Cargo Selection for Bulk Carrier MV Lotus Dawn - Case Study Example

Cargo Selection for Bulk Carrier MV Lotus Dawn Abstract Table of Contents 1. Introduction 1 2. Maximum Cargo Weights and Volumes 2 3. Loading, Unloading, and Handling Risks and Considerations 2 3.1.General Hazards of Bulk Cargo 2 3.2 Specific Hazards of Coal as Bulk Cargo 3 3.3 Specific Hazards of Iron Ore and Mineral Concentrates 4 4. In-Transit Risks and Mitigation 5 5. Conclusion & Recommendations 5 References 7 Cargo Selection for Bulk Carrier MV Lotus Dawn 1. Introduction This report will examine the cargo selection options for a voyage of the bulk carrier MV Lotus Dawn from Manila, Philippines to New York via the Cape of Good Hope, the route that was determined to be the most practical in terms of trip safety and costs. In order to make the correct selection among the available options – coal, iron ore, or mineral concentrate – the carrying capacity of the ship within the parameters set by the selected route must be considered, along with the handling and carrying hazard risks each of the possible cargoes presents and the procedures and safeguards that must be employed to minimise those risks. The liability of the ship for loss or damage to the cargo will also be considered, along with the steps that must be taken to minimise any potential claims. The parameters that apply to the MV Lotus Dawn for this voyage are as follows: Winter loadline and draft deadweight applies – Those are given as 13.8 metres and 74,650 tonnes, respectively. Lotus Dawn will be departing Manila on 28 December 2010 and arriving in New York on 15 February 2011. This is further restricted, however, by the draft limit at Manila, which is 13.4 metres. (World Shipping Register, n.d.) At 72 tonnes per centimetre, that reduces the draft deadweight of Lotus Dawn to 71,770 tonnes. Freshwater, constants, and fuel on board – 100 tonnes of freshwater, 250 tonnes of constants are the specified ROB, and 848.31 tonnes of fuel are required to reach the bunker port at Cape Town with the specified 10% reserve. These reduce the cargo capacity to 70,570 tonnes. Total cargo volume available for a bulk cargo is 89,300 cubic metres. Ship performance is the same for any of the available cargoes – The assumption is made that the performance of the ship given for the calculation of the route options (11.5 knots average speed and 1.3 tonnes per hour bunker consumption) are not affected by the type of cargo. 2. Maximum Cargo Weights and Volumes Given the above parameters, the maximum amounts of each of the cargo options that the MV Lotus Dawn can carry are as follows: Iron Ore: Iron ore has a weight of 0.35 tonnes per cubic metre, making it the lightest cargo. 89,300 m3 x 0.35 tonnes/m3 amounts to 31,255 tonnes, less than half of the cargo weight capacity available for this voyage. Mineral Concentrate: Mineral concentrate has a weight of 0.48 tonnes per cubic metre, so the cargo volume available on the Lotus Dawn will accommodate 42,864 tonnes. Coal: Coal is the heaviest cargo at 1.42 tonnes per cubic metre. The maximum available weight capacity of 70,570 tonnes if loaded in coal will only account for 49,697 cubic metres’ of the ships available volume and will easily be accommodated. Because any of the available cargoes will constitute a full load for the Lotus Dawn either in terms of weight or volume it is most likely that the ship would be hired by the customer on a charter basis, meaning that the shipping cost would be relatively equal for any of the loads, and only be adjusted based on the special handling, safety risks, risks of loss associated with each of the cargoes. This is not actually good news for the owners of the Lotus Dawn, as dry bulk cargo rates measured and guided by the Baltic Dry Index have been declining rapidly since the first quarter of 2008. (Bockman, 2010; InvestorTools.com, 2010) Therefore, the cargo that presents the minimum amount of risk to the ship, risk of loss, and least amount of special handling precautions should be preferred to maximise the revenue from the voyage. 3. Loading, Unloading, and Handling Risks and Considerations 3.1 General Hazards of Bulk Cargo There are specific risks associated with the handling and carriage of coal, iron ore, and mineral concentrates, but there are general hazards and precautions that apply to any bulk cargo, and should be considered first. The master of the ship must have complete information on the ship’s stability and the proper distribution of cargo, and must have complete and accurate information about the cargo itself, not only in terms of the properties of the cargo such as potential for chemical reactions that can create heat or harmful gases, but concerning the actual condition of the cargo as well, particularly in terms of moisture content. (Transport Canada, 1994) This is of particular concern when loading iron ore or mineral concentrates in a tropical location such as Manila, and is discussed in greater detail in the next section. Apart from whatever particular hazards are posed by the type of cargo, all bulk cargo presents a risk to the ship’s stability. If loaded unevenly, bulk cargo can shift the centre of gravity and the weight distribution of the ship, which can change the handling characteristics of the ship, or worse, put the ship at risk of foundering or capsizing. Care must also be taken to ensure that the cargo will not shift during passage. In general, it is proper practise to trim bulk loads level, utilising the full space from bulkhead to bulkhead to prevent the load from moving while the ship is underway. (Transport Canada, 1994) 3.2 Specific Hazards of Coal as Bulk Cargo Coal is considered a hazardous material in bulk, and presents a number of hazards to a vessel (Transport Canada, 1996): It can produce flammable gases, and may cause an explosion or fire. Coal easily oxidises, which depletes the oxygen in the cargo space and increases the amount of carbon dioxide. This presents a danger of suffocation to the crew if they are obliged to enter the cargo space and do not have proper breathing apparatus. Coal is also capable of self-heating, and may spontaneously catch fire. Coal reacts with water, and can produce corrosive substances which may damage the ship. A coal cargo picked up in Manila would be similar in characteristics to Indonesian coal in terms of its composition and handling; as in Indonesia, most coal is barged to the main port, and due to its exposure to the tropical elements and its chemical make-up is prone to self-heating. (“Coal Mining in the Philippines”, 2010; “Coal Cargoes from Indonesia, 2010) Leading maritime insurer Skuld advises that specific steps in handling coal cargoes must include careful monitoring of the load’s temperature before and during loading – a temperature in excess of 55° C is considered dangerous – that holds must be covered immediately upon completion of loading or for any break in the loading process lasting an hour or more, and that surface ventilation of the load be done during the first 24 hours on board to prevent methane build-up. (“Coal Cargoes from Indonesia, 2010) 3.3 Specific Hazards of Iron Ore and Mineral Concentrates Without knowing the particular kind of mineral concentrate that might be carried by the Lotus Dawn, it is not possible to specify the hazards that might be presented, apart from the common risk posed by all types of mineral concentrates in fine form (powder or small particles), which is liquefaction. This hazard applies to iron ore as well, since it can also be processed as fines, and the concern about liquefaction is particularly significant in tropical locations such as the Philippines. (“Liquefaction of cargoes of iron ore”, 2010) Because these cargoes are usually exposed to tropical elements and rainfall for a period of time before loading, they may have excessive moisture content. In liquefaction, a loose material in combination with moisture and motion – even the vibration of the ship’s engines might be enough to cause it – loses its cohesion and behaves as a liquid, which can shift suddenly and violently and severely destabilise the vessel. The SOLAS (International Convention for the Safety of Life at Sea and IMSBC (International Maritime Solid Bulk Cargoes) Code 2009 give safe limits of the “Flow Moisture Point” (FMP) of various materials; the cargo should be tested before loading, and if its FMP value – expressed as a percentage of moisture content – is in excess of the guidelines, the cargo should be refused. (Ibid.) Iron ore presents a number of additional hazards because it can be produced in different forms which have unique reactive properties. Iron ore is often pelletised and then reduced by passing hot gases such as hydrogen over it, which removes the oxygen and renders the ore lighter while maintaining its iron content and volume. The reduced iron can readily react with air, and is subject to oxidation, self-heating, and release of dangerous gases, primarily hydrogen. The safest way to transport DRI is to carry the cargo under an inert gas blanket, in other words, to replace the regular oxygen-carrying atmosphere in the cargo space with a non-reactive gas such as nitrogen or helium. This is, in fact, the recommendation of the IMSBC Code for DRI of the smaller particle varieties and fines. (“Carriage of Direct Reduced Iron [DRI]”, 2009) 4. In-Transit Risks and Mitigation From the analysis of the risks presented by the various cargoes, it is clear that proper procedures and safeguards applied at the time of loading will do much to reduce risks to the ship while underway. Complete and accurate documentation of the cargo and a thorough inspection and testing of it before allowing it aboard are essential, but are not quite enough; once underway, the cargo will have to be attentively monitored to make sure hazardous conditions are not developing. All of the cargoes present the same kinds of risks, albeit in varying degrees, so the same hazard mitigation tasks can be applied for all of them. These include monitoring the temperature of the cargo to watch for signs of self-heating, monitoring the air quality in the cargo space to guard against the generation of dangerous gases or excessive oxidation, and monitoring the moisture content of the cargo; in the case of iron ore or mineral concentrate in fine form this is primarily to protect against liquefaction, and in the case of coal, to prevent the formation of corrosive substances that can damage the ship. Preventing oxidation and water reaction also guards against loss of part of the cargo through spoilage. 5. Conclusion & Recommendations Of the three available cargoes, only mineral concentrate seems to offer the combination of most efficiently using the capacity of the MV Lotus Dawn with a reasonable margin of safety. While there are critical hazard-reduction steps that must be taken with a cargo of mineral concentrate, these are much less for most materials than they would be for either coal or iron ore; loading in the Philippines, it would be a reasonable guess that the mineral concentrate would be nickel, a fairly safe material and one of the few ore exports of that country. (“Liquefaction of cargoes of iron ore”, 2010) The precautions against liquefaction caused by excessive moisture content must of course be strictly followed. Unlike coal, however, which requires extra attention to safeguard against self-heating and corrosive effects, and iron ore, which requires the same attention as coal plus the provision of an inert gas blanket over the cargo, a cargo of nickel concentrate presents fewer risks. There are a couple of other factors that favour a mineral concentrate cargo. In a study of 125 bulk carriers that foundered between 1963 and 1996, 48 of them were carrying cargoes of iron ore. (Roberts & Marlowe, 2002: 442) That indicates that iron ore is a rather risky cargo, something that is likely to be reflected in the insurance rates for the voyage. While that cost would be borne by the customer, a high insurance rate makes the trip more expensive, perhaps even unattractive to the prospective shipper; Lotus Dawn, of course, earns nothing unless she sails, so the less chance the associated costs have the customer thinking twice about booking the voyage, the better for the ship. That same study also noted that the odds of foundering were greatly reduced for ships that were ballasted. (Ibid., 443) That is also a significant consideration for the Lotus Dawn. With a cargo of coal, the entire weight capacity of the ship is used, which eliminates the possibility of adding ballast. With a mineral concentrate or iron ore cargo, the entire volume capacity is used, but 27 to 39 thousand tonnes of the weight limit is still available, more than enough for ballasting. The problem with the iron ore cargo, however, is the requirement for the provision of the inert gas blanket; if the entire cargo volume is occupied, this is simply not possible unless the load is kept at less than full capacity. A normal mineral concentrate cargo does not present that difficulty, and as was explained in Section 1 is significantly heavier at the same volume than iron ore, which reduces the amount of ballast needed. Taking all these factors into consideration – safe handling requirements, cargo weight, cargo volume, and the need for ballast capacity – mineral concentrate is clearly a safer and more practical choice of cargo for MV Lotus Dawn. References Bockman, M.W. (2010) “Freefalling rates spark fears dry bulk crash has arrived”. Lloyd’s List, 8 July 2010. Available from: http://www.lloydslist.com/ll/sector/dry-cargo/article173189.ece. “Carriage of Direct Reduced Iron [DRI]”. (2009) North of England P & I Association, 23 September 2009. Available from: http://www.nepia.com/cache/files/1303-1272281074/LPBriefing-CarriageofDRI.pdf. “Coal Cargoes from Indonesia”. (2010) Assuranceforeningen Skuld, September 2010. Available from: http://www.skuld.com/templates/Page.aspx?id=1502. “Coal Mining in the Philippines”. (2010) MBendi Information Services, updated 25 September 2010. Available from: http://www.mbendi.com/indy/ming/coal/ as/ph/p0005.htm. InvestmentTools.com. (2010) Baltic Exchange Dry Index (BDI) & Freight Rates. Available from: http://investmenttools.com/futures/bdi_baltic_dry_index.htm#bdi. “Liquefaction of cargoes of iron ore”. Loss Prevention Circular 08-10. Gard AS, June 2010. Available from: http://www.gard.no/ikbViewer/Content/4836393/08-10%20Liquefaction%20of%20cargoes%20of%20iron%20ore.pdf. Roberts, S.E., and Marlowe, P.B. (2002) “Casualties in dry bulk shipping”. Marine Policy, 26: 437-450. Available from: http://202.114.89.60/resource/pdf/1892.pdf. Transport Canada. (1994) “Carriage of Cargoes: Solid Bulk and General”. Ship Safety Bulletin 11/1994, 2 September 1994. Available from: http://www.tc.gc.ca/eng/marinesafety/bulletins-1994-11-eng.htm. Transport Canada. (1994) “Vessels Loading Coal”. Ship Safety Bulletin 04/1996, 29 March 1996. Available from: http://www.tc.gc.ca/eng/marinesafety/bulletins-1996-04-eng.htm. World Shipping Register. (n.d.) “Philippines, Manila”. (Port information). Available from: http://e-ships.net/ports/Philippines/3392.htm. Read More