ports. The Biden Administration is under pressure to mediate the dispute, but so far, it has refrained from intervening. Concerns are growing that shippers may divert cargoes to other ports, leading to long-term consequences for the West Coast ports.

The United Nations Development Programme (UNDP) announced the acquisition of binding insurance coverage for the operation to transfer over 1 million barrels of oil from the deteriorating FSO Safer in the Red Sea. Securing insurance coverage is a significant milestone as it reduces financial risks for stakeholders involved in the ship-to-ship transfer (STS). The FSO Safer, loaded with approximately 1.14 million barrels of light crude, poses an ecological and humanitarian threat due to its decaying state. The UN has warned that a major spill would devastate fishing communities and disrupt shipping through the Bab al-Mandab strait. The cost of cleanup and trade losses could reach billions of dollars. The operation involves transferring the oil to a UN-owned VLCC tanker and scrapping the Safer at a scrapyard. The UNDP collaborated with over 100 underwriters and insurance broker Howden to structure and syndicate the specialized set of policies.

South Korea’s flagship carrier, HMM, has submitted a bid of KWN300bn ($233m) to reacquire its former company, Hyundai LNG Shipping, as it aims to diversify its earnings base. HMM had previously sold Hyundai LNG Shipping nine years ago during financial difficulties. Hyundai LNG Shipping currently operates a fleet of 16 LNG carriers and six VLGCs. Although HMM is well-known for its container exposure, it has engaged in other trades and owns a fleet of 72 boxships, 15 tankers, 13 bulk carriers, and four multi-purpose ships. The private equity owners of Hyundai LNG Shipping have yet to decide on HMM’s bid. HMM, which has been under state control for the past decade, is now undergoing a privatization process. Several significant shipowner changes are also underway in South Korea, including Hahn & Company seeking buyers for the tanker division of SK Shipping and H-Line Shipping, and private equity backers of Polaris Shipping exploring a possible sale.

You can read previous issue of ‘Currents’ here.

Disclaimer: ‘Currents’ is an online shipping news service by Earl’s Rock Trading (Pvt) Ltd that reports on the latest developments and trends in the maritime industry. We do not take any responsibility for the accuracy or completeness of the information provided in our news stories or for any opinions expressed by the people quoted in them. Our aim is to provide our readers with up-to-date news and insights from reliable sources. However, we do not endorse or take any responsibility for any actions taken by our readers based on the information provided in our news articles. We also want to make it clear that we do not own any of the images used in our news stories, unless stated otherwise. All images belong to their respective owners, and we use them solely for illustrative purposes. If you are the owner of any image used in our news stories and want it to be removed or credited, please contact us, and we will take the necessary action.