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Tide turning against cheap yard deals for shipowners - 01/04/09
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Shipping insiders are warning the sweet repair deals owners can secure from work-hungry yards can turn sour through credit risk and lax supervision.
The swift end to the acute shortage of shipyard capacity, which had been driven by the boom in newbuildings and which had pushed up the cost of repairs for shipowners and insurers, has brought its own pitfalls, according to claims experts, despite useful benefits for operators and their underwriters.
 Christina Kalimbassieris, managing director of Kalimbassieris Maritime, said that for owners and underwriters, the bright side is that availability of drydocking space has improved dramatically. “We are now seeing major repair yards in Greece, Romania and Turkey offering immediate availability. This is a phenomenon that has not been seen for some time: just six months ago waiting times for drydock space were two months or more.
“Fewer delays in repairs mean lower costs and vessels back in business faster,” said Kalimbassieris, whose company is a leading provider of marine technical consultancy and claims-handling services, especially in the eastern Mediterranean region. 
Greater availability means better choice of yards for repair projects and also means owners are more likely to find an appropriate yard within easy reach. 
Despite this, the issue of cash flow is a looming peril. One Turkish repair yard reported a case in December where repairs and maintenance worth around $4m had been completed but the shipowner, as a result of the freight market crisis, was unable to make payment. 
Although the yard could have taken legal action, directors complained that arresting the vessel was not an ideal solution. For a start, they had nowhere to put her —anchorage space in, for example, Tuzla Bay in Turkey is fully occupied by vessels laid up as a result of plummeting rates. Second, taking legal action against clients was seen as bad for business. 
“Despite these cash flow problems, in our region we have not yet seen signs that the situation is so severe as to put yards out of business,” Kalimbassieris said. However, she warned: “Obviously in this climate, owners and underwriters need to be more aware of the financial solidity of the yards targeted for repair work.” 
Although operators are able to obtain more competitive quotations from yards, it is more necessary than ever to ensure adequate supervision of the tendering and repair process, advised the claims specialist. She underlined the need to appoint a surveyor as soon as possible after a casualty and to get an underwater survey, if necessary, to give underwriters a preliminary assessment of the likely costs of claim and repair options. 
“Now yards are being pressed to offer lower prices, even more care should also be taken to prepare a detailed, all inclusive specification in order to avoid the risk of additional items being found later and charged at higher rate.” said Kalimbassieris. 
Costs can also be controlled through supervision of the repair process. “In the current climate, on the shipyard’s side there is greater scope for repairs to run over time when there is not the pressure of a long queue of vessels awaiting drydocking space,” said Kalimbassieris. “Also, with shipping rates at low levels, owners with loss-of-hire insurance may be inclined to let repairs run over time. There are some methods for saving time on repairs, including where possible pre-assembly of sections before a vessel’s arrival. 
“Agreeing on procedures for measuring steel renewal, including a system of periodic joint measurements, means that any dispute in the figures can be resolved on the spot throughout the repair process. Giving early attention to issues such as this avoids the risk of large discrepancies or disputes at the end of the repairs.” 
Usually the most lucrative and desirable work for yards is maintenance or smaller repairs which involve a regular turn-around and a wide spectrum of work so that yards can appoint a larger team. “However, now we are seeing yards competing fiercely for major repair works involving longer term drydocking and very specific work, which six months ago they would have been reluctant to touch,” said Kalimbassieris.


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