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Inspired by an upward trend in classification, the societies are heading for new growth markets, increased competition but also cooperation and new, mostly green technology.
Seaborne trade is still subject to downside risks. Overcapacities continue to be an issue. While the merchant ship orderbook was[ds_preview] falling, offshore investment was growing. As a result, the proportion of shipyards with an orderbook building offshore units jumped from 17% in 2005 to 40% at the start of 2014.

Classification societies closely linked to shipbuilding are confronted with more competition. The merger of DNV and GL resulting in the world’s largest classification society in terms of tonnage has been successfully completed. As carthel authorities finally approved of the merger, a new Goliath has entered the scene under the name of DNV GL. Japanese ClassNK was forced to second place.

The formation has started new impulses for growth and at competing class societies. Investment is becoming dominant in classification. Experts fear a price war in ship classification is about to start as DNV GL’s competitors try to win market shares from the new giant. Lately, demand for modern tonnage encouraged shipowners to pile up newbuilding orders, broker Golden Destiny reported in May.

Much optimism for new growth era

An upturn in the global economy brought renewed confidence in 2013. A surge in new orders and projects has followed.

Bureau Veritas (BV) said 2013 was a pivotal year for shipping. The whole maritime sector is thus »looking healthier than it has at any point in the last five years,« BV announced in May. New ship orders almost doubled, to 8.6 mill. gt, with a substantial number of container vessels, bulk carriers and tankers. What is more, the French also succeeded in winning over ships already in service from transfers-in. The Executive Vice President Marine & Offshore Division Philippe Donche-Gay talked about a »new cycle of growth«. BV launched a voluntary notation for containerships which will allow more flexible container stowage, called »Lashing WW«. With the initiative the society aims at offering the embattled container market a surplus when cooperating with the French.

As a consequence of more competition, strengthening market positions by investment is on top of many class societies’ agenda. For example BV acquired DTI DiversiTech in June.

Japanese ClassNK is also expanding. In March, they acquired leading maritime software house NAPA. The same month ClassNK classed their first US-flagged ship. And in April they established a new survey office in Belem, Brazil. They also gained a foothold in the German market with multipurpose vessel »Bremer Fortuna« in June.

In 2013 ClassNK saw completion of their first mid-term management plan called »Global Approach 200«. The new plan for 2014 »ClassNK Global Challenge 250« envisages new offices, efforts to improve service activities and an expansion of the company’s service network.

The »most significant event of the year« 2013 as defined by ClassNK Chairman and President Noboru Ueda was the casualty of ClassNK-registered container ship »MOL Comfort«. This incident drew attention to the general problem of container declaration. Although the reasons for the desaster are still not fully investigated, reinforcement work to increase the hull strength of the sister vessels was carried out as a preventative safety measure.

Meanwhile, Lloyd’s Register (LR) managed to win over DFDS, which is transferring eight vessels into LR. The transfer highlights LR’s role in the passenger ship, RoPax and RoRo freight ferry sectors. In June LR was confirmed as the highest performing Recognised Organisation (RO) in European port state control area for the period 2011-2013. In LR’s Group Review 2013 Marine Director Tom Boardley defined the years 2012/2013 as »transformative for the marine business«. Restructuring at LR is going on.

Offshore: energy boom & wind power

In the offshore industry, profits loom large in the US where classification is fostered by the energy boom. In 2013 the fleet classed by the American Bureau of Shipping (ABS) grew by more than 6% year-on-year. ABS maintained a leading position in the global orderbook closing out the year with 38. 8 mill. gt contracted to their class, 22% of all vessels on order. As an offshore specialist the society claims to certify the largest share of floating production installations worldwide. Oil tankers continue to comprise the largest tonnage within their fleet, growing more than 5% year-on-year to 73. 8 mill. gt, with orders for a further 139 vessels aggregating 6. 2 million gt. The latest project is a newbuild floating liquefied natural gas (FLNG) vessel, called »Petronas FLNG« for Malaysia’s state-owned Petronas. In 2013, however, jack-up platform »St. Malo FPU« was in focus of the society’s action when it moved towards first oil in November. Preventive measures in offshore oil are another important area of work: A deepwater emergency response plan has been worked out. Bureau Veritas has been awarded the OMAE 2013 Best Paper of Offshore Technology Symposium in June for a research into second-order rolling of FLNGs. They are developing harmonised guidelines for the estimation of roll motions of FPSOs. China Classification Society (CCS) also won an offshore award: »Leadership in Offshore Technology and Training« was given to the CCS by the President of Seatrade, Chris Hayman.

The trend in European offshore wind was towards larger turbines and bigger wind farm projects in 2013. Twelve offshore wind projects were under construction in January and EWEA expected continued sustained activity. After recent minor incidents in offshore wind crew transfer vessels differences in standards between class societies were criticised by parts of the industry. Old munitions slowed offshore wind in Germany and Britain while Germany cut its 2020 target to 6. 5 GW.

LNG: Studies and orders

Another growth market is LNG technology: The list of LNG-fuelled ships in operation in January shows DNV GL in a good position, most of all with ferries where they realised four projects by then. LR was chosen for one RoPax ferry by Viking Line. In March United European Car Carriers signed a contract to construct two LR- classed dual-fuel LNG pure car and truck carriers. Together with Capital Ship Management Corporation, LR will develop LNG-fuelled Ultra-Large Container Ships (ULCS). As for LNG carriers ABS were awarded a class contract for two 150,200m3 capacity vessels in May. So-called Moss-type cargo tanks will have no minimum filling limits and the vessels will serve as shuttles to and from FLNG or other offshore facilities.

DNV GL has launched a new LNG tanker project to produce tankers with a smaller environmental footprint. CCS acts as class partner for a 14,000m3 LNG carrier delivered in August 2015 for Zhejiang Hua­xiang Shipping. In LNG bunker structure standardisation was well under way, DNV GL reported in September. And in November, Singapore completed an LNG bunkering technical standards and procedures study with LR.

Hotspot Greece

As Greek shipowners slipped ahead of Japanese in gross tonnage in 2013, the Greek market and recent Posidonia exhibition have become more embattled by classification societies. DNV GL announced at Posidonia they would be establishing a new customer support centre in Piraeus. Competitors’ attention has also been attracted: »Greeks are the most important clients for China. Greece is the biggest market,« said Bill Chen, Vice-President of BV’s bureau in Shanghai.

China Classification Society is eagerly awaiting results from a bilateral agreement governing the delegation of statutory survey and certification services between China and Greece signed in June. During 2013 CCS »maintained a stable and better growth in all business sectors«, as President Sun Licheng said. The overall society’s fleet reached 3,017 vessels or 62. 84 mill. gt, according to company numbers. The increase in tonnage amounted to 179 newbuildings of 4. 88 mill. gt. CCS achieved 79 transfers of ships in service with 2. 42 mill gt. At Posidonia, CCS and Chinese ship design companies presented latest technology including green ship types.

In the meantime, Italian classification society RINA and the Hellenic Shortsea Ship­owners Association have signed a cooperation agreement to strengthen their relationships in the fields of ship classification, safety, environmental protection awareness and training of personnel. With approximately 280 mill. € of turnover in 2012, over 2,200 staff and 150 offices in 53 countries RINA Group is going the path of cooperation.

Cooperation and the »newbies«

A key aspect in DNV GL’s strategy focused on research and development (R&D) is cooperation. The society has not only increased the R&D budget but signed a memorandum with Maritime and Port Authority of Singapore in February to promote R&D. ABS and RS cooperated in surveyors training on classification services for LNG carriers. And Italian RINA supported the formation of Tasneef classification society in the United Arab Emirates (UAE). In August 2013 Tasneef engaged in a deal with Dubai Drydocks to classify merchant vessels. In May this year, Actual success in terms of customers is still limited though: In February the society reached a milestone when it classed its first tanker. Until now, Tasneef managed to class about 50 vessels.

Founded in India in 1975, Indian Register of Shipping (IRS) is not really new but growing. The society which expanded to the world market in 1998 is authorized by 22 flag administrations to act as Recognised Organization (RO) on their behalf including the most important ones. In May 2013 IRS announced new appointees in Singapore and London. According to the company these new appointments allow to offer a more diverse range of auditing and compliance solutions. In November 2013 Indian Register of Shipping had over 1,700 vessels registered totalling about 11 mill. gt. A recent important step was acquiring full membership of the International Association of Classification Societies (IACS).

Green shipping

Increasing international regulation creates new demand for the class societies’ expertise: The world’s first mobile app containing all up-to-date IMO conventions was released in April by Korean Register (KR). It enables users to identify regulations relevant to a specific task.

In June the pressing challenges associated with the need for vessels trading to Emission Control Areas (ECAs) were focused at an International Chamber of Shipping (ICS) meeting. The urge to switch to low sulphur fuel in North America and Europe is being felt by shipowners. According to ICS the shipping industry is investing billions of dollars to ensure compliance – an investment monitored by the specific class partners who continue to profit from the final countdown for low sulphur fuel. Another sector of regulation applies to gas carriers constructed after 1 July 2016. Some of these new requirements also apply to existing vessels. As operational risks have to be identified, there is much work for classification.

The need for green solutions leads to more pilot schemes. ClassNK announced that their comprehensive eco efficiency and operational optimisation solution ClassNK-NAPA Green has generated fuel savings of 3. 9% on a »K« Line (Kawasaki Kisen Kaisha) container vessel in April. The software was tested aboard an 8,000+ TEU container ship in January.

Beyond software DNV GL presented the first three vessels to use DNV GL’s rules for low flashpoint fuels. These 50,000 dwt tankers ordered by owners Marinvest and Westfal-Larsen will pioneer in methanol fuel powered shipping. DNV GL believes in LNG as an early success according to a position paper issued in January. In the long term hybrid propulsion solutions in combination with batteries are regarded as promising alternative. For this reason a Maritime Battery Forum has been introduced by the society which has attracted many attendees so far.

New Arctic frontier inspires classification

Interest in the Northern Sea Route and the development of LNG and offshore projects in the Arctic is vast. The Russian Maritime Register of Shipping (RS) is working on the largest number of icebreakers built in a decade. In March RS issued the first Type Approval Certificate under the procedure for mutual recognition of certificates issued by EU-recognised organisations (EU RO MR).

Furthermore, RS is involved in preparation and transportation to the operation site of the central processing platform (CPP) topside section for V. Filanovsky field in the northern part of the Caspian Sea. Just after the Arctic Shipping Forum in April had emphasised RS’ leading role in Arctic shipping, icebreaker »Vladi­vostok« of the new generation project was launched in May. Over 300 RS-classed ships, including 30 icebreakers, are capable to operate in the Arctic.

Conclusion and outlook

With the financial crisis of 2008/09 still being felt in worldwide shipping, large players in classification increase investment in new areas. Confidence returned in many sectors and regions of the global economy which enables classification societies to take »advantage of the opportunities«, as RINA Chairman and CEO Ugo Salerno said in the society’s 2013 annual report.

In order to improve consulting ressources, growth and acquisition was chosen as the leading strategy here and by the most dominant class partners. Strong financial partners were thus much asked for in maritime classification business. RINA and LR e.g. engaged in clarifying and restructuring their societies, and DNV GL will follow now the merger is done.

The increased competition is risky, though, as it is about to come at the cost of a price war in maritime classification. However, classification societies may find new areas of growth, a fact that privileges companies committed strongly to areas beyond shipping.


Sverre Gutschmidt