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t r a n s p o r t t i p s c o n t i n u e d buyers, tend to look at freight rates on a per- metric-ton basis rather than the daily-rate basis used by shipowners and shipbrokers. A common destination for both Capesize and Panamax vessels is called ARA (Amsterdam-Rotterdam-Antwerp), or sim- ply Rotterdam, in the lingo of the shipping industry. In Table 2, per-metric-ton rates for three major Panamax loading sites and four major Capesize loading sites are shown. Distances to ARA for all those load- ing sites are also listed. Several facts may be noted for the Panamax vessels: same origins rates ran $2.25-$2.65 higher than Capesize, and U.S. Gulf rates ran a disproportionate $1.85 higher than Puerto Bolivar rates. This rate differential may be due to the fact that the initial steaming for U.S. Gulf vessels is on the Mississippi River, where slow travel is combined with very high pilotage fees to cost the shipowner more than a trip origi- nating in Puerto Bolivar. By contrast, Capesize loadings at Hampton Roads, Puerto Bolivar and Richards Bay, South Africa, yielded per-ton rates that were very close to each other, even though Hampton Roads is much clos- er than the other two. Newcastle (Australia) vessels have to transit the Suez Canal, pay high canal tolls, and travel 8,222 miles far- ther than Hampton Roads vessels, yet their rates were only $1.55 per ton higher. This hardly seems fair to Hampton Roads ship- pers, but it illustrates the effect of supply and demand on prices. In the Pacific mar- ket, there are far more ships available than needed, so the shipowners have to compete through low prices. The Lay-up Alternative The shipping industry has always been volatile and the demand for ships tends to vary with world trade. Thus, occasionally ship operators will find that they are unable to employ their vessels profitably, and must consider the decision to remove them from service. During the daily rental highs (high- er than $150,000) of 2008, pricing euphoria was so great that new Capesize and Panamax vessel orders shot through the ceiling, compounded by the order of 35 Valemax vessels at 400,000 tons per copy. In a very short period of time, there was an excess of dry bulk vessels on the market, particularly in the Pacific. It may be that the owner has a reason- able expectation that demand will quickly recover, so will merely find a suitable anchorage and keep the vessel fully func- tioning and ready for employment, with her crew aboard. That state can be described as "warm" lay-up. It is not as simple as it sounds, because even the "suitable anchor- age" requirement is not easy. Owners will avoid lay-up like the plague, much as a coal miner will avoid a decision to park a $30 million dragline indefinitely. Even so, the owner might view the mar- ket less optimistically and decide to take the vessel out of service for a period of months, or even years, until demand is restored and the vessel will be put in "cold lay-up." Once this was a relatively simple procedure, with a ship having found a safe and sheltered mooring or cheap lay-up berth and effec- tively shut down with a couple of watchmen to see to security, sound the bilges and keep the vessel safe. Modern ships are more complex and if they were merely shut down and left, would swiftly deteriorate. The mass of electronics and delicate machinery aboard will require the maintenance of a benign, dehumidified climate, while modern machinery will require regular rotation, so that the lubrication does not emigrate downward and leave the upper parts unprotected. Ideally, a skeleton crew to maintain the vessel's basic services will be kept aboard. Possibly, if a number of sis- ters are being laid up, the crew will be able to maintain the most optimum conditions aboard a number of ships "rafted" up together, or on adjacent berths. Large ves- sels may require as many as 10 people to comprise a skeleton crew. It may be necessary to physically remove some of the vessel's computers and other electronic equipment to a place where they will not deteriorate and can be maintained. Software, too, may need regu- lar updating to avoid the ship, when she is eventually reactivated, being filled with redundant equipment or electronics that fail to operate. This is actually a more likely consequence of lay-up than many mechan- ical equipment failures. Cold lay-up of a modern ship also pre- supposes a more "controlled" condition than "warm" lay-up, with some sort of power supply to be maintained, providing electricity for whatever climate control equipment is fitted. Preparation for lay- up is a much more demanding exercise if it is done properly, ensuring that anything prone to corrosion is protected, that equipment does not seize up through non-use and that proper arrangements are made to lubricate machinery. It is perhaps not surprising that many owners elect to keep their vessels opera- tional, or at least capable of reactivation in the short term, rather than effectively "put the ship to sleep," with all the complexities that this entails. It is notable that compared to the shipping recession of the 1980s, when huge numbers of ships were laid up inactive for years; relatively few vessels were put into cold lay-up after demand dipped following the onset of the 2008 financial crisis. Slow steaming, it seems, has been a useful alternative. Dave Gambrel is the owner and chief consul- tant of Logisticon Inc. He has chartered more than 50 vessels of Panamax and Capesize capacity, and has consulted with ship bro- kers on the carriage of coal. He can be reached at david.gambrel@gmail.com. December 2014 www.coalage.com 25 Source: SS&Y; Table 2: Coal Rates to ARA, 2014