Is There Enough Cargo To Move Around?

In the last few years there has been an upsurge in the ships that move cargo. First, that became noticeable with the LCTs that became ore carriers of the black sand mining in a few provinces and particularly in Surigao where opening of mines close to the sea boomed. That happened because of the sudden great demand then of metals in China.

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An aggregates carrier LCT off Taganito, Surigao

Just after the peak of that demand, a fleet of brand-new LCTs built in China appeared in north Mactan Channel. That happened when the demand for metallic ores in China was beginning to wane. And so initially those LCTs especially those owned by Broadway One Shipping and Cebu Sea Charterers were just anchored in the channel. Those LCTs were only known by their numbers but in size those were bigger than the average Philippine LCT. Generally, their powers and speeds were also higher and better.

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Row of newly-arrived LCTs in north Mactan Channel

With nowhere to go these LCTs including those owned by others but also built in China (like the Poseidon LCTs, the Meiling LCTs, those owned by Premium Megastructures Inc., Adnama Resources, etc.) became aggregates carriers and Cargo RORO LCTs and in the latter it challenged in the business then dominated by Goldenbridge Shipping which had a route from Labogon, Mandaue to Hindang, Leyte. Sand is gold in Cebu because of its construction needs and it is not readily available in the island in quantity because of its upraised sea floor origins which meant just a lot of limestone. And so sand is transported from Leyte whose land is volcanic in origin and thus there is plenty of sand and hard rock. Aggregates carrier LCTs go as far as Samar and some also go to Bohol.

The value of Cargo RORO LCTs was highlighted when the super-typhoon “Yolanda” struck and lots of trucks have to move to Leyte and long queues of truck formed in Matnog and Lipata ports and there was also a lot of needed bottoms for trucks crossing from Cebu to Leyte. The LCTs filled this need and suddenly the Cargo RORO LCT segment was here to stay. It challenged not only old LCT operators like Mandaue Transport and Simpoi Shipping but also the overnight ferry companies operating ROROs that Roble Shipping even felt the need to charter LCTs from Asian Shipping Corporation (ASC), owner of many LCTs for charter. Now Cargo RORO LCTs connects many islands and it is also a viable transporter now of container vans from Manila to the Visayas and Mindanao, a mode pioneered by Ocean Transport that also started by chartering LCTs from Asian Shipping Corporation before acquiring their own China-built LCTs.

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On the left is an LCT of Asian Shipping Corporation chartered by Roble Shipping

I can understand the need and value of LCTs which have proven their uses and versatility recently and that is why it is still continuing to increase in number. But in the same period I also noticed the rise in the numbers of our container ships and general-purpose cargo ships which are mainly freighters on tramper duty. In general that is a surprise for me as I know our local inter-island trade is flat and intermodal trucks have already stolen a significant portion of their cargo and that can be shown in the queue of trucks in many short-distance crossings like in the routes to Panay, the routes to Eastern Visayas and Surigao and Cargo RORO LCTs are used by these intermodal trucks along with short-distance ferry-ROROs. Cargo RORO LCTs are also used by tractor-trailers hauling container vans to serve islands where local container ships are now gone or where the service is weak or the rate expensive. Examples of these are Samar, Leyte and Bohol islands.

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A Cargo-RORO LCT

I have been contacted by a writer doing the history of Delgado Brothers or Delbros which once dominated the Manila ports and which was also involved in shipping then (it was also the first employer of my late father). Delbros happened to by one of the two dominant leasers of container vans locally together with Waterfront and they cannot resolve the problem of flat leasing for several years already and they cannot fathom the reason why. I told her the reason is simple – the intermodal trucks are stealing their business.

But in recent years I have seen our container shipping companies add and add container ships. Most remarkable is Oceanic Container Lines (OCLI) which has the most number of container ships now. Notable too is Philippine Span Asia Container Corporation (PSACC), the new name of the controversial Sulpicio Lines. Lorenzo Shipping and Solid Shipping have also added a few. There are new players which are Moreta Shipping Lines which was formerly in overnight ferries, Meridian Shipping and Seaborne Shipping and these new players are also expanding their route networks. To this might be added Trans-Asia Shipping Lines Incorporated (TASLI) which now has a container ship to Manila.

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A deck loading ship

Another notable addition is Fiesta Cargo and Logistics (this is not the exact name of the company) which operates true deck loading ships. These ships have flat decks like those in LCTs and booms for cargo handling. Aside from this and container ships, the Asian Marine Transport Corporation (AMTC) also added a few RORO Cargo ships, their forte and choice of transport.

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A RORO Cargo ship

For NMC Container Lines and 2GO there was no noticeable addition although the latter have chartered container ships from Caprotec and they also charter ships from Ocean Transport (or is it Key West?). Hard to say because of the rumored split between the two. Escano/Loadstar meanwhile seems to be exhibiting a decline in their fleet.

In general-cargo ships a few companies showed newly-acquired ones and probably topping the list is Avega Brothers which from chartering ships from Asian Shipping Corporation went on a spree of acquiring trampers that though Manila in origin they regularly anchor ships now in north Mactan Channel. Medallion Transport and Roble Shipping also both acquired a significant number of freighters. Aside from the three mentioned many other shipping companies also added freighters to their fleet.

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Asian Shipping Corporation LCTs in their Mandaue port

Asian Shipping Corporation which specializes in chartering ships and operating barges aside from LCTs needs special mention because of the rate they are adding ships annually. As of last year their fleet total is nearly 200 ships already including the lowly tugs but MARINA (Maritime Industry Authority) has noted that they already have the biggest fleet in the country in terms of Gross Tonnage (GT), the traditional method of comparing ship and fleet size and that they have already displaced 2GO from its old Number 1 perch. 2GO temporarily regained the top ranking with their acquisition of the liner St. Therese of Child Jesus but I wonder if they did not slide to Number 2 again with the sale of the liner St. Joan of Arc. For an operator of supposedly “lowly” ships the achievement of Asian Shipping Corporation certainly has to be lauded.

But all of these leads me to the question, “Is there enough cargo to move around?” I know many of the trampers are just carriers of cement and other construction/hardware/electrical materials that they are practically “cement carriers”. Some are “copra carriers”. And these trampers are also carrier of bagged flour of various kinds and also other bagged products like fertilizers and feeds. But our freighters seldom carry rice and corn now unlike in the past. Ditto for cassava – the volume now is small.

Is there really a significant rise in the volume of these products? Maybe in cement and related materials because of the construction boom. But I wonder about the others. Are there other products being carried now? What I know is a lot of grocery items is now carried by the intermodal trucks.

Coal might be big now because of the rise in number of our coal plants. But freighters do not carry that. Other types of fuel are carried by the tankers.

There are incentives now from the government on the acquisition of new ships and it even opened a loan window with the government-owned Development Bank of the Philippines (DBP). Are shipping companies taking advantage of that just to hoard ships?

What I know is shipping rates in the country are high if compared to other countries. That can cover low cargo volume. The most visible show of that are our container ships. Seldom will one see them full or even near that. Well, operating ships is expensive especially since MARINA exactions adds to the cost.

Whatever, newer ships are always good. I just want to see where this would lead. Lower rates? Probably not. Better service? That is hard to measure on cargo ships. More availability of ships? Maybe one can count on that.

Anyway, this article is just meant as an update on one aspect of our cargo shipping.

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Time Will Come The LCTs Will Take Away The Business Of The Container Ships

It was a friend of mine who worked as trusted man of someone high up in shipping who told me that MARINA has set it just to 30 or 35% load for a container ship to be profitable. I was aghast by that because that will mean terrible inefficiency and high rates for the shippers. That was twenty years ago and in that same time span our local shipping industry has been under attack for very high rates and it has been pointed out that from Davao it is much cheaper to send a container van to Hongkong or Singapore which are much farther than Manila. But even after two decades there has been no change in the situation of the industry. If there was, it is the rates went up geometrically higher. And of course that was unacceptable but our bureaucrazy only acts to change things if there is already an imminent revolt.

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Intermodal trucks for loading in BALWHARTECO Port in Allen, Samar

As they say water seeks its own path and one cannot hold or bottle it forever. One big response by shippers that I saw was in the widespread deployment of intermodal trucks that use our highways and then boards short-distance ROROs at the end of the road and then continue on to the next island. The intermodal truck might then still board another short-distance RORO to another island. I found out there are even trucks whose origin is Mactan island which are bound to Manila and will traverse Cebu island, Negros island, Panay island and Mindoro island before landing in Batangas port. And of course intermodal trucks from Manila or CALABARZON find its way to Davao regularly and there are some that reach as far as Zamboanga.

Consolidation” of the local cargo shipping industry especially the container sector has long been proposed by experts both local and foreign. But it has fallen into deaf ears and the national government will not wield the proverbial stick to make this come true and so it lays until now where it started, that is as proposals. “Consolidation” would have led to greater efficiency and thus lower rates. But locally, businesses and not only shipping wants to see efficiency not to lower rates (of course, they will pay lip service to that) but to higher profits. And so greed rules and trumps everything and the higher national interest and greater good do not matter in the end.

Our different shipping companies are republics of their own and historically they have never been into cooperation, consolidation or merger (except the “Great Merger” which produced WG&A and which had been a disaster to local shipping) even though some are related by blood. If there has been a CISO (Conference of Inter-island Ship Owners) in the past, it is only because they want to present a common front vis-a-vis the government and also to make sure that the agreed rates are being observed by all (however, in other countries that will ruled as “cartelization” and subject to penalties or even jail terms; but not here as that term is practically unknown and even Economics teachers here do not know that). Oh, well, actually the cartel master locally is MARINA which sets the rates. Historically, they set the maximum rates but like what happened to LTFRB they treat the maximum rate as also the minimum and MARINA in the end serves just the needs of the shipping companies and not the general public. But before it be misconstrued that they are servile to shipping companies, the truth is shipping companies fear MARINA as their livelihood and fortune is dependent on the decisions of MARINA. If the rates are drastically brought down then they might all go down.

That is the reason why the shipping companies will fight toe and nail for the retention of the Anti-Cabotage Law which bars foreign shipping companies from sailing local or inter-island routes. If the Congress (which has the power to repeal the Anti-Cabotage Law) allows the entry of the much more efficient and capable foreign ships then local cargo rates will drastically go down but our local shipping companies will drown. Regarding the Philippine Competition Commission (PCC), that entity will not amount to anything in shipping because that only checks mergers and mergers are a near-impossibility in shipping.

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LCT Raenell of Asian Shipping Corporation in Mandaue

And so shippers and other related interests will find new ways to bring down rates some other way. One of these is the employment of the cheap and cheap-to-operate LCTs which has only 1,000 horsepower on the average which is just about a third of the power of the container ships. True, they will probably only run at about 7 to 8 knots compared to the 11 to 12 knots of the container ships. So they will take three days to Cebu where a container van will only take two days. But, hey, the bulk of cargo is not express anyway and a difference of one day will not really matter, in the main. Nowadays if one really wants it fast one takes to the plane and use air cargo which is P20/kilo at the lowest now.

It is through the use of chartered LCTs from Asian Shipping Corporation that Ocean Transport had their start. Using big LCTs (by local standards), 94 TEUs can be fitted with the container vans stacked like Lego and handled by big forklifts. The LCTs cost P70,000 a day, fuel and crew included and so the transport cost one way is just over P200,000 not including cargo handling in Manila and possible cargo handling in Cebu. Plus of course other labor, office, yard and anciliary costs and maybe insurance. Under the table money, I have only the vaguest of ideas. But in this calculation one can see the movement of a TEU to Cebu via chartered LCTs is just P4,000, starting. That will not be the actual rate but one can see how low it is via LCT when the normal commercial rate for a TEU to Cebu is probably 5 times of that. The LCT might have just a capacity of 94 TEUs and the container van has 300 TEU but if they are only a third full on the average then the actual load of the two is just about equal and the LCT has probably only has a third of the horsepower of the container ship. The LCT usually has about 100% load. So it is very easy to see which is more efficient and why an LCT can give much, much cheaper rates.

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Roble Shipping was the next to follow the shipping model of Ocean Transport and like the first they were also very quiet about it. Maybe the two fear that if it becomes known widespread that the LCT mode is successful some shipping companies will lobby MARINA and MARINA will institute a crackdown and maybe cite “safety” again which is the usual bogey of MARINA. It has been a long time that the LCTs, being flat-bottomed and not that resilient against capsizing has been tagged with safety issues. It does not help either that being open-decked and having a low freeboard some issues were also attached by some to those. [Note: Ocean Transport and Roble Shipping now operates their own LCTs regularly carrying container vans from Manila to Cebu.]

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LCT Akira of Ocean Transport by John Carlos Cabanillas

The longest route I have seen LCTs bring container vans regularly is from Manila to Cagayan de Oro. And so locally it is proven now that LCTs can be container carriers for 500 nautical miles. I do not know if they are capable of Southern Mindanao routes which is up to 800 nautical miles but I think they can do it if needed. Of course, LCTs are normally earlier to seek shelter than container ships when there are storms. But if MARINA and the Coast Guard suspends voyages at 45kph wind speed then the container ships might not have an advantage anymore.

The LCTs are looked down upon by many but they should know that China which is already the biggest shipbuilding country in the world and is already a shipping power widely uses LCTs to move their cargo internally and on shorter distances. Actually most of our new LCTs now are from China and many came here brand-new. In terms of age, our LCTs might be younger than our container ships now. And LCTs are the backbone of our Cargo RORO LCT fleet which not only move trucks but also trucks and trailers bearing container vans especially to islands that are not served well by container ships like Bohol, Leyte and Samar.

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LCT PMI-3 from Leyte

If MARINA won’t crack down, I see intermodal trucks and LCTs further taking away the business of the container ships which is still growing in number but I know their cargo volume is not increasing. Consolidation would have been easy for them if they will just open their eyes and be open-minded and it does not mean that they would have to merge, an anathema to many executives as that might mean losing their positions and careers that they have built over the years. Actually the simplest consolidation is the swapping of container vans. There is no container company that has daily departures even from Manila and the simplest is they should load their containers to their partner shipping companies which has the nearest departure. That will mean ships being fuller and at the end of the month they can reconcile their figures and charges would have to be paid for the difference but of course it should be on friendship or partner rates.

With that, less ships might have to be employed, there would be less sailings and that would have to mean savings that should be passed on to consumers if they have any integrity. With consolidation too there might be enough containers vans to ports and islands that they have already abandoned or bypassed and so the container ships can come back there and sailing level might be maintained (now isn’t that neat?). Internationally, this system I mentioned is already being used and not only in shipping. I don’t see any valid reason why the local shipping companies can’t do it. It will only be impossible if their distrust of each other is too much and their owners and executives are too obtuse. The national government should also wield the stick after incentives are laid out. They can even set the rules and the system. It is high time already as for the past two decades after constant criticisms I have not seen our local container companies try to bring down container rates to acceptable world standards. They are just being kept afloat by the blood of the shippers. And that is why forwarder companies are making great strides and container shipping is just where they were two decades before. That is also the true reason they won’t venture out to foreign waters because they simply cannot compete. Regarding their charge that our ports are too shallow that is baloney because much bigger foreign ships use the same major ports that they do.

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LCT Poseidon 15 in Verde Island Passage

I wish the LCTs well for maybe it is them that will be able to bring down container rates even though they might not look modern or beautiful. If they drown the container ships then it is the fault of the container shipping companies themselves.

The MV Ma. Angelica Grace

The Ma. Angelica Grace is a unique but hard-luck ship. Of Korean design and origin she had that extended scantling already making for a bigger passenger accommodation although she is basically an LCT. Following Korean innovation she is faster like a conventional ferry and her hull is not exactly flat but more like that of a conventional ship. She is really speedy for an LCT (17.5 knots!) because she is overpowered.

When she first came into the country in 2009 and sailed for Rapal Inter-island Shipping, I was surprised because I knew the route she is embarking on is bound to end in doom. That is the Batangas-Romblon-Masbate route. Sometimes, I wonder why some shipping companies seem not to study failures in the past. But maybe then they might have a connection or attachment in the place which is hard to quantify.

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The route linking Batangas and Masbate was marginal even in the heydeys of Viva Shipping Lines and to think it was a long-held route by them. The competing Lucena-Masbate route is even superior from the passenger and rolling cargo point of view. This is so because since rates in the sea is far higher than rates in the land then what makes sense for them is a short sea crossing, if possible and the Lucena-Masbate route is far shorter than the Batangas-Masbate route. In fact that route was held longer by Viva Shipping Lines (up until their demise) that the Batangas-Masbate route.

But then the entry of the basic, short-distance ferry-RORO to Masbate from Pilar trumped both Batangas and Lucena since that route is very short. Suddenly, the crossing of trucks to Masbate became affordable (thence, only a select few dare pay the hefty rolling rate to Lucena or Batangas). Later, with the ferry company encouraging and supporting the bus companies, soon the rolling of buses also commenced and that impacted a lot on the choice of the passengers. Suddenly, the direct bus crossing to Masbate was already their default choice.

In the Batangas-Romblon section, Rapal Inter-island Shipping will also not have its way. Montenegro Lines has a headstart there and CSGA Ferry (MV Princess Annavell) was also doing the route. And that is aside from the ferry from Lucena of Kalayaan Shipping. Soon the successor of MBRS Lines (which held the Manila-Romblon routes then) will come back as the Romblon Shipping Lines and operate the liner Mary The Queen. Romblon does not have a big population anyway nor such great economic activity to support so many ships. So when the Maria Angelica Grace came into the picture I know they will go out of the picture soon (pun intended) and I was not mistaken.

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Maria Angelica Grace was first known as the A Rim Car Ferry No. 2 of the A Rim Car Ferry of South Korea. She was built by Ilheung Shipbuilding Co., Ltd. in Mokpo yard in South Korea. She has two masts, two funnels, a half passenger deck and a car deck with a single bow ramp as access and she has a square end stern. Like most LCTs, her access to the passenger deck is through stairs at the very end of the ship.

This modern LCT measured 56.6 meters in length over-all, a beam of 10.0 meters and a depth of 2.8 meters. Her dimensional weight are 416 gross tons and 200 in net tonnage and the ship’s DWT is 152 gross tons. She is powered by twin Caterpillar engines with a total of 2,550hp (that is High Speed Craft range!) which gave her a top speed of 17.5 knots which was indeed very fast for an LCT.

Maria Angelica Grace had a limited passenger accommodation but it had airconditioning which might have been original in Korea. However, she was fitted with bunks since her route to Romblon and Masbate are overnight routes. She also has a few seats and in the rear there is a small canteen and mess. That facility is needed by ferries doing overnight routes.

When she quit her Sibuyan Sea route she was then leased to Surigao to carry not passengers but metallic ores. I wonder why they did not just apply for other routes because later it was found out that metallic ores loaded into the deck is toxic for LCTs as the ores easily corrode the deck and since it is a deck exposed to rain the water combined with the ores will result in leaching.

Maria Angelica Grace was pulled out after two years in Surigao and her shiny white paint was already gone and the deck corroded. She was leased to Mandaue Transport which has Cargo RORO LCT operations from Cabahug wharf in Mandaue, Cebu to Tagbilaran, Bohol. The MARINA of Region 7, however advanced some conditions. They demanded a new coat of paint and repairs has to be made to the car deck. Work was being done to her when we visited her. Her bunks were also being removed. MARINA Region 7 is rather strict in the rule the Cargo RORO LCTs should not have passenger accommodations. They do not want any passenger revenue accruing on the sly.

With these met she soon began sailing as the third LCT of Mandaue Transport in the Mandaue-Tagbilaran route carrying rolling cargo (i.e. vehicles). However, her career with Mandaue Transport did not last long how; it was actually very short. In a few months, she capsized (but not sunk) right in Cabahug wharf while loading. The strong wash of a High Speed Craft passing capsized her. Maybe the time that happened her load was unbalanced and maybe it was a vulnerable point as Cabahug wharf is in the northern narrows of Mactan Channel and High Speed Crafts pass just about a hundred meters away.

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Maria Angelica Grace was refloated and she was towed to Colorado Shipyard in Tayud, Cebu. However, years have passed and yet no work was being done on her. That was still the situation when Philippine Ship Spotters Society (Philippine Ship Spotters Society) members visited Colorado Shipyard. She looked rusty again and maybe it is even more rusty in the car deck. With her capsizing, she also suffered damages in the engine room and bridge for sure.

I do not know what is her future. What I know is her capsizing resulted in the restrictions in the the speeds of the High Speed Crafts inside Mactan Channel.

I just rue such fate of a once fast LCT.

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Photo Credits: Nowell Alcancia, John Carlos Cabanillas, Mike Baylon, Philippine Ship Spotters Society (PSSS)