Latest / UnDocked: The Maritime Transformation Show / Shipping’s 2050 Fuel Forecast, Helium Supply Shortages, and 54,000 Sea Miles for One Sausage Roll
Transcript
- Raal: they're making this twenty-five year asset decision while carbon prices, hydrogen costs, fuel availability, technology pathways you know, port infrastructure, all of that is is still uncertain. Hello everybody and welcome to this week's episode of Undocked and hello to you, my friend Nick Chubb. Nick Chubb: Hello, Raal Harris. How are you today? Raal: I'm I'm a bit too busy to be honest. Yeah, it's a busy time at the moment. This is what I call the sort of back to school period. It's Nick Chubb: Yeah. Raal: it's the exhausting slog. this is the classic period, the September to November period, which is where everybody suddenly remembers all the things they were supposed to do by the end of the year, and it's their last chance to try and achieve any of them. So you get called to lots of meetings, and lots of things get put Nick Chubb: Yeah. Raal: on acceleration. Nick Chubb: I even, I set some personal goals for the year, including taking my wife out on a number of dates through the course of the year. And I've ignored all of that, so we'll be going out every other day between now and the end of December. Otherwise I'll miss my target. Raal: So what have you what have you seen in the world of maritime this week? Nick Chubb: I've got some weird and wonderful stuff today. Raal: Mm-hmm. Nick Chubb: Let me start by asking you a question. Do you know what the world's smallest molecule is? Raal: I have no idea. This is a subject of which I'm really ignorant. Nick Chubb: It's helium. Raal: Oh is it? Nick Chubb: And it's so small that it leaks through steel. you can't seal it in. Isn't that amazing? Raal: poor the steel is porous he my god. It is amazing. Nick Chubb: It's amazing, but it's also problematic, I found out this week. Because once you get helium out of the ground, you've got about 45 days to ship it somewhere useful to get it doing something, or it all just gets lost to the atmosphere. It can't be stored, it can't be stockpiled, it's gotta come out of the ground. So it comes out of the ground as a kind of byproduct of natural gas. It then has to be shipped and put into something useful in somewhere between 35 to 60 days. Otherwise, it will just vent to the atmosphere and it will get lost forever. The other thing to remember about helium, course, is we can't make any more. we don't have a way to chemically manufacture it. Once it's leaked out of the ground, out of a tank, out of an MRI machine, that's it. It goes off to the atmosphere and we never get it back. And there is a finite amount of helium in the ground. I've heard estimates that there's only 200 years worth of it left. Raal: so we've got 200 years to find another way of conducting an MRI scan. But in the meantime, let's have a children's party and blow some of that helium. We're an interesting species, human beings. Nick Chubb: Or use it to make your voice go nice and high. Raal: Very much the architects of our own destruction, aren't we? wondering if there's I'm wondering if Yeah. Nick Chubb: I do know from my research for this story that birthday balloons use low grade helium. Yeah, but high grade Raal: they use low grade. Nick Chubb: helium has a lot of uses. Raal: Fleet IT shouldn't mean a constant cycle of hardware refreshes, scattered support contracts, and capital tied up in kit that's hard to maintain. It's the same discipline behind Insights Day-in-the-Life Device Management on the Aroyah Refit. Every one of 650 plus onboard devices tracked, maintained, and accounted for across its life cycle, on schedule and within budget. Insight's ship-to-shore IT asset management brings that same model fleet-wide, monising onboard technology without upfront capital spend, shifting fleet IT from a lump capex cost to a predictable service. It's a smarter way to run fleet IT. freeing your teams to focus on operations, not infrastructure. Simplify your fleet IT with insight. Follow the link in the episode description. tell me more because I'm I'm guessing it needs to be shipped in some way, otherwise it would be curious for you to bring it up. Nick Chubb: It does. It does indeed. It does have to be shipped and it is stuck. 33 % of the world's helium comes from Qatar, which means of course it's on the wrong side of the Strait of Hormuz. And despite what our orange friend in the White House might say, the Strait isn't as open as it was, although he seems to say it's very open. Raal: Yeah. Yeah. Nick Chubb: But actually, the real numbers is that there's roughly 20 % of the number of ships going through the Strait of Hormuz currently, as there were before the war began in March. And helium is one of the casualties. But it actually creates massive knock-on impacts on the supply chain, which I had absolutely no idea about. So MRI machines, they rely on helium to be able to make the scanners work. To do an MRI, you need to super cool the magnets down to very, close to absolute zero. Apparently liquid helium is the best way to do it. But because it leaks, you need to replenish the MRI machine with roughly 5 % of its helium capacity needs to be put back in every month. Otherwise, it all just leaks out. And suddenly, we end up in a position where we can't do MRIs in hospitals. Raal: My God, that's really serious. And you've all you've you've made the sage point already that you can't store it either. So it's not like you can have a huge stockpile this stuff. Nick Chubb: Correct, exactly, that's a problem. Interestingly, Raal: Yeah. Yeah. Nick Chubb: there was a stockpile in this state, so the only place that helium will happily reside for some time is underground. But basically, the gaps left by pumping out natural gas, you can pump helium back in to those caverns, and it will stay there with some leakage, but not as bad as if you're putting it into tanks, which sort of blows my mind. it was owned by the federal government in the US. They had this huge stockpile in Texas. Because there's a whole load of defense and aerospace uses for helium as well. But they sold it off. So they sold it in 2013 to a private company. So that stockpile is now privately owned and the cost of helium is going skywards, ironically. And so, exactly. Raal: Like a child's balloon. Like a child's balloon at at the fairground let loose from the the candy floss stained fingers and watching it fly above the crowd. Yeah. Nick Chubb: What a beautiful image. That Raal: Yeah. Nick Chubb: is one of those slightly strange, unknown or unexpected consequences of the war in the Middle East. We're now Raal: It's mad, isn't Nick Chubb: facing a helium shortage. Raal: MRI is obviously very you know, scary thing to not be able to do any of those scans. what what else is helium used in? Did did it come up anyway? Nick Chubb: Pressurizing satellites before they go into space. They get pressurized by helium, which I didn't know. Also, very, important, given that we'll all be serving our AI overlords very soon, the production of semiconductors. You need helium to support the kind of etching and cooling of semiconductors in advanced AI chips. You may find that the likes of OpenAI or Nvidia start to get involved and then suddenly things might start to move again. But at the moment, it's looking like the main plants in Qatar where helium production happens, one is not running at all and the other is running at a sort of very light capacity. Raal: Yeah. It's interesting, isn't it, when you think about like a 'cause obviously most of the time when you sort of the discussions around peak oil, around you know, used to be that used to be the discussion before we got into discussions around decarbonisation, the big anxiety was around when when we'd actually run out of all these fossil fuels. And we think about them in fuel terms, don't we? But but there are many other aspects to this that you you you know, like for example with oil, the number of byproducts of oil that are actually important to all sorts of other things. Medical side of things is is a a big part of it. I'm struggling to give you an example right now, but I think it's all sorts of medicine is dependent on by products. I think oil you mentioned there, you know, helium being a potential one i in that as well. Nick Chubb: I think people would be shocked to understand how many things we take for granted in day-to-day life are actually byproducts of the oil and gas industry Raal: Mm. Mm. Nick Chubb: and potentially have very, little replacement. Everyone thinks of it as purely as a fuel and energy problem, but actually things like plastics, even sort of rare earth. metals like lithium for example can come out of oil-filled brine. You've got sulfur which I think we talked about a few months ago. Raal: Yes, we did in the con same context. Yeah. Yeah. Yeah. Nick Chubb: Yeah, and asphalt. We actually build roads with basically what gets left behind once you've boiled off everything else. Whole loads of different things. Raal: Yeah. So it's cute, you know, th there's there's other reasons other good reasons for not just burning it all and using it. Which leads me which leads me Nick Chubb: Yeah Raal: to a a story. So we we've talked about decarbonisation a number of times, different initiatives Nick Chubb: Yep. Raal: decarbonise. We've also talked about the fact that since the net zero framework didn't past last year, the way in which things are I guess the way in which people have been re reacting to that and and there perhaps being a bit of cooling. So we've seen a lot of a lot of vigour going into energy efficiency and things like wind assisted propulsion, which you talked about last week and stuff. But we've talked a bit less about the about the the new fuels side of things. And this is obviously really crucial when it comes to new builds, right? And this is one of the the things that we perhaps gets a little bit lost in in in the arguments because when you're building a ship, you're building for I think it's probably a 25-year horizon, you're expecting to to be able to sweat Nick Chubb: Yeah, sounds about right. Raal: that asset, you know, to get it to pay for itself and so on. So shipbuilding is a pretty good indicator of of how people are looking at. the new fuels thing. And so anyone building vessels is having to navigate looking at, you know, what's happening there, what's fuel avail availability look like, viability. And you might say, well, we've established in the past that there are, you know, viable fuels, things like ammonia, methanol, you know, they're in use i in some areas. But there's a very big difference between a kind of a proof of concept and being able to do things at scale. And of course ships move around globe so is there you know is no good setting off with a f a full tank and then finding that wherever you end up there's there's nothing that you can do with it. So there's a good article brought to my attention Sam Chambers is a very reliable secret squirrel for me on these UnDocked episodes he's been sending me dutifully stuff over. Sam also has in response to last week's discussion he shared with me that wonderful story about the the techno DJ from ShipFix Sam's declared his own shipping DJ name to be Crude Carrier, which is very appropriate. Perhaps that's the wrong inflection. If Nick Chubb: That's good. I like that. Raal: you read crude carrier, crude carrier sounds like it's an inference that perhaps he wasn't intending. So the so yeah, so so there's an article in there, a very detailed one that I'm not gonna prepare to kind of, you know, get get my head around in entirety. I haven't had a chance to properly study it, but I think it's worth bringing up for a couple of reasons. There's a re report called navigating the maritime fuel transition, modeling the 12 different pathways and six engine configurations through to 2050. and as you might expect, it's it's really saying that rather than anything else, what's really going to shape it is the the decisions that people make around building building the ships because that's ultimately what's gonna go forward. And Under its base scenario, the IMO tier two remedial unit penalty th is three hundred and eighty three hundred and eighty dollars per ton of CO two equivalent. so conventional fuels basically under that scenario pretty much maintain dominance, right? So by twenty fifty, VLSFO and fossil LNG will account for about forty percent of fleet energy consumption. But where it says is the the difference is if the carbon penalty reaches seven hundred dollars per ton by twenty fifty, because at that level the calculations then are that new fuels become pretty much competitive. and that could then change it. So so so that would change the the mix to around they think to around sixty one percent of shipping energy consumption with with Nick Chubb: So be set. Raal: conventional fuels. And then third first fossil fuels, sorry, sixty one would then move to the new fuels and and thirteen percent the fossil fuels. Nick Chubb: Am I right in saying, is that per ton of fuel burned? For some context at the moment, if I look at the ship and bunker for the global 20 ports average, it's just under $900 a ton for VLSFO. So you're saying that $300 or so on top won't make that much difference, but when the price effectively gets doubled by a tax, let's call it what it is. That's when the market would start to move. Raal: Yeah, well, when it would make financial sense. I think what what the report is Nick Chubb: Right, okay. Raal: pro so yeah, I I think the es the essence of it, my reading of it, is that when people are making these calculations, they're basically saying, I'll take the hit at that price. But if that then then goes to Nick Chubb: Yeah, yeah, yeah. Yeah, that makes sense. Raal: if that then goes to seven hundred dollars per ton, as you say in tax, then it then it it changes it a as well there. So I think there's two, there's the the other thing in there which is pretty clear is that the, you know, we've we've said about this for a while that there's this perception that there might be a winners and losers in this race, you know, like sort of Beta Nick Chubb: Yeah. Raal: Max and VHS and, you know, one few will come to rule them all. But I think we've certainly said on this show for a long time that it's it's going to the mi the mix is going to maintain and that's not going to be you know, not gonna be one clear winner necessarily. Nick Chubb: Yeah. Raal: and all because all of them have these drawbacks, don't they, So so it's it's kind of looking at the the difficulty in investing around that and trying to sort of navigate all these different elements in terms of you know the costs, the availability, and then what's going to happen in the in the regulatory framework to to to do that. There was some interesting comments from SGMF as well. so yeah, SGMF declined to crown a winner, arguing production pathway matters as much as the molecule itself. So low carbon ammonia and renewable methanol offer the deepest decarbonisation potential. but LNG remains the most mature near-term option. Now the interesting thing that they did say though also was that methanol benefits from easier storage and handling. Now I think that's a comparative, isn't it? Because I think methanol stuff Not the easiest thing still, but but when you compare to ammonia, it it certainly is. But the but but yeah, th there's huge the huge the huge variability in all these different things to try and consider it from an investment point of view is extremely difficult when you're trying to predict how things are gonna look within that twenty five year period that you're looking to sweat that asset. So I don't envy So yes, it's all very much about, you know, that final investment decision and what people are backing with these new build structures. Now, you always like to give me a little bit of a quiz. So I'm going to give you, Nick Chubb: I you what, I love a quiz. Raal: I'm going to turn the chair, the tables, the chair. I'm going to turn the chair. okay. Well, I think you might, I think you might, I think you might do all right in this one. Nick Chubb: don't like being quizzed. I don't mind quizzing. I don't like being quizzed. Go on. Okay. Raal: So here we are today. Let's do the 2030 projection 45 % conventional fuels 12 % conventional and OCCS exactly yeah so Nick Chubb: onboard carbon capture and storage question number one tick Raal: Yes, there is a piece on that I meant to say about that. I forgot about that. But anyway, yeah, we'll come back to the carbon capture and storage. Then we've got 27 % LNG dual fuel. And then we got, you know, little bit of methanol and a little bit ethanol. Let's go forward to 2050 Nick. What is your Nick Chubb: Okay. Raal: projection? What's the big what's the big one going to be the categories are the same? What's the biggest? Nick Chubb: Okay, I reckon. Raal: Remember, methanol and mariniers, it's all in there. Nick Chubb: I reckon the biggest, the biggest will probably, it depends if I'm being optimistic or realistic, but let me try and be, let me try and be optimistic. I reckon the biggest single category will be methanol. So I reckon it'll be something like 20 % conventional, 30 % LNG. 20 % carbon capture storage. Raal: You're you're Nick Chubb: Am I adding up to 100? 30 % methanol. Raal: Let's not go there. But what I will say is your optimism is where you're being let down here. I'm afraid Nick Chubb: no. Raal: You went, Nick Chubb: I think. Raal: you were a bit high on conventional. Conventional is estimated, well, it's not estimated. This is the order book, isn't it? 11 % conventional, but it's the Nick Chubb: Really. Raal: big one is conventional and onboard carbon capture Nick Chubb: is it. Raal: storage, 41%. Yeah, so what does that tell us? kind of think they'll carry on using conventional fuels and just try and capture it on the club. Nick Chubb: Sure. Raal: And that's the way out of it. LNG is pretty stable Nick Chubb: Wow. Raal: actually today, 27%, 21%. LNG and dual fuel, obviously. Stay is kind of pretty consistent all the way through actually throughout the whole period which goes some way to showing why there's been such a continuous boom in that. area and of course the big thing there from a crewing perspective that's really quite a pinch point there for everyone. Nick Chubb: Yeah, yeah, yeah. Raal: know methanol again sort of floundering around sort of the looks like around 10 % I would say ammonia, Nick Chubb: Is that all? Raal: ammonia very slender and then 13 % ethanol which again pretty consistent. Nick Chubb: ethanol. Raal: picks up from about 2040 ethanol, yeah, 12%, 13%. Nick Chubb: That's really interesting, because I think if you look at the order book today, methanol is the biggest, or at least in terms of raw numbers, if not tonnage. mean, parking LNG, which is the actual biggest, but Raal: Hmm. Nick Chubb: I feel like LNG is cheating slightly because of the C in it. And methanol, guess, is also cheating slightly because of the C in it. If you're looking for genuinely... zero emission fuels, then it is ammonia, hydrogen, nuclear. Nuclear doesn't feature. Raal: this is obviously, no, Nuke doesn't feature at all, remember this is new build engine, so this isn't any of the, this doesn't take into account what's gonna be there. If you're interested, the engine fleet mix projection through to 2050, slightly different picture. But yeah, but again, I mean, it's, yeah, still no real feature for. for methanol, which, you know, again, I find quite surprising because it was one of the first, wasn't it? One of the first emerging ones, Nick Chubb: Yeah, I'm surprised by that. Yeah. Yeah. Raal: I Merce were very quick out the traps with that one, weren't they? Yeah. Yeah, Nick Chubb: and they're very quietly sort of backed away from it. Raal: yes. So there you have it. So follow the money. Nick Chubb: Wow, that's fascinating. Raal: Not got any easier. Nick Chubb: I worked on a chemical tanker and we carried ammonia and we had to have, during cargo operations, a full top to toe chemical suit on with breathing apparatus during the cargo operation. Like it was that and I think sulphur dioxide was another one where we basically, and you have the absolute minimum number of people on deck. because it is so dangerous. Raal: Mm. Nick Chubb: And that, you can make the same argument that we've had and then got over, you know, similar safety concerns when you look at things like LNG, for example, but I do think it's worth sort of dwelling on how long it's taken us. as an industry to get something like LNG to work. So I've just looked it up, going back through old notes. Do you have any idea when the patent for the first dual fuel marine engine for LNG was registered? Raal: Well, just so I'm clear on that before I answer, 'cause I won't pretend to know the ins and outs of it, does that include when they would use the boil off? Nick Chubb: So this is using it as a dedicated, effectively as a dedicated Raal: Right. So Nick Chubb: fuel, dedicated engine. Raal: Okay. I reckon it was probably longer ago than you think, so it's gotta be it's gotta be before the the turn of the century, hasn't it? Got gotta be nineties. Nick Chubb: 1969, it was invented, yeah. Raal: God, really? Wow. Nick Chubb: And the problem is, it became possible to use LNG as a marine fuel at that point. It physically was possible, but it took Raal: Yeah. Nick Chubb: so long to build out the infrastructure and then build out the working practices and all this sort of stuff to make it actually possible at scale across the industry that you could send a ship across an ocean fueled by it. Most people assume it's around the 2000-ish mark, but actually the lag between inventing the tech to make it work and then building the infrastructure to make it work, two very, very different things. And it's a lot longer than people think. And so Raal: Well. Nick Chubb: I think we have the same thing with every alternative fuel option. Raal: Yeah. Yeah, I think when I I'm just trying to remember when I 'cause I was s GMF, the Society of Gas and Marine Fuel, developed training standards Nick Chubb: I am. Raal: and I worked on an e learning course for that and that must have been fifteen plus years ago. But it certainly, you know, certainly wasn't in the that's quite a big lag from you saying that these things were in operation from the sixties. yeah. Nick Chubb: Well, they were invented rather than in operation. that's kind of point. Yeah. Raal: yes, yes, sorry, yes, you said patented, wasn't it? Yeah, yeah. Yeah. So I mean, this is the thing. It's it's and on you know, this is just lot even entering into the equation here is how you kind of go about making it safe. But there's a lot of things in there which are quite tricky as well, because I know, you know, that is one of the arguments with ammonia when when people are horrified with ammonia. One of the one of the arguments is that well, it's been carried as a fuel for a very long time, but the the discussions I've had with serving engineers who are worried about this is that they're you know they're saying yes but it's not in the engine space. That's the issue. That's the difference. And it is, Nick Chubb: Yeah. Raal: as you say, it's unbelievably toxic. Yeah, so within the study finds that E methanol and E ammonia are far closer economically than than is often assumed, with ammonia benefiting from lower production costs. I'm guessing, as you said, it's quite mature from from use of fertilizers and all that sort of stuff, isn't it? So that may be a risk. Nick Chubb: Yes. Yeah. Raal: but the advantage there is cancelled out by more expensive storage, transport, bunkering, and safety requirements. So Yeah, so so that's one hydrogen, biggest swing factor. which I was surprised about as well because I haven't heard too much about higher hydrogen for a while. Counts for fifty-four to sixty percent of the levelized costs of both e fuels if renewable hydrogen falls the base assumption. but but but it does say methanol and ammonia could together provide thirty six percent of global fleet energy. demand. So but yeah, again it's it's coming back to the same thing. you know, the final investment decision, there's so much cash in there. that you can read all sorts of things about intent and ambition and all that sort of stuff. But what really paints the picture for you is is what people have actually been prepared to back financially. And so that's what you're seeing with these the commitment that they've got in there for for the new builds. And and yeah, that they're they're asked you know they're making this twenty-five year asset decision while carbon prices, hydrogen costs, fuel availability, technology pathways you know, port infrastructure, all of that is is still uncertain. And this I think is what I mean it doesn't go into this as an option because it's not something that's that's in the new build picture at the moment. But this is why there's such a such a interest in nuclear, I think. Nick Chubb: Yeah. Raal: because whilst it comes with a whole host of problems, none of those problems are about availability and infrastructure and all that sort of stuff. It's all about really self sufficiency of the ship as fundamentally, isn't it, from the reactor that it's got on board. Nick Chubb: I think if nuclear doesn't come to fruition or if it takes a lot longer than people are starting to predict. I actually think we could end up in a world where we see the death of tramp shipping. know, because at the moment, pretty reliably, if you've got a ship, then you can get it to a port. You can fuel it, you can bunker it in some way. Someone there will have a bunker. that will give you something that roughly fits, whether it's exactly what you want, you you might end up with HFO and really you want VLSFO and all this sort of stuff, but ultimately speaking it's pretty practical wherever you go in the world. Whereas I think what we're moving increasingly towards, as I agree, I don't think we're going to be in a world where we have, you know, every alternative fuel available at every port. Governments are sort of trying to incentivise green corridors anyway, where you're picking out port pairs. across oceans and then working together to create a net zero route across it. I think that's potentially going lead to the point where you will have a lot more liner shipping, where you've got known ports along the way and you're either shuttling back and forth between them or you're going on a route around the world where you're going to these known ports and the bunker ports become very much a known quantity. and I think you're gonna end up with these kind of specialist routes where you might have, you know, hydrogen doing ferries in the Baltics and the Nordics. You might have ammonia doing transatlantic crossings, or even actually, potentially, that is where nuclear seems to be hotting up the most, is sort of transatlantic between UK and US. Singaporeans seem fairly set on methanol and ammonia, so that might then become a kind of, you're building ships that are going to work on methanol, you've got a bunker via Singapore, and so what does that do to your routing? So the idea that you could just put a ship anywhere in the world, I feel that becomes much more limited, and you've got to plan for the bunker infrastructure much more. Raal: Yeah, I mean the I've always struggled to get my head around tramp shipping anyway, because the one bit I could never really get my head around. I got I understand that, you know, you've got these lithe ships, they're going wherever there's business fundamentally. I mean that Nick Chubb: Yeah. Raal: that bit's sensible enough. But one of the things that I d maybe this happened to you. I don't know. but where where you're actually the c the cargo th you suddenly then just changes who you're who's now buying it and you go somewhere c completely different, right? That's that's one of the scenarios where you're you're actually kind of you're not exactly sure how it's Nick Chubb: We never had it laden. I know it does happen. I know, Raal: Yeah. Yeah. Nick Chubb: example, a friend of mine worked on a, I think it was an oil tanker, like a product tanker, and he just spent like eight weeks just off the coast of South America just waiting basically for someone to buy the cargo. And Raal: Yeah. Nick Chubb: I think it was kind of like a price play, because prices were on the way up, so keep Raal: Yeah. Nick Chubb: it out at sea. We used to have it embalmed quite a lot, coming back the way empty. We wouldn't know. We'd find out after Sri Lanka basically, are we going north up to the Middle East or are we going to go around the bottom of Africa and around to West Africa? And you'd just sort of be waiting. Are you going to go Raal: Yeah, but that but you knew Nick Chubb: left or right? Raal: but you still the buyer remained the same though, rather than Nick Chubb: Well, because we were empty, we were basically just waiting for orders. But once we were full, yeah, exactly, yeah. Once we were full, Raal: you were waiting for the next job, effectively. You were on the rank. The cab rank. Yeah. Yeah. Nick Chubb: I don't, I know I didn't do it very long, but I don't ever remember our orders changing after loading. But I know it does Raal: Yeah. Nick Chubb: happen. Raal: Yeah. It it's always mad. I've no I've must get to the bottom of it somehow. But come on and tell us about it. Nick Chubb: Also, someone who's more informed, tell us, and tell us. Someone who's in oil trading. I Raal: Yeah. Nick Chubb: think, particularly oil products, I think they can change hands like three, four, five, six times in the course of a voyage. They Raal: Yeah, yeah. Nick Chubb: still go to the same place, but the actual value of the oil, if you like, is being traded while you're sailing. Which is sort of mad, isn't it? Raal: Yeah. Well, it's still there. It is a bit bonkers, isn't it? Yeah, yeah. But yeah, but it obviously I think you're right. I mean and the other thing as well is you were talking about those ballast voyages. One of the things I really liked, Clavness have these other brands maybe available, but I know the clavness ones, great company Clavness, now part of OSM Tony from a management perspective. But they they had these great or they still have these great combination carriers, have you seen those? A fantastic idea. No, but Nick Chubb: Yes, I've never been on one, but yeah. Raal: I mean and and again, when I one thing I was hugely impressed with is how they can kind of do any kind of turnaround moving from wet and wet Nick Chubb: Yeah. Raal: and dry cargo is just completely incre crazy to me. You know, when you think about like tank cleaning and how how difficult that is even just with with with liquid products. Nick Chubb: Yeah, yeah, yeah. Raal: but yeah, but but the idea is that they, you know, they'll go deliver a cargo rather than taking on the ballast for which they'll take on grain or something and then they'll, you know, be able to then take that on and then they can switch to something else. It's again, these kind of innovations are a really much more efficient way of us kind of getting around rather than rather than just going under ballast and so yeah. Nick Chubb: Yeah, yeah, you can take wine, is it wine back from South America and oil out to South America, something like that. And just have a little clean in between. Raal: Yeah, th they were established. But again, again, I think again though, those are kind of quite there are those established kind of routes in there. But there is I mean, one of the reasons for this is that, you know, that there's actually a massive boom essentially, right, at the moment. And this is what everybody the Clarkson index hits an all time high. That was another headline. Why is this super cycle feels different in in Splash? Pictured bottles of champagne. Have you been tracking this? These rates are pretty incredible. Nick Chubb: Yeah, well, I remember chatting to Julian Brey about this in Bergen, and him sort of saying, it feels a bit like 2008, which should put everyone on edge. Raal: Hmm. Nick Chubb: But it's also not 2008. And the difference is that in 2008, the entire industry was very, very heavily leveraged. And so if anything did go wrong, such as a major financial meltdown. the banks would very quickly be calling in those debts. And that's exactly what happened and left a lot of ship owners, well a lot just went bust and many took years to recover. We're now at a point where think most of the world fleet, because there's so much cash coming in at the moment, is unlevered. A lot of the big ship owners, I don't have any figures to hand, but a lot of the big ship owners sort of got 20 % net debt versus the asset value of the ships in the fleet. If there's a major financial crisis or an economic slowdown, it's probably not going to have anything like the same impact it had last time. And we're at a point where we've been sort of trying to work out how to get enough cash in the door to fund decarbonisation. And 2026 is the year where most, not all, but most shipowners have probably made more money. this year than they ever have in all the time they've been operating because freight rates have gone so high. So actually, a lot of ship owners are sort of totally awash with cash. And so where that gets invested is a question that I find very, interesting. Raal: Yeah, you're absolutely right to call out two thousand eight. That's exactly where it starts in the article. And it points out that it was a it's a nice expression. anyone who lived through the heady days of two thousand eight remembers how quickly the music stopped. so Baltic dry index peaked at eleven thousand seven hundred and ninety three in May of that year, and within six months it was below nine hundred. Unbelievable. That's steep. Yeah. To put it in picture. Nick Chubb: Yeah. Raal: So, you know, so cape sizes that have been earning well north of two hundred thousand of dollars a day suddenly struggling to cover their operating costs. And that's yeah, And then as you say, they called in the debts and fortunes were lost. But yeah, fast forwarding to today, you're absolutely right. People living high on the hog, levels that would have seemed fantastical. So this is the Clark C index hitting an all-time high. Now remember, this is a weighted average, and it's just the earnings. So just the earnings are hitting fifty-six thousand five hundred and sixty-seven a day. And I believe today it's it's looking at it was 14th of September. I think now it's up to sixty-four thousand, something like that. Yeah, yeah, yeah. Nick Chubb: 60,000 plus, yeah, which is mad. Raal: Yeah. So so yeah, boom time. But as you said, Julian Bray. What what was his take? We've we've got that. That's on the on the archive, isn't it? For discussion. It's only a couple of months up. Yeah. Nick Chubb: Well, it's on the archive. Go back and have a listen. But basically, I think we agree that history doesn't repeat itself, but it rhymes. And the market is very different to where it's structurally very different to where it was in 2008. So we're probably, touch wood, it's probably not all about to collapse. But it's certainly. Raal: Well I I I think it's it's looking at this bubble and the booming trade volumes and the freight rates that people are enjoying and what's actually behind that. I think that's where you have to look at, as you say, different factors. Now, normally it's sort of trade demand, those kinds of things that are leading to these kind of these cycles. And so you're looking more at economic information and and that kind of thing to see Can we expect this to rise? If we if we're honest, what's really driven up these kind of you know these kind of rates it's more the kind of geopolitical disruption, right? It's the disruption that we've seen from COVID that has been pretty much relentless through sanctions, the Russia invasion of Ukraine, the Red Sea diversions, which of course are now getting worse than ever. Some trade, you know, trade wars will play a part in that. shadow fleets and then of course you've got Hormuz and you know this is all leading to people having to take much longer routes, taking capacity out, it's taking longer voyages, which which means, you know, th that the that there's cost coming in there, the number of days that you need to to charter a vessel for and all that sort of stuff. So it's it's it's you know those kind of factors which are driving a lot of the profits that people are are enjoying. today. And then of course then we're then we then it becomes a story about whether we think that that's, you know, likely to continue. But of course, a ceasefire and agreement could could suddenly change that picture very, very dramatically. So again, we talked about the decisions people are having to make about their investment decisions they're making around new fuels. That's just one part of the picture. You've got all this kind of stuff going on with it as well. And as we know, we also have a little bit of a history of boom and bust with under supply then leading to oversupply. So so yeah. Nick Chubb: Yeah, it's worth explaining, guess, for anyone who doesn't know how these markets work. The supply of ships is relatively static. So you day to day, week to week, and even sort of month on month, it doesn't really change. We have a certain number of ships that exist. Every day some are scrapped, and every day some new ones roll off the production line. It is, if you like, it's infrastructure that is quite difficult to build out in a hurry. It takes many, many years. And so as the demand for those ships gets disrupted, and that could just be general economic growth and prosperity, or it could be these shocks that Raoul has mentioned, know, Hormuz. the crisis in the Suez, the Panama Canal having a bit of a drought, all things that we've talked about over the last six months, they effectively take supply out of the market, which is what shoots the prices up. Ironically, when the shipping industry does a bad job and supply comes out of the market, everyone earns more money because it does work on a supply and demand curve. And then what happens is the economy slows down, some of these crises end, and all that demand effectively... gets taken out of the market again and then we end up with loads and loads of ships and nothing for them to do. And normally what happens as well is the order book of new ships. I think we're going out to the early 2030s now at this point with the order book of ships that's in the yards. That's all contracted so those ships are just going to come onto the market. We know they're going to come onto the market over next four or five years. And so the supply of those ships will actually continue to increase even if the world's in... you know, something of economic turmoil, which is another factor of what happened in 2008. And we end up with ship owners who have a fixed cost of operating their vessel per day, end up moving cargo for significantly less than that and everyone starts losing money. So it's very much a kind of cyclical boom and bust industry, which some people can time very, very well and make a lot of money from, and others seem to... get caught by greed and time less well and end up losing quite a lot of money. Raal: Hm, yeah. I mean it's it's interesting, isn't it? 'Cause they've all got the same potentially access to the same information. It does it come down to that really at the end of the day, just like knowing when to leave the table? Nick Chubb: I think so. Yeah. Raal: Yeah. Nick Chubb: Well, I mean, you know, I'm not a ship owner, but I remember the conversation we had with Mikael Skov when he was CEO of Hafnia. Yes, they Raal: Yeah. They've done it very well, haven't they? They've done a brilliant job. Nick Chubb: have. Yeah. They have indeed. But yeah, there is something of needing to have the stomach to watch the, you know, Raal: Mm. Nick Chubb: watch the freight rates drop by 50 % in a day and still find a way to make trades. Raal: Hmm. They I I remember I remember having dinner with someone. This was years ago. and this guy was trying to fix an asset and it was the most stressful meal I've ever had in my life. Because the amounts of money involved in this were and they they had Nick Chubb: Yeah, yeah. Raal: it was a it was a it was a rig. So it wasn't a a vessel, it was an oil rig. And they were just trying he he was trying to fix this this rig, you know, that was currently no trade on and I can't remember where it was. I think it was somewhere off in the Middle East or something. and you know, it it was just palpable the the kind of stakes involved in that, in having if Nick Chubb: Yeah. Raal: you have an asset or you're responsible for an asset which is not earning money, you know, the money that you're burning through just having it sat somewhere. Nick Chubb: Well, you have to fuel it and you've got to pay for that fuel. You have to crew it and you've got to pay for that crew. And then the crew need feeding and they need water and all this sort of stuff. And then Raal: Mm. Yeah. Nick Chubb: you also need spare parts and all the maintenance equipment. And at the same time, you probably don't own your ship. The bank probably owns it. So it's sort of mortgage. So then you've got the monthly mortgage payment on Raal: Yeah, you'll just leverage. Yeah. Nick Chubb: it. It's a lot of cash out the door when a ship is unemployed. A lot. Tens of thousands a day. Raal: Yeah. And it he was walking and w God knows how he was involved in it, I don't know. But he w he was walking me through the the the numbers and I was just you know, I could I could understand why he wasn't he was a bit distracted. Yeah, yeah. Nick Chubb: He was off his mail. Raal: But anyway, there's a nice nice quote at the end of the article which I think I mean you've kind of I think we've made the point, but it's nicely put together. The boom that ended in two thousand and eight was powered by confidence in the future. This one Is powered increasingly by uncertainty. And Nick Chubb: That's good. Raal: yeah, it's nice, isn't it? And and and I think, you know, to your point about that, you know, when it comes down to the winners and losers, who's got the stomach, who's got the appetite, the risks, and and and all of that in involved. I mean, the number of dimensions that you're playing with in terms of trying to make those judgment calls is just I mean, we are so far through the the looking glass now. compared to where we were in two thousand and eight in terms of global uncertainty, right? when you look at, you know, even I mean, you and I were talking just before the show started about the the levels of debt now in the United States and the dollar. You know, I'm very interested now to know how people are looking at that right now. That's a lot, a lot of money. Nick Chubb: Yeah, yeah, yeah. Raal: forty trillion, you know, We're all backing the dollar. I need to come back to this. I'm gonna do a show on that. We're we're Yeah. Yes. If you Nick Chubb: Yeah, let's put a pin in that and subscribe if you'd like to hear our analysis of that in full. Raal: wanna know what we're we're gonna look at there, if you wanna be the first to know when that news breaks, subscribe. Yeah. Nick Chubb: Do know who makes money? Boom or bust. Whatever's going on in the economy. Raal: Undertaker's. Nick Chubb: Well, yes, almost certainly. Good point. No, Greggs. The Bakers. Raal: Bakers. do tell me. Is that true? Or are you just is that Nick Chubb: Yeah, no, it's like a recession proof. let me tell you how this came about. Raal: Hmm. Nick Chubb: I went on a stag weekend this weekend, just gone. But I had to drive about five hours, a five hour round trip to get there. And I stopped for a snack. And that was the first place I spotted was Greggs in the service station. And what does everyone get from Greggs, Raal Raal: Well, I believe I wouldn't know 'cause I wouldn't go in there, as you understand. I'm far too posh. I believe it's a sausage roll. Yeah. Nick Chubb: It is indeed. Guess how many sausage rolls are sold every year by Greggs? Actually, guess how many are sold every day? Raal: how many gregs are there? I mean there's one in every town, isn't there, pretty much. towns out there. I reckon it's I'm gonna go I'm gonna go half a million a day. Nick Chubb: way off. They sell a million sausage rolls a day, 365 million a year. made in Newcastle and then Raal: All of them. Nick Chubb: yeah they have a factory in Newcastle where they bake their sausage rolls and then they're shipped frozen to the shop and then they get they get properly baked in the shop and that Raal: Baked on the premises. Nick Chubb: made that got me thinking About a trip I did a couple of years ago. So every year we get our team together. We actually did one this last week. But we get our team together and we try and do some sort professional development around it. So a couple of years ago we visited the Port of Bristol and they were very generous to the team. They put on a full tour. So we got to go around the entire Port estate, see the container yard and how all the container cranes work. We went to the car area. and saw all the cars being unloaded for import to the UK. And then we went to the grain sheds, and we went into this enormous sort of cavernous warehouse, and then sort of look out the window of the bus we were in, and it looked like there were mountains to the side of the shed. And it turns out it was grain for pig feed. And the guy in the port said, if you eat pork that's been reared, anywhere in kind of west of the UK, west and southwest, it's been fed on grain that's come through this port. So that grain came from Canada. And that got me thinking. Where do the ingredients in the Greggs sausage roll come from and how do they get to Newcastle? Raal: Okay, let's go. Nick Chubb: Quite a long list of ingredients, so let me give you the highlight. Raal: You're not giving away their secret recipe, are you? Nick Chubb: Thankfully, it's published online. There is salt involved, would Raal: Is there salt involved? I imagine there's salt. Yeah. Nick Chubb: you want to guess? Raal: How much salt in a s in a Greggs sausage rub? Nick Chubb: I don't know how much, but where it's come from as well. Raal: Where the salt in Greggs comes from. Nick Chubb: Yeah. Raal: Well, I bet it's they're not going for molden high quality molden sea, so what are they? They're going for Nick Chubb: I'm getting the sense you're being ever so slightly snobbish about Greg here. Raal: Guilty as charged. I once had a vegeta I had a vegan sausage roll from there because Nick Chubb: We've got different tastes. How did you? Raal: I they were in the news. They were very lauded in the news and I thought I better Nick Chubb: they were, that has a much more complex supply chain than the regular pork one. Raal: Yeah. Are we gonna go into that as well? Nick Chubb: No, no I didn't have time. Raal: But yeah, that's as w as far as I go with Greggs. I I no, I'm not keen. I'm not Nick Chubb: So the ingredients for the Greg sausage roll, and this is both the primary ingredients, then we're also looking at the second and third tier supply chain. So it's not just the pork, which comes from the UK, it is the Raal: really? Nick Chubb: feed that goes into the pork, which comes from Brazil and Canada. Raal: Comes from Canada. Brazil. Nick Chubb: Indonesia supplies nutmeg. White pepper that goes into the sausage roll comes from Vietnam. Various salts and ascorbic acid and niacin come from China. Soda ash comes from Wyoming in the US. The folic acid comes from Gujarat in India. Milling Wheat and Potash, which goes into the delicious, flaky, buttery roll, comes from, I can never say it, Saskatchewan in Canada. Phosphate Rock comes from Morocco. And the sunflower oil, despite everything that's going on there, comes from central Ukraine. So the total number of sea miles that goes into your single sausage roll is 54,100. Raal: Jesus Christ. That's mad, isn't it? I used to do I used to do Nick Chubb: I think it's mad. I think it's incredible as well. I think it's a modern miracle that I can go into Gregson for £1.89 and buy a sausage roll that had 54,000 Raal: Well, this is the thing. Nick Chubb: miles go into it. Raal: This is the thing, 'cause we've literally just been talking about the enormous rates involved and shipping living high on the on the hog. not the hog not the hog from the sausage roll. But the you know, like that the the additional sort of cost that that puts on. But it's still cheaper, one assumes, unless Greggs have a particular penchant for Canadian grain or Gujarati folic acid. you know, that they're doing that because that's economically yeah. Nick Chubb: Yes, you're right. They're sourcing it at scale. And yeah, and it's a cost question and an availability question. Yeah. Raal: Because i you know, unless we forget, sausage rolls have been possibly, you know, you can you can prepare them f indigenously. It's just clearly not commercially viable to do it. So that's just absolutely mad. It reminds me though, I wish I'd known this at the time, 'cause I would have probably made mo my my point more effectively. But when I used to have a new member of a team, I used to kind of do this routine with a new start or whatever, you know, sort of ask them to stand up and sort of, you know, I'd sort of point out like everything that they were, you know, wearing or that they're Nick Chubb: Yeah, yeah. Raal: the you know, and and sort of explain to them just to kind of give them that sense of what we did as a business, you know, was about the fact that their trainers would have come on a ship from this and everything that they was, you know, had on their person, the breakfast they'd had that morning and everything. And he's just gonna sort of talk about it in those terms, of where it had come on a ship and and been made possible by the industry. But that is a really great example because almost certainly they will all have had a Greggs sausage role if they're in certainly if they're in the UK. Are they gregs elsewhere? I think I've seen Gregs at airports, but usually airports Nick Chubb: I don't know, I've traveled quite extensively but I don't think I've ever seen a Gregg's outside the UK. Raal: I've seen them at I've seen them at airports where there's heavy UK footfall, you know, holiday places and stuff like that. Yes. I think there's a great Nick Chubb: I am desperate to see one in my home town by the way, if anyone from Gregg's does listen to this. I'm in Seven Oaks and we are Gregg-less. We've got everything else. No, no, it's a shocker. Yeah. Raal: Where is your hometown? Yeah, but there's no Greggs in Sevenoaks. Wow. That is a shocker. Yeah. But no, that's a wonderful kind of example of of how how yeah, how amazing the shipping industry actually is and makes something as delicious as a Greg sausage roll possible. And a hell of a lot of ingredients in there. Do the vegan one next week. We don't want to leave anyone out. We don't want the Yeah. Nick Chubb: Okay, okay. I'll do one more little stat from you off the back of this. 115 crew days per year estimated based on the amount of the different ingredients coming from different places going into a sausage roll. So if you're eating a sausage roll, you owe the seafarers responsible for getting it to you quite a lot. Raal: Wow. Nick Chubb: At least some warm thanks. Raal: Yes, the least you can do. Write them a letter. Yeah. that's amazing. That's really good. Nick Chubb: All right, I've got one more slightly concerning story to close if we've got time. Raal: Bit time. Nick Chubb: There have been a spate of incidents on tankers that have been linked to cyber risk management in the last few weeks. Raal: Hmm. Nick Chubb: So there's been a few. Let me walk you through them. So the first was the VL Prosperity, which is a Liberian flag crewed tanker managed by HMM, the Korean ship owner. That was flagged, it was boarded by the US Coast Guard and the FBI on the 21st of August after authorities found indications that its network had been compromised. Then an LPG carrier was boarded three days later under very similar circumstances. And then just in the last few days, it's been reported that a ship from H9, the Vivat Africa, which is an LNG carrier. has had a similar issue. All of them have been involved in the transport of oil or gas to or from the USA. So this last one, the LNG carrier was sailing from Louisiana towards the Adriatic LNG terminal in Italy when crew reportedly lost access to internal control systems. crew reported the incident to the Korean Register, which is investigating. It's important to say that the ship owner has said a technical malfunction, and the Italian Coast Guard said it's a malfunction in the systems used to monitor cargo parameters requiring intervention by the company's technicians, but it's also being widely reported that crew have said that this was effectively a cyber attack. And what's unnerving to me about these is that particularly when they're to do with gas and they're to do with the systems that are controlling how that gas is being stored on board, it feels like something that could become a sort of major vulnerability. So it's not necessarily that they're trying to take control of the vessel, but potentially trying to... warm gas up beyond where it would stay liquid, potentially trying to influence how it's being stored, managed, discharged. US authorities are now monitoring nearly 20 ships worldwide for cyber threats. And these three tanker cases have turned cyber security concern into a fleet management issue. So just to get your take on that, it seems to be a bit of a worrying trend. Raal: Yeah, I did see I I saw the latest one that you mentioned, And I I I was I was toying with the idea of bringing it up. I think what put me off was that there there was it wasn't that thing that it wasn't really conclusive. The crew was sort of really driving this idea that it was a cyber attack. And yeah. Nick Chubb: that it was a cyber attack. Raal: And and I did you know, sometimes when you when you've got that it it's it's easy to sort of start jumping to conclusions and stuff like that. But what I hadn't pieced together was that there'd been a number of attacks. And and the second thing that you said which I thought was really interesting was that they'd they were all relating to trade with the US which Nick Chubb: Yeah. Raal: is which is distinct and the other thing that you rightly picked up on which I I was concerned by was it was exactly as you said. This is I'm just trying to see now what specific element it was. But this is to do with the actual I mean essentially what it what it's it's it's equipment that's that's directly leading to a safety concern around explosion, right? Because trying to find exactly where to be try be precise, but it's the ship's control systems, isn't it? Fanta but it's the cargo control systems. I'm no engineer as as people following this show will have already Realize. But it's that thing exactly as you said. Like a lot of the time it's been about navigational Nick Chubb: Yeah. Raal: thing that's left ships maybe stranded or or spoofed GPS they're not where they think they they they are. And obviously that in itself is dangerous. But this is a different level of danger because the implication is well what was what was this t intended to to achieve? It's not just sort of disrupting operations, whether by accident or by design, it's puts the actual, you know, safety of everybody on board that vessel is being really compromised. Now obviously there's a big difference if that happens at sea. Obviously huge tragedy for everybody on board the ship. I'm not I'm not making light of that, but doing something like that in a port is a different story. I mean that's potentially you know, for the for those in the in the port and the port community, that could be a very weaponized attack, let's say, on a on a country, which is maybe what what's on the mind with the with the US there. But it does seem does seem to be I don't remember hearing any any cyber attacks before where where that was the issue. Mostly it's been you know, try often trying to kind of do some same kinds of things that f that that are on board ship as well, around sort of s same things that happen off ship, you know, like sort of getting people to spend money or, you know or yeah, hack into those kind of systems and sometimes as we've seen with with the the actual navigational side of it, this is this is different level really. I'm very worried. Nick Chubb: Yeah, I mean, it could be an indication of an increase in attacks. It also could be an indication that the US is just taking cyber risk management for the maritime sector much more seriously, given that they're currently engaged, although currently under ceasefire, at a war. It's important to say, US authorities said there were no reports of operational disruption, vessel instability, physical danger to crews, or environmental impact. But they did confirm... on at least one of the incidents, the VL Prosperity, that there was malicious cyber activity on board. And so, yeah, it is quite possible that this stuff has been going on for some time. It's just that we haven't really paid close attention to it. But I think possibly the US is sort of stepping up efforts to monitor this stuff. Raal: Yeah, I've seen the the actual passage. The the crew further claimed that while the ship was tr transiting in the Adriatic, the attackers compromised tank pressure control systems and pressure relief valves and disrupted the boil off gas management cycle. This disruption significantly increases the risk of tank rupture and explosion, the email stated. So so I don't know why the the Americans were saying there wasn't any risk to anybody, 'cause it sounds that sounds like a hell of a risk to me. Nick Chubb: And the Italian Coast Guard issued a notice to mariners to keep distance from the vessel Raal: Yeah. I was just gonna say that th it's obviously far too early to be able to understand how they you know, what the attack vector was there or how they would have gone about doing this, but yeah, it's it's worrying. Nick Chubb: It's certainly a helpful reminder to people to follow best practice when it comes to any cyber risk management for IT, OT on board. And there's lots of good practice out there. Raal: Yeah, well there's a sh Yeah, we can give a shout out to the the episode that we did recently with Steve, can't we? where we got into this subject of whether or not not whether companies were taking cybersecurity seriously, that wasn't the framing. It was whether they whether it was well enough understood how much the risks were sort of growing and amplifying and Nick Chubb: Yeah. Raal: and no small part due to the ease with which you can conduct these things with we're using some of the AI models. Yeah. Nick Chubb: Yeah, that episode is well worth listening to. We do also have a, on the Digital Ship website, there is a Cyber Resilience Journal, and we have a dedicated session at the Digital Ship Summit, which is in a few weeks now, in October, on cyber risk management as well. So, plenty of places to go if you're looking for a swat up on what good looks like. Raal: Yeah, yeah. But yeah, that that recent episode, if you if you wanna catch that, you'll see that in our archive. There's a lot of material there now and a lot of it lot of great interviews and stuff like that. So if you are new to the show and you're not not perused the archive, suggest you do have a Nick Chubb: Awesome. Thanks everyone. Thanks Raoul. See you next week. Raal: Good to see you, Nick. Cheers. Bye. Nick Chubb: Bye.