Episode 7 The Bottom Line

says it will not mean GPs will be on call 24 hours per day. And now The

Bottom Line with Evan Davis. We take a look at the world of shipping and

the advent of container ship. International trade has become more

possible than ever before. What voyage is the industry and barking

on this century? Each week, influential business leaders gather

in London for the BBC Radio 4 programme, The Bottom Line. You can

see it as well as hear it. I.e. Joint around the table by three

people involved the shipping industry ` integral to it but each

in very different instances of it. A private company which owns and runs

21 ports. Most notably James? The port of Immingham. On the east coast

of the UK. On the South Coast we have the port of Southampton. We

have a shipper, chairman of Stena Line UK. He is also president of the

UK Chamber of Shipping. 15 million passengers in the UK. A few million

cars and 1.6 million freight. And we also have an insurer, Rupert Atkin,

CEO of Talbot Underwriting and chairman of the Lloyd market

Association. I have been in it for 32 years. I have been reading a

little about the business. How many fascinating facts and there are.

Most of us know very little about your business, what I want is an

interesting fact from each of you. A fascinating fact and then we will

fill in more details from there. Maybe, James, a fascinating fact.

ABP handles 1.3 million containers per year and if you start them

together, they would reach from London to Los Angeles. 30 million

containers around the world at one time. Vast amounts. A little known

fact that 85% of UK trade ` imports and exports ` come by ship.

Insurance? I doubt that many people realise that the insurance market

has been involved with payments in order to release of the crews that

have been captured by pirates off the coast of Somalia. They amount to

roughly $500 million. We think as an estimate. If you add on top of that

all the legal costs and costs in chord with actually getting the

money to the pirates it is north of the billion dollars. Over the last

five years. That is a lot of money. We will come back to some of the

themes that lets get back to some of the specific businesses. James, tell

us about the ports. Most are small and specialists and a few handle the

bulk of the trade? The `` there are 120 ports in the UK. The jobs of the

ports is simple ` to provide the infrastructure that moves cargo

between ships and sure. We are the ones that look after the water and

the waterfront and provide the waterfront for the activity to take

place. What skills, what distinguishes a good port from a bad

port? What would you look out for? For many of our customer's the spec

deep, there are certain factors which to be honest to not have much

to do with management ` the location and natural characteristic.

Southhampton is a natural port. Gateways to from Europe. Having said

that, the next thing that a shipping Linux port is for speed and

turnaround of servers. The less time a ship spent in port, generally, the

better. The second factor is how weekly did you get the cargo onto

its onward journey ` onto a truck or train? How quickly do you do that?

Ten to 20,000 ` the biggest in the world is 18,000 of these containers.

How long does it take? 24 hours. In that time we are looking to move a

couple of,000 boxes, containers. We aim to be moving about 30 containers

per crane per hour at the container terminal in Southhampton. Sometimes

we will have six cranes on a ship. Kenneth, you are a seaman. When the

juice first start working on ships? 1959. 54 years ago. I progressed

through the ranks. Came ashore in the mid` 70s to take up a position

as ship manager, running a group of ships ` oil tankers, container ships

` so I have been in the industry a long time. What was your first job?

It is interesting, may father was determined that I was not going to

go to sea. But I wonder the argument. His compromise was that I

would go away as a galley boy on one of the transport system west of

Scotland, carrying 1800 passengers. The galley boy's job is to peel

potatoes stop he thought that I would be pleading to come ashore

after a few months. He said was the master. He said what is your

ambition and I said it was to be chief and go over the world. Let's

talk about insurance. Rupert Lloyds, how does the insurance work

that you're ensuring the cargo and the ships themselves? We ensure the

house ` the ship ` the cargo and associated liabilities.

the ships themselves? We ensure the house ` the ship ` the You have been

involved in the 'Costa Concordia', how much is that cost? A tragic

event like that. The 'Costa Concordia' is a very large crew ship

that landed off the coast of Italy. The value of the vessel was $900

million and the value of the total claim is now around about 1.6

billion dollar `` million dollars. The difference between the whole

value and the total claim is largely associated with removing the rack. I

would like is to drill down to the size issue. The ships have got very,

very large. The biggest is about a quarter of a mile long. The biggest

we handle is 400 metres. Majestic Maersk is the biggest? The biggest

in the world. 18,000 containers. How big can you go? Whether it is an

aeroplane or an office block or a shop or a shopping more. The right

economic forces tried to get them bigger and bigger and there were

also technical and other economic forces that constrain the size. I am

interested in how big these things are and what are the forces of

enlargement and those constraining how big they can get? One of the

first ships I was on `18 months ` UK Europe, through the Panama Canal, to

Australia and New Zealand. It took as three weeks to load the cargo for

Australia and New Zealand. In various ports. It took us 35 days to

get to one port. In three weeks to get to New Zealand. A container ship

today... That ship did 15 knots... The average speed today is 23 knots

and they carry and do that trip in 19 days. With a crew of 13. We had a

crew of 36. It was all manual labour. Unloading is quicker, the

journey time is quicker. But it is not as much fun, I can tell you. Why

it would you not just go on making them bigger and bigger? A couple of

reasons. I have to say, when I first started working in UK ports, 4500

Tierce was the largest. These are the 20 foot equivalent units

basically a container. A small container. They are now 18,000

tears. They have exceeded most people 's expectations. The driver

of that is the shared volume of trade. It has moved across the world

's great oceans. Asia, Northwest Europe and Asia to North America. It

has enabled the trade is of going hand in hand? The constraint is how

expensive it becomes for ours to actually build the infrastructure

necessary to handle these very large vessels. The incremental cost of

dredging the channel is very, very large. Five inches of dredging

Southhampton water is about ?3 million for five inches of

additional debt. The numbers built quite quickly. `` depth. The port is

a big part. If you take some vessels, they go very fast across

the Pacific but they were especially commissioned by Walmart to bring

goods in from China to the West Coast of the state and they do not

go anywhere else. Having a bigger ship only works if you can fill it.

It is an occupancy game. I do think that they have containerised almost

everything that they can. It is a sad fact that of the five full

containers coming into the UK, to leave empty. One leaves with scrap

metal, one leaves with scrap paper in one leaves with something of some

value stop they are good to fill them with anything they can. We have

this interesting thing that in an empty container they will be sending

some Scottish fish to be filleted in China or whatever it is. To

underline the point of instant `` infrastructure. Those bigger

container vessels, I do not think they can pull in any North American

port at the moment and they cannot go through the Panama Canal. There

are parts of the globe that they cannot access. The size of the ship

increases the tendency towards big risks. But does it change the

business at all? There are definitely more complex and

definitely more available. People estimate the range of values in a

given container as anything between $20,000 `$50,000. So if you have

18,300 containers at the higher end of that range, you are looking at

nearly $1 billion of cargo. If there was ever a large loss of life, it

would stretch our business. Let us talk, we have talked about

the size. Other developments in the shipping business. You were hinting

at the difficult economic times. It is a cyclical business, basically,

isn't it? It does well when the world does well and it does badly

when the world does badly. You cannot do anything else with the

ships, you cannot turn them into resorts or shopping centres. There

are basically ships. Exactly. We have overcapacity in most sectors of

shipping at the moment. But the world was doing well in 2006`2007.

The shipbuilders work building warships, more tankers. More

container vessels. And then what happened, can I say Lehman Brothers,

the whole lot collapsed. You cannot just pick a ship off the shelf. It

is sometimes three years in the planning. You have to anticipate. I

personally witnessed five of these booms and busts. But everything

seems to get better. Shipping has cut its costs. Who is in charge of

the shipping industry? The employees a multinational. The lower ranks

often seem to come from poorer countries. The ships often fly under

flag that there are no relation to where the ship was built or the

headquarters of the company is. Is that a reasonable summary of how it

works? That would be eight perception. But shipping is very

well regulated. That is backed up. You can issue rules and regulations.

You will soon find crew members that want to abandon. Every ship calling

to an American or European or a British port will have a visit

possibly even from the flag of that country. They will come down and

have it look. If a Liberian ship comes in three British port, it

would be inspected by a British coastguard. Exactly. Typically it is

an ex` master or chief engineer. What happens if you are not? You

ship could end up being detained. The ships are detained. Quite

frequently. I would be interested in your perception. One of the

questions often asked is how many detentions have you had in your

perception. One of the questions often asked is how many detentions

have you had any year. One of the good things is to have well

maintained vessels. Who are the big players? That is what China does.

Not developed countries seeing themselves specialising in. Does

that lent itself, obviously China has some of the biggest ports in the

world. Does it also mean that China operates some of the biggest ships?

The three largest container operators are all European. They're

all based in Europe. There is a growing Chinese fleet. But I think

the three account for some 40% of the world's container fleet. That is

pretty accurate. If you take it into the dry dock section, China had an

unprecedented demand. Just the gearing of the country. Owners were

building these massive vessels from south America. They came from all

places, Australia as well. They found that it was boomtime. 250,000

tonne vessel. Chartered by the Chinese to fill this to mind.

Suddenly the Chinese for strategic reasons decided that they were

overheating. They cut back on these imports. There are starting to pick

up again, I understand. That affects shipping. Some of them do it

recklessly. But some of them are just trying to keep up with demand.

If you are to talk about what keeps you up to tweak `` at night, piracy.

Have been some high`profile cases, but is a pretty big part of the

business. It presents a moral dilemma. Should these payments be

made? Are we fuelling the fire of the problem? You are paying ransoms,

basically. Yes. I thought you were not allowed to pay ransoms in some

jurisdictions? Technically I am telling them ransom because that is

what people understand them to be. If we were to get technical about

it, it is actually a payment being made to prevent the loss of our

property. We do not ensure the crew themselves, we ensure the ships and

the cargo. We pay the money in order to have the research vessel

released. But everybody else would say it is obviously a ransom to get

the crew back. It is, but we are dealing with the shipowner.

Attempting to avoid us having a further loss. We have to negotiate.

This is very close to my heart. Between the ships that we are in

ourselves and the ships that we manage, we have a ship per day in a

piracy hotspots. We have a moral duty to look after these people as

best we can. If it comes to considering paying a ransom, we

would certainly do that. Just consider this point. If it comes out

that the British government said that they do not want us to pay

ransoms, how are you going to get the crew demand these ships that

carry these goods, the 85% adjusted to the UK alone, if the crew believe

that there are going to be abandoned because the ransom is going to be

paid? We have a duty to make sure that we get our crew out of danger.

How many people are we talking about? Five years ago, six years ago

there were over 1000 seamen incarcerated on ships that had been

taken by pirates or a pirate cabs. `` in pirate cabs. I think we are

down to under 40 at the moment. Sadly the Korean fishing boats or a

Bangladesh or in the Indian Ocean, we know this. Even if ten airline

passengers five years ago had been incarcerated on it would have been

resolved. This is primarily because these are not European. Exactly.

They are Filipino, Indian, Bangladesh, Indonesia. The world

turned its back on them. There are other hotspots of piracy. West

Africa is now on the rise. That is a different type of pirate. He is not

interested in taking the ship to get a ransom for the crew. He wants to

take the cargo and sell it. Where is very possible market to sell cargo?

Trust me, there are plenty. He will not let the crew stand in his way.

There are many issues facing shipping, sulphur emissions down to

the world economy. It is all about money. But piracy is life and death.

We need to bring this voyage to an end. Let me thank my guests. James

Cooper, Kenneth MacLeod and Rupert Atkin. Thank you to the three of

you. Thank you at home for listening. Join me next week when I

will be back for with more guests. Do not forget, downloads of the

bottom line are available. Details on the website. You can also listen

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