At the present time, the Greek-flag fleet (that is, ships flying the Greek ensign, and registered in that country, as distinct from Greek-owned) is the eighth largest by tonnage in the world, aggregating some 41.8 million GT.  However, merchant shipping under Greek beneficial ownership totals more than 4,600 vessels, of 147 million GT presently in operation.

Although 94% of shipping under the Greek flag is said to be owned by companies that are ultimately Greek, many of the most notable Greek shipping companies are based abroad, particularly in London.  Therefore, to a large extent, these companies and their ships are protected from Greece’s present economic troubles.

Greek owners are the largest distinct nationality within the European Union, and Greece has overtaken Germany as the owner country with the most valuable fleet, estimated to be worth $87.9 billion compared to an estimated $86 billion for the German fleet.  Greek owners also have more vessels on order, with, according to Clarkson Research Services, some 605 ships, of a combined 35.2 million GT.

German owners have approximately 518 vessels, aggregating about 18.5 million GT, on order.

Greek owners have been the most prominent in the demolition category during 2011, scrapping 5.3 million GT worth of vessels, of an average age of 29.5 years.  The effect of this has been to reduce the average age of the Greek owned fleet to 16.8 years, 4.1 years lower than the average worldwide total.

Up to now, it has been clear that no change in the favourable tax treatment of shipping revenues is contemplated by the new Athens government.  But the economic and fiscal cataclysm now threatening to engulf all of Europe puts us in mind of Heraclitus’ warning.  The winds of change are clearly blowing.

On December 5, under the pressure of financial crisis and with the euro at stake, the two main leaders of the euro zone proclaimed that they would work to remake the European Union into a more integrated political and economic federation, with tight legal restraints on national parliaments.

This is a crucial week, ending with a European Union summit on Thursday and Friday.  Chancellor Merkel and President Sarkozy have called for amendments to European treaties that would include centralized oversight over budgets and automatic sanctions against countries that “violate firmer rules on deficits.”  Such changes, if enacted, would effectively subordinate economic sovereignty to collective discipline enforced by European technocrats in Brussels, and, though, none dare speak the name, Berlin.

It does not take much imagination to realize that Greece’s national laws, and indeed its constitution, that in effect ring-fence shipping-related revenues from heavy tax treatment, would be subject to unfriendly scrutiny in Brussels, Paris and Berlin, at least to the extent that they would be vulnerable to revision and override.

Moreover, Messrs Sarkozy and Merkel stated yesterday that Greece was “unique”, and that no other country would have its debt restructured as Greece’s will.  Mr. Sarkozy remarked that “it is a strange idea to think that France and Germany would pay for the debt of others, without any control over that debt.”

As they say in Russia, “draw your own conclusions”.

Of course, the Paris-Berlin proposal threatens to divide the 17 European Union countries that use the euro from the 27 nations that are part of the larger European Union, some of which, like the United Kingdom, are likely to reject intrusive budget oversight from the aforementioned northern European capitals.

Nevertheless, the two leaders are aiming at a new treaty.

It is no surprise that the Greek-flag merchant marine is beginning to diminish in size, although the actual extent of its recent drop is uncertain.  The Greek-owned merchant marine, not merely that under Greek registry, is one of the few clear economic assets, other than sunny weather, beautiful scenery and tourism, that Greece can currently count on.  Greece will fight hard against what one shipowner privately refers to as “the policies of the Fourth Reich”.

In the 17^th century, the men, women and children of the Greek island of Andros, beset by Turkish persecution, took to their ships, sailed out of the Mediterranean, and after a long voyage, arrived at the Pool of London.  There, they petitioned King Charles II and his brother, the future James II, for asylum.

Knowing a good deal when they saw it, and exercising rare good judgment for the Stuarts, protection was granted.  Moreover, the crown authorized the construction of the first Orthodox Church in London, on a street in a location in what is now called Soho, thereafter named Greek Street.  The rest, as they say, is history, and there are loads of British families today claiming descent from the first expeditionary force of Andros refugees.

While cataclysms still happen, history still has its rhythms, resonance and patterns.  This time, however, the refugees will be considerably more affluent, and they may head for New York and Singapore, instead of London.

European results were to the same effect, with the Eurozone PMI confirming earlier estimates showing that it fell to its lowest level in 2 years.

And you say we’re not in a recession?

You also say that this has nothing to do with shipping, and that the coast is clear for another ordering spree?

My grandmother had an expression, apparently born of experience in at least one World War: “Things must get worse before they get better”.

Granted that this is the wisdom of the knowing, why is there so little of it in our industry?

It is very clear that the worst part of shipping’s current recession is not yet upon us; it is also apparent that many of us have not taken a close look at the implications.

Given the shortage of capital, and the problems that many companies now face, we can expect a decline in the quality of newbuildings, reflecting narrower margins of quality dictated by a lack of cash.

The implications for marine safety are obvious, and call for our careful attention. The worst of this market is indeed yet to come.

Another “truth” that is repeated constantly is that “we’ve got to do something about piracy”, particularly the Somali variety, and that if our industry musters the “will”, whatever that is, the world will listen. And the third is that Greece’s (and Europe’s) current economic and political passion play has, and will have, no relevance to the Greek-owned shipping sector.

In my more than 40 years in shipping, I’ve learned that like most businesses, ours is dominated by relatively few voices, functioning within an echo chamber of mutually supportive expressions of internal consensus. These voices do not always take account of uncomfortable events outside: a failure that brings unpleasant surprises from time to time.

There are a number of reasons why the three “truths”, that I have referred to, aren’t actually true at all.

“Truth” no. 1 ignores the fact that sound risk management, as a good classification society will tell you, requires a programme that implements principles embodied in the International Safety Management (ISM) Code, the U.S. Oil Pollution Act (OPA ’90), SOLAS and MARPOL. These principles, particularly stringent internal and external audit procedures – in other words, sound corporate governance –  were notable for their absence leading up to every major oil spill up to and including (you guessed it) last year’s in the U. S. Gulf. They apply to shipping companies just as much as they do to oil companies and offshore rig operators. Perish forbid that the great and good should publicly take note of this.

“Truth” no. 2 maintains that the Great Powers are minded to heed the pleas of some of us, and take concerted action against Somali and other pirates. This is implicit is the mantra: “something must be done”. A related school of thought has been active in promoting the belief that mercenaries can be put into smallish private navies, and counter-attack the skiffs and “mother ships”. Well, of course this is possible, but the enormous liability exposure that it would entail has, it seems, not been fully considered. As for the notion that the Obama administration or China, or another Great Power, is willing to take on the pirates, that too is possible — just.  There are reasons, though, to doubt that any such thing is likely.

One is that the rise of Al Qaeda in the Gulf of Aden area is of greater concern to certain powers than a little thing like piracy, and that the said pirates – or their tribal colleagues – are adroitly selling their services, as allies, to certain famous intelligence agencies.

A second reason is that after the less-than-stellar performance of NATO & Co. re Libya, and the forthcoming U. S. skedaddle  from Afghanistan,  evidence exists that further military activities are being discouraged, for now. I can’t refrain from adding that our industry’s leaders have not been good at burnishing our image – not that they’ve tried very hard – with the result that our political leaders have very little stomach for pounding Somali villagers, and their husbands, with predator drones, J-Dams and Seal Team Six.

Yes, I know about the poor seafarers, but do they have effective spokesmen in the councils of the mighty? Show me. If something CAN be done, I don’t think we’re there yet.

“Truth” no. 3, that the Greek shipping sector is (more or less) unaffected by the increasingly messy situation in that country, has more merit than “truths” 1 and 2. Most Greek shipowners of my acquaintance have been careful not to get too close to Greek banks, much less the government. They tend, with good reason, to prefer foreign flags, foreign banks and foreign corporate domiciles. Those however who say that the present crisis will leave no imprint on the “mind” of the Greek shipping sector are mistaken. The present spot of trouble only confirms the traditional sectoral belief that it’s best not to put all one’s eggs in one basket, or one’s ships under the blue ensign.

Those of us who remember the fervent efforts of successive Greek governments to woo shipowners back to the Greek registry realise that the present developments are likely to be unhelpful. Social unrest is growing. Greece is insolvent: its debt load is now about 160% of its GDP. Greece is a rare — and maybe the only — country where shipping is still regarded as a fundamental national asset, accounting for nearly 30% of GNP. Shipping has for many years enjoyed preferential tax treatment. Posidonia, Greece’s famous biennial maritime bash, is the industry’s foremost global trade fair. While none of these is really at risk, there is a growing realisation that a company’s identification with Greece will sometimes be unhelpful in the global financial markets.

On the other hand, it has long been said that when times are bad in Greece, Greeks turn to the sea. Hellenic seafarer recruitment is up and is likely to grow further as shipping revives. The Hellenic shipping sector has a long history of surmounting troubles ashore. Buoyant is an apt word for it.

The tragic events in northern Japan led to this disclosure when General Motors announced on March 17 that it would temporarily close a truck plant in Louisiana because the flow of Japanese-made parts had been stopped by the earthquake, tsunami and nuclear crisis. These parts, in other words, are made in Japan, and largely transported by sea to the United States.

The plants in Japan are generally referred to as being part of a “supply base”. The means by which parts are carried to North America are usually described as the “supply bridge”. When parts are carried by vessel to North America, it is estimated that shortages resulting from the shutdown of production in Japan will take about a month to have an impact at the assembly plants in the United States. However, for lightweight parts such as microchips, which are usually shipped by air, a stoppage will occur much more quickly.

Different automakers employ different logistical models. At Volvo, for example, about 10% of the parts required come from 33 Japanese suppliers, which themselves may be dependent upon lower-tier manufacturers. About 20% of the parts used by Hino Motors, a Japanese company that makes components for three Toyota models at a plant in Arkansas, come from Japan.

The American plants, such as that of General Motors in Shreveport, Louisiana, make pickup trucks. Automakers, like other manufacturers, are careful not to reveal much about their supplier networks, or choice of transport mode. It is clear, however, that the globalisation of manufacturing, in many industries, is more dependent on international shipping movements than in bygone times, when a car or an airplane was manufactured in locally based factories.

The coordination and assembly of parts originating in different parts of the world, and their final integration into a finished product, is of course vulnerable to catastrophic events on land, such as those in Japan. The present nuclear crisis, following the recent earthquake, reveals something more: the growing importance of deliveries of these parts by ship. The importance of shipping, therefore, to the world economy is mind-boggling.

Ships, as the poet indicated, are designed and built to a long-term plan.

In those distant days before the summer of 2007, we lived in a more ordered age, in which many commercial people willingly made long-term plans.

Shipowners used computer forecasts to predict future market patterns with confidence they could rationally foresee the employment, or “career” of a projected newbuilding.

However, the financial crisis has damaged that sense of certainty. While the fear of doom that descended in the autumn of 2008 has abated, it has left an awareness that the shipping business is, like the rest of our world, an unpredictable one.

Maritime trade is a cyclical industry, of course. The rhythm, if there is one, of seaborne trade is subject to the supply and demand of those commodities that move across the world’s oceans.

Growth and profitability are also driven by the physical distance between where a cargo is produced and the place of its consumption or delivery. Market capacity is largely a factor of the number, type, and availability of existing ships.

It is important, in designing a ship, to accurately forecast the trends in the markets that it will serve, and to guide the hand and mind of its architect in keeping with its planned future use.

Case in point: Vale, the world’s largest producer of iron ore, is planning 33 of the biggest bulkers ever constructed.

These VLOCs may not, of course, have an overwhelming effect ten or fifteen years from now. They may not even be wise investments. They do, however, reflect an appraisal of future market needs. They also reveal a prediction of resale value during various stages of each vessel’s life.

The current orderbook of dry bulk newbuildings seems to be heavily weighted toward Capesizes, with nearly half the DWT on order being made up of this type. This would indicate that the prevailing wisdom of the market anticipates that most cargoes will move to China or other consumers over long hauls.

The planner may need to consider that terminals may in future suffer from increased congestion and/or insufficient capacity, and that the planned vessel might profitably be more efficient as a self-unloader; that the density of future bulk cargoes, and therefore the future vessel’s cubic capacity, may vary, and should be expected to differ from that required today.

Another planning factor worth pondering is future crewing trends. It is likely that as crews become reduced in size, accommodation and other spaces may be reconfigured.

An example, from history: in the tanker sector, the effect of forward planning, and changes in the nature of the cargo, can be seen in the evolution of the Aframax class.

This vessel type originated from the freight pricing scale, or average freight rate assessment (AFRA), employed by large oil companies transporting crude oil on their own tankers. The Aframax class of vessel was initially designed to carry 500,000-barrel parcels, a standard oil trading size in 1992. However, as time passed, crude oil grades became heavier; the oil majors began to charter more, and own less. The Aframax “label” came to grow from roughly 79,999 DWT to an average size in 2010 of 120,000 DWT.

But now, current indications show many future crude parcels will be made up of lighter, sweeter, low- sulphur grades. This may indicate that the future of the Aframax lies in a different market than the one for which the type was originally designed. Aframaxes now on the drawing boards are being designed for reduced draught, to permit greater port flexibility. In 1995, the average Aframax design draught was 13.8 metres; it peaked at 15 metres in 2008; but has declined to 14.8 in 2010.

A careful study of market trends will reward the scholarly!

Finally, it cannot be repeated too often that regulatory intervention will increasingly be a determinant of design. Twenty years ago, the U. S. Oil Pollution Act initiated the mandatory retirement of single-hull tankers. The potential for drastic change today is shown in the NOX air emission requirements coming into effect in 2016. These dictate an 80% NOX reduction in emission control areas.
The baleful decision facing the planner and designer is: fuel-switching or scrubbing, or maybe a mix? The market in crystal balls has an excellent future.

Somehow, these facts of life must be made to work alongside the need to maximise the commercial usefulness of each planned newbuilding, in light of the conditions referred to above. New ships require investment, and money is scarce (as are lenders) these days.

The demand for design flexibility has grown with the expanding need for regulation-compliant ships, on the one hand, and the commercial pressures imposed by markets that never stand still.

Shipowners, generally, aren’t dolts.  Their aim must be enhanced commercial flexibility while keeping costs as low as possible.

This is hard and exasperating work. Decisions are difficult things. Planning the design of a ship, like business in general, is about anticipating, preparation and prediction.

A bulk carrier, for example, may be built in the expectation that it can trade for more than 20 years. However, many regulations and market forces are likely to change during that period.

The greatest dilemma is whether to opt for design flexibility, or for specialization, or a combination of both. The lesson of recent years has been that an investor must take account of potential regulatory change during the ship’s expected life, and the resulting impact on its value.

In framing the specifications for a new ship from an environmental standpoint, there are therefore many imponderables.

One of the problems lies with the vagaries of the regulatory process. The possibility of mandatory retrofits or even forced scrapping, obsolescence or retirement is particularly hard on the decision-maker who wants (a) to choose the right design, and (b) sleep well at night. When the U. S., in the Oil Pollution Act of 1990 (OPA 90) ordained the retirement or conversion of non-double-hulled tankers, some owners and their lenders were taken by surprise.

A good example now at issue is the uncertain  future regulation of the sulphur content of vessel-generated air emissions. Emission control areas (ECAs) have been created in the North Sea and the Baltic, and have been designated for implementation in North America. A European directive mandates that only 0.1% sulphur fuel may be used, at berth or at anchor, in EU ports. The point is: how best to reduce the sulphur content of bunkers?

Marine engineers and architects have to tackle the problem with one eye on the present, and the other on what may happen in future. This requires some shrewd guesswork. Currently, the favoured way of reducing sulphur emissions in an ECA is by fuel switching.

The ability to use low-sulphur distillates, such as marine diesel oil (MDO) or marine gas oil (MGO), when a ship is trading in an ECA, requires versatility of design: the need to control fuel costs encourages the use of intermediate distillate fuels, costing about $450 per tonne, contrasting with low-sulphur marine diesel, at roughly $600 a tonne. The shipowner has an incentive to use intermediate fuel to the maximum extent possible, switching to low-sulphur distillate when operating within an emission control area.

The design dilemmas are clear, but not simple; fuel tanks with adequate isolated capacity for intermediate and distillate fuels will be required. Intermediate bunkers must be heated, while distillates do not need to be. Thermal shock and vapourisation effects must be prevented.

A decision: is it practical to develop two isolated fuel systems for the main engine? Should the planner decide on specialised equipment, or, instead, by restricting, no doubt for its useful life, how and where his ship will be operated?

A famous aircraft designer, Marcel Dassault, once remarked: “For the most part, my business is the avoidance of failure.”. But how does one know what choices will bring success?

This dandy ordinance was the brain child of some famous shipping tycoons in the 1950s., names available on request.

Essentially, it provides for a broad exemption from tax for a “Law 89″ company, which is essentially one engaged in the shipping business.

Obviously, tax breaks for the elite, certainly including shipowners, will now come under scrutiny.

Greece’s current Pasok (Socialist Party) government is under growing pressure to soak the rich, and this includes repeal of Law 89 and other
so-called incentives.

Word on the Akti Miaouli (the famed street of maritime dreams fronting on Piraeus harbour)
is that the Papandreou government, and the gnomes of Brussels and Berlin, are sharpening their knives.
Law 89 is basically what’s kept the shipowning class in town; but now, a chill wind is blowing.

The conference that I’m speaking at, Mare Forum, holds a session in Italy each year.

This one is entitled “Optimism in the Air”. The headlines, however, say “Banks Brace For Spread of Europe’s Credit Crisis”.

What is now happening is that nobody really knows what’s happening. We do, however, realise that our lack of information about which European banks are vulnerable to sovereign debt problems, and therefore defaults on government bonds, means that virtually all lenders, including those to shipowners, will stop making short-term loans to one another.

This very likely will lead to a second freeze in interbank lending, like the one that followed the failure of Lehman Brothers in September, 2008.

Another good example of how what started in Greece will have an impact on the global shipping industry. More on this, and the unfolding oil spill in the Gulf of Mexico tomorrow.

Rome is a city that, as every tourist knows, reminds us of its 2500 years of history, including recent  events, on nearly every street. History’s monuments may sometimes hide themselves; here, they shout at us.  From the Caesars to the Treaty of Rome,one is reminded that, of course, this is still a place that matters.

History tells us some things about our favourite business, too: over many centuries, shipping has been a business that is unusually subject to the harsh or gentle push of events.
A glance backward: in two days we will mark, or ignore, 65 years since the war that definitely ended all wars in Europe. Shipping has changed a lot in those 65 years, a fact I will point out in my remarks here. Also today, we mark, or ignore, yet another British election, a puzzling one, and more Americanized than those of the past.  Greece (or at least Athens)the cradle of democracy and street riots, sweeps up after yesterday’s, and probably sweeps much of what remains of its domestic shipping  sector out the door.

The euro crisis, as a whole, gives a new meaning to the word “ineffective.” It also adds another layer of debt, and doubt, to the meltdown of 2008. Speaking of meltdown, there’s Chinese overtonnaging, the KG zusammenbruch, the inability or refusal of banks to lend, and the effects –short and long-term–of the oil spill in the US Gulf. And don’t forget the pirates of Somalia, and of Wall Street.

I like history better than today’s worries. At least we know how things turned out, mostly. The ups and downs of Rome, the Eternal City, over 2600 years, make cosy bedtime reading in this springtime of trial and trouble.

Today, Kastellorizo’s permanent population is slightly over 500 people. Is Kastellorizo’s fate a metaphor (a Greek word, by the way) for Greece’s maritime future?

The forthcoming review and overhaul of the Greek tax structure will obviously bring changes to the nation’s shipping sector, though these may be slow in appearing.

Shipping has been treated as a “national champion” for many years, but it is now becoming clear that the EU and its central bank will, over the protests of the Union of Greek Shipowners, demand that the industry bear its share of the costs of a more frugal and austere regime. Higher taxes and other costs and charges are in the offing. These alterations will, no doubt, lead to altercations.

The IMF structural programme that will soon be brought to bear on the Greek economy will include potent austerity measures that, I predict, will make it unattractive to keep at least some Greek-owned merchant shipping under the domestic flag. That’s what I think. We shall see.