17-08-2016

An Insight into Lay Up Management by an Industry Expert

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The current demand and supply imbalance has resulted into an excessive oversupply of ships leading to the harsh reality of high operational costs and very low freight rates for the ship-owners. The vessels which find employment are barely able to recover operational and running costs. Industry insiders report that some ship owners have opted for laying up of their vessels. Ship owners seek lay-up management services as It lowers the cost for the ship-owners substantially and makes vessels available at a very short notice. To find out more about how a ship management company can assist ship owners (particularly the dry bulk operators) during these challenging times, we interviewed Mr Sanjay Shesh, Managing Director, Crowley Accord Marine Management Services.

Mr. Sanjay Shesh started off by explaining what lay up management is and how Crowley Accord came about to providing these services,

“The whole idea came up when one of our Clients participated in buying some Ultramaxes. This company was very closely associated with us, they invested in these new buildings of Ultramaxes. These were modern ships, carrying 64,000 metric tonnes at an economical fuel consumption, very efficient ships. Our clients participated in equity. When the vessels were to be delivered to us, we realised that it was difficult to even recover the operating cost due to prevailing market conditions.  Now, the ships were to be delivered and the question was how do we maintain a brand new ship in a brand new condition? If there is a sudden surge of upward movement in the bulk carrier market we should be able to get the ship operational within the shortest period of time.

Being a marine engineer myself, we thought over this issue and worked out that one of the biggest aging processes on a bulk carrier or any ship is due to the circulation of sea water within the system. So we came up with a plan that the moment the ship is out we will drain out all the seawater from the ship, we will pump in fresh water into the ballast tanks, the circulation system is very much there, we only have to make one suction from the ballast tanks and circulate fresh water within, crank all the sea suction chests.  Tie up all our six ships together and keep a very minimum team of around five to six people to manage all the six ships at the same time. They would all be tied in safe sheltered anchorages. These are very broad guidelines mentioned but there is much more to it in the form of procedures, preparation and execution.

There are many places in China for laying up the vessels and the overall expense is lesser compared to cost of operating them, this is almost the miniscule amount of payment. We tried this strategy with three ships.  Our charges per ship for this particular activity is very less and  we then we extended this idea on other ships as well. We talked to the Sri Lankan government to get a place in Trincomalee which has a sheltered safe anchorage.  The lay up option according to me is a very economical option in case a company is not making money on a bulk carriers because the reactivation time in the lay up management that we talk about is not more than a week.” He further added, “ The lay up management service that we offer, you can take the flag state dispensation and put just about the crew which can keep trying machinery on regular basis to keep it operational.”

It is highly beneficial to all parties involved including the government, “We provide this service in sheltered waters, if some ship owner/operator needs this service, we can talk to various governments, which we have done in the past and they are ready to do it at a very less cost.

Coming to the conclusion, very briefly put why should a bulk carrier operator go for layup management and whether he is aware that these kind of facilities are available?

“Considering financial aspect, as I discussed with the owners, if the vessel is operating, the banks insist that they get their repayment. When you lay up the vessel and you’re not operating the vessel, the bank gives you a holiday on repayment of loan, that’s a huge breathing space for the ship owner that he doesn’t have to repay the loan for that period because the vessel is not operating plus he is also limiting his liability. Even if he Is making a loss on a particular vessel, he is obliged to repay the loan. Banks can consider holiday period for the loan because the owner is actually not operating the vessel. The important part being that the vessel is safe and sound also available within a week when she has an employment.”

Source: Kavita Mishra / TST Newsdesk

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