Salving the Super Large Vessels.

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JK
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Salving the Super Large Vessels.

Postby JK » Thu Feb 25, 2016 6:48 am

This is a very interesting report written by Joanna Waterfall of Roose + Partners who are insurance specialists in cargo.
Bolding is mine.
Last week we reported on the APL VANDA grounding, the second grounding of an ultra large container vessel within as many weeks, and we referred to concerns that salvors do not have the resources available to salve such large vessels where simply using tug power is not possible or has been exhausted. We were not blaming salvors but were merely seeking to highlight the continuing issue that as commercial vessels get larger the salvage craft and equipment needed to assist them need to develop and adapt. This issue is not new. As tankers got larger in the 1970s and 1980s there was similar concern raised.

It is a simple fact that further investment is still required to meet the continuing development of larger vessels. The increases in vessel sizes, containerships especially, has been rapid and it may be that the speed of development has led to a lag in investment, not forgetting the very considerable costs involved. We understand some salvors have developed systems to offload ultra large container vessels but have not built them due to the capital cost. Interestingly we were recently involved in a casualty where the capital investment of the attending craft and equipment was over five times the value of the vessel being assisted.

Some would suggest that salvors already receive sufficient encouragement to invest via salvage awards. It is certainly the case that the 1989 Salvage Convention and Lloyd’s Open Form provide a mechanism to encourage investment and salvors who can demonstrate a commitment to investment should receive due credit in salvage awards (LOF or other). This is also a principle enshrined in English law. However, although there was an increase in LOF contracts last year, there are less LOFs generally year on year and increasingly many LOF agreements are capped or amended. These amended forms give the salvors (offering them) a commercial advantage over their competitors and also reduce property underwriters’ potential exposure to salvage. When considering the bottom line in negotiating responses to a particular casualty agreeing such caps could be seen as a win win for both salvors and underwriters. However is this a potentially a short-sighted approach, on both sides, which may lead to underfunding and under investment?

With less LOF contracts and reduced opportunities for salvors to be credited for investment by way of salvage rewards, are there any alternatives and who should be responsible for the investment? Is it for salvors alone? Most have responsibilities to their shareholders so there is inevitably a balance between investment and profit. Clearly it is important that all those involved, including shipowners, charterers, salvors and marine insurers, work closely together to understand the changing risks and challenges facing the shipping industry in terms of potential casualties and salvage requirements. There is little doubt that the increased sizes in commercial vessels will have brought significant economic advantages and increased profit to owners and operators. Perhaps there should be a funding process whereby some of the profits derived from operating the larger vessels could be diverted towards salvage investment with levies raised either on ships or cargos to contribute to salvage investment. The debate continues. To assist we understand the ISU is currently trying to compile data on the investment made by its members.



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