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A map of Dubai is covered in coloured
blocks with labels such as ‘Dubailand’, ‘Living
Legends’ and ‘Jumeirah Village’ (the
word ‘village’ is very much a misnomer). All
those blocks are marked as ‘u/c’ – under
construction. And they are huge, stretching for kilometres
in every direction.
In the northern emirates of Ras Al Khaimah, Sharjah,
Umm Al Quwain and large-scale commercial, residential
and offshore projects will soon begin. There’s
also a massive development boom currently in Qatar.
Although demand for construction material in the Gulf
looks as if it will hold up for many more years, there
might not be so much maritime trade to come. Still,
there’s a lot of local cement-making capacity coming
online.
“Qatar will still be an importer for the next year,
and I think we still have three years to go for Dubai
and even longer for Abu Dhabi,” Dajani tells Fairplay.
CTI is so confident of local trade holding up that it
is committing to building a shoreside facility in Abu
Dhabi.
“We’re loading in India and Pakistan, and
we discharge directly onto trucks at Jebel Ali,”
Dajani explains. “That takes us four or five days.
Turnaround will become much quicker with the new facility
– we will discharge in one day and then bring in
more cargo.”
Carriage of cement is a niche trade – so specific
that Dajani comments that it is separate from the Baltic
indices. It also throws up some curious oddities. For
example, cement carriers are of an age when any other
vessels would have long been driven onto the beaches.
Take, for instance, the group’s 27,616dwt vessel
Flag Investors, which was delivered four decades ago.
Many of the floating cement terminals (bulkers specifically
converted for cement storage, loading and unloading)
are equally elderly. And one of the company’s floating
terminals in California is an astonishing 37 years old.
Although floating terminal values are very high, bulk
carriers are quite lucrative in today’s markets.
Dajani explains: “Some of the floating vessels
are irreplaceable. Equipment for cement handlers has
become expensive as there are only a few suppliers.
We are hesitant to order a conversion. It is often cheaper
to build a shoreside facility, although they are useful
when there are shortages.”
Dajani points out that cement carriers tend to shuttle
back and forth between points, rather than tramping
around the world. So there should be less everyday damage.
CTI disposed of two vessels last year, got rid of another
this year and will dispose of another vessel next year.
But CTI plans to buy ‘young’ cement carriers
– 15 years old – next year.
The ships can be sold on the open market despite their
advanced years, because the cement-handling equipment
on them is so valuable that a new owner an always be
found. “
Opportunities in carrying cement are limited, despite
the construction boom. The major problem for the industry
is over-reliance on cement.
A consolidating wave has swept through the manufacturing
industry so just a handful of players control more than
half of the industry. This concentration threatens the
carrying business. As prices for cement drop, so does
the carrying market.
The other problem is that demand for cement shifts from
place to place depending upon construction, or reconstruction
after events such as Hurricane Katrina. Trade chases
the demand; ships have to follow the trade.
“When you shift, you have repositioning costs.
The Mediterrean was good last year, and the USA was
a good market until the housing market fell,” recalls
Dajani. Now most of the group’s ships are in the
waters around Arabia.
Another major risk factor is politics. Owners of cement
carriers have to watch out for it – no sane ship
operator would want to trade an elderly, expensive and
irreplaceable vessel in any waters where there is even
the most remote chance of damage or loss.
Dajani declares: “We concentrate on safety –
Iraq is still too dangerous. Although we go to Sri Lanka,
we never go to the north.”
It is a particularly relevant issue because the Middle
East as a whole addresses far greater risk than, for
example, northern Europe. It has been a long time since
Norway and Sweden got into a conflict.
Sadly the same cannot be said of the various states
in the Middle East.
Dajani acknowledges: “There is always a political
risk because it is the Middle East. But we have good
relations with our underwriters, so we have no problems.”
That seems to be a solid, commercial approach: don’t
be frightened of risk but do be aware of it, assess
it and manage it as appropriate.
So the cement carrying trades are particularly sensitive
to asset risk, industry/economic risk and political
risk.
But there’s one other big risk: operational difficulties,
as posed by crewing problems. Although shipping worldwide
faces – or ignores – the increasing difficulties
of sourcing qualified and experienced crew, for cement
carriers it is a particularly acute risk.
The problem lies in the nature of the business. The
ships are so specialised and complex that crew require
an additional six months on top of regular training
to handle the vessel. But this proves costly for the
carriers if, after completing training, the crew decides
to ‘jump ship’ and work for a rival vessel.
CTI has discovered a way to eliminate this problem.
The company has become exclusively affiliated to a crewing
agency in the Phillippines, which provides staff. This
may be costly short-term, but it is effective long-term.
By: Jim Wilson
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