It Seems They Are Beginning To Fear The Cargo RORO LCTs Now

Once upon a time, in the early days of connecting islands, LCTs had a place as exemplified by Millennium Shipping in the 1970’s and the LCTs connecting Mactan island and the islands of Samar and Leyte. But as it moved into the 1980’s and the 1990’s, it was the short-distance ferry-ROROs that began connecting the islands like in San Bernardino Strait, in Surigao Strait, in Verde Island Passage, in Guimaras Strait, in Tanon Strait, in Bohol Strait, across Camotes Sea, in Basilan Strait and in Panguil Bay. LCTs began losing favor then and some of the reason might be psychological. There was a belief then that LCTs were “less safe”.

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It was actually only Maayo Shipping and Tri-Star Megalink which bucked the trend in those decades before the change of the millennium by still using LCTs as passenger-cargo carriers. To some extent, Asian Marine Transport Corporation (AMTC) can also be counted here before the start of the new millennium. Among the the most notable operator of passenger-cargo LCTS in this millennium are Lite Ferries and Starhorse Shipping Lines. Of course, LCTs also connected Samal island, Guimaras and Olutanga islands but I would rather exclude it here as they were very short connections like the connection across Sula Channel of Albay to Cagraray island.

LCTs as means of transport are slow and slower than short-distance ferry-ROROs. Their passenger accommodations are also very basic and small and can be uncomfortable. They were never really meant to be people carrier unless one is talking of the hybrid Korean LCTs (like the Ma. Angelica Grace, Reina Banderada, Reina Justisya and Star San Carlos among others) which have more comfortable passenger accommodations and even airconditioning plus bigger engines which afford speeds higher than the basic, short-distance ferry-ROROs.

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I do not know which started the trend of using LCTs for vehicles mainly with not much intent to carry passengers. The most significant I noticed that had an operation like this was Golden Bridge Shipping of the Lua family (owner of a tramper company and Oceanjet) which has its base in Cansaga Bay and had a route to Hindang, Leyte. Early on they were known as Socor Shipping. Of course, Mandaue Transport also had a route from Mandaue to Tagbilaran and Simpoi Shipping had a route from Carmen to Ormoc.

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There were also LCTs that were used not for rolling cargo but as container van carriers. Ocean Transport chartered LCTs from Asian Shipping Corporation for this purpose which was copied by others until they were able to acquire their own LCTs. But of course, transit time from Manila to Cebu can take up to 4 days but container vans won’t protest unlike passengers. Some Asian Shipping Corporation LCTs were also chartered to load container vans from Manila to Cagayan de Oro.

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These operations are of course Cargo RORO operations. The only difference is instead of using Cargo RORO or RORO Cargo ships, LCTs are used. That is why I termed these LCTs as “Cargo RORO LCTs”.

Starting in 2012, LCTs from China began appearing in great number in Mactan Channel and the biggest owners were Cebu Sea Charterers, Broadway One Shipping, Concrete Solutions/Primary Trident Marine Solutions and Royal Dragon Ocean Transport. The first two simply had numbers as names of the LCTs. The third one was the owner of the Poseidon LCTs and the last one was the owner of the Meiling LCTs. Asian Shipping Corporation also bulked up their LCT fleet. Supposedly, these LCTs which were called “deck loading ships” in China will be used to transport ores from Surigao to China.

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However, two major happenings intervened. One, the need of China for ores declined and in November of 2013, Typhoon “Yolanda” wreaked havoc in Eastern Visayas. In the aftermath, in the need for relief and rehabilitation of the region, trucks and trailers have to cross. This happened during a time that the long-distance trucks were already running via Eastern Visayas as substitute for the ship-borne container vans and many of these are still destined for Mindanao.

Immediately, mile-long queues of trucks formed in the ports of Matnog, Allen, Liloan, Benit and Lipata leading to loud protests. MARINA then allowed the temporary use of LCTs which became de facto permanent until today. Meanwhile, there was also a great demand for bottoms to be used by trucks across Camotes Bay. Suddenly, the moored “deck loading ships” in Cansaga Bay was crossing Camotes Bay, San Bernardino Strait and Surigao Strait. Cebu Sea Charterers and the Poseidon LCTs slowly begans Cargo RORO LCT operations together with the Adnama LCTs (many more were used in Surigao and elsewhere). Roble Shipping meanwhile chartered LCTs from Asian Shipping Corporation which they replaced when they were able to acquire their own LCTs.

There was also an upsurge in LCT demand to Bohol and some old LCT began plying routes. Feeling their grip threatened, Lite Ferries bought them all lock, stock and barrel aside from buying additional LCTs. Meanwhile, Cebu Sea Charterers invaded other routes like the Carmen-Ormoc, the Dumangas-Banago and the Tuburan-Escalante routes. Suddenly, the lowly LCTs which became Cargo RORO LCTs looked menacing. Even the pioneer Golden Bridge Shipping which had queues even before “Yolanda” feels threatened now.

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How did this come to be? One reason is at the start, the overnight ferry companies crossing Camotes Sea did not give due regard to the rolling cargo or vehicles. They were too content in their successful palletized and loose cargo operations and they underestimated the need of the rolling cargo. At the start only Golden Bridge Shipping, Simpoi Shipping and Asian Marine Transport Corporation were servicing them. It seems Lite Ferries saw the need earlier than their fellow overnight ferry companies. Well, they are strong in rolling cargo operation in Bohol and is even dominating it.

Secondly, in terms of rates none can beat the Cargo RORO LCTs. They might be slow but in terms of rates they are far cheaper than the overnight ferry companies as in they can give rates that are cheaper by 40%. Well, they don’t need to invest in passenger services and accommodations and they have small engines compared to overnight ROROs. Now they even carry container vans not in trailers to Leyte from Cebu superseding the container ships that used to call in Leyte ports from Manila.

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That is always the danger brought by Cargo RORO LCTs, the low rates. Now feeling they can’t beat it, the overnight ferry companies are beginning to acquire their own LCTs. Lite Ferries is so well ahead in this game but Roble Shipping is already following suit. Medallion Transport seems not to be that worried yet because compared to other they saw immediately the need for rolling cargo operations and were not too dependent on palletized and loose cargo operations. After all they started in short-distance ferry-RORO operations and so they might have had a better understanding of rolling cargo from the start.

The old ROROs better adjust now. From what I heard even the big Asian Shipping Corporation which has the most number of ships in the Philippines is joining the fray. It seems they might have already tired of just chartering LCTs.

In the eastern seaboard, I heard the Cargo RORO LCTs are already the favorites of the truckers. As they say money talks. Price point as decision point is simply too easy not to miss. Everybody wants savings.

To me, it is no longer a question if the Cargo RORO LCT sector will take a slice of the pie. The question is how much. From container ships to liners to overnight ships to short-distance ferries, all are threatened. They will not be overwhelmed but they must be prepared to share the pie with the Cargo RORO LCTs. By how much, now that is the guessing game. All I know is the Cargo RORO LCT rates are simply unbeatable. And that might be sending shivers now down the spine of the competition.

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And I dare say this development is good. Rolling rates are simply too high in the Philippines because the regulatory agency MARINA never learned how to compute rates. It is as if fuel and distance are never really factored in.

Rolling cargo rates of the LCTs across Camotes Sea is now lower than RORO rate across Surigao Strait. How did that happen?

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The Ocean Fast Ferries or Oceanjet

Many except for those from the Central Visayas do not know that Ocean Fast Ferries, more commonly known as Oceanjet is already the Philippines’ largest operator of High Speed Crafts or HSCs. This is especially true in Luzon which has only been recently exposed to the Oceanjets when they invaded Batangas. Therefore, many think the old king SuperCat is still reigning because the ads and glitz are still around and they still have the best booking service and so foreigners and tourists easily find them online. Being connected to 2GO doesn’t hurt them either.

Oceanjet actually did not start very late as some might surmise. They only came a little later than Bullet Express and SuperCat and almost about the same time as Waterjet and the Sea Angels of Negros Navigation. They were even a little ahead of SRN Fastcraft (which is more popularly known as Weesam Express) which started in Zamboanga and the SeaCats of ACG Express Liner. All of those mentioned actually came only in the mid-1990’s. The Montenegro Shipping Lines fastcrafts came significantly later than them and still much later did Star Crafts and Lite Ferries started operating High Speed Crafts.

Ocean Fast Ferries did not start with a bang. Neither did they expand very fast. They were actually on the conservative side. The other HSC operators were overly ambitious and they paid for that mistake. Some coalesced, some were driven out of business. Because of the fast expansion of the High Speed Craft sector, there came an instant overcapacity. Filipinos are still poor and so price or fare is a big decision point for them. Most are not willing to pay fares of the HSCs which were in general double the fare of the ordinary ferry. The reason for this is HSCs gobble a lot of fuel because they have oversized engines plus they don’t carry a significant amount of cargo.

Since Oceanjet did not expand fast in the early days of the High Speed Crafts, they were able to avoid the mistakes of their competitors. They only started expanding in 2001 when the dust of competition in the HSC sector already started to settle. The Ocean Fast Ferries expansion seem to come in batches. In 2001 to 2003, their brand-new Oceanjet 3, Oceanjet 5 and Oceanjet 6 which were all sister ships started arriving from Cheoy Lee of Hongkong. These were the first brand-new HSCs for Ocean Fast Ferries as the Oceanjet 1 and Oceanjet 2 which they acquired in 1996 were just bought second-hand from Japan.

These trio of sister ships brought success and recognition for Ocean Fast Ferries. They were not that fast (as in sub-30 knots while the SuperCats and Weesam Express fastcrafts were capable of speeds over 30 knots) but they were big and high. It seems these trio started a design template for Ocean Fast Ferries. Moreover, the trio also started the engine combination favored by Oceanjet which is a pair of Cummins engines with each developing 1,800 horsepower and a total of 3,600 horsepower for a speed of less than 30 knots. While not that that fast the engine combination saved fuel, the parts are easy to source (Cummins has a depot in Cebu), engineers are familiar with it and Cummins is a good engine make.

Oceanjet was also not fond of waterjets for propulsion and instead relied on the trusty propeller unlike some of their competitors. Waterjets are also more maintenance-intensive and it can foul in the dirty waters of our ports especially in Cebu and that can send schedules awry. They tend to consume more fuel too. Of course in speed they are matchless. The speed where waterjets become inefficient comes much later than that of a propeller.

It took seven years before Ocean Fast Ferries acquired another High Speed Craft. In 2010, they purchased the Oceanjet 7, an old but gold Westermoen catamaran. This was the first cat of the company and it was an antithetical acquisition. Maybe they were attracted by the solid and high reputation of a Westermoen. Maybe it was the price. Or a combination or both. I really don’t know. Suffice to say this cat proved its value to them and is still reliable.

One big supplier of High Speed Crafts in the world especially aluminum-hulled ones is Australia. It came naturally for them as they are a boating country and they were once the king of aluminium. However, in this decade Australia stopped production of High Speed Crafts because with their high labor cost and the strengthening of their currency they were no longer competitive. So what they did is they were just selling HSCs in kits to be assembled by the buyer.

One of those that took advantage of this was Ocean Fast Ferries. In Mandaue, Cebu, in their own reclaimed land they put up a related company to assemble HSC kits. This was the Golden Dragon Shipyard. In finishing they just drag the near-completed ships using rubber bellows to their shipyard in Labogon where repair works and drydocking is done to the vessels of their other shipping companies. The launching and completion of the new Oceanjets are just done in Labogon shipyard.

Out of this process came the sister ships Oceanjet 8, Oceanjet 88, Oceanjet 888 and Oceanjet 168 from 2011 to 2015. Australian engineers came to assist in the assembly of the first kit-built Oceanjet but this took the longest to be built because of their unfamiliarity (well, the first is always the hardest). These were also high fastcrafts and maybe that helped Oceanjet because there are many passengers who are not comfortable with low-lying crafts. That seems to be one disadvantage of the fleet of Weesam Express. Many passengers get the chills when they see water spray in their craft’s windows.

These four followed the same engine template favored by Ocean Fast Ferries which is 2 x 1,800 horsepower Cummins engines. Again, the speed is not that much at sub-30 knots. But Ocean Fast Ferries guessed well. Nobody was still running at over 30 knots when fuel prices really got high. While it is already lower right now still nobody runs at over 30 knots because their engines are already old. They either can’t do it anymore or they are already preserving the engines.

And that comes round to one of the strengths of Ocean Fast Ferries – they really have the financial muscle to buy new engines and they can afford to re-engine their old High Speed Crafts, an endeavor that their main competitors SuperCat and Weesam Express can no longer do because of weak financials. So Ocean Fast Ferries started being the laggard but now their HSCs are already faster than their competition with its old engines. What a reversal! It is only Weesam Express which try to give them a fight in the speed department and this might be more out of pride and not of technicals.

While acquiring these four HSCs built-from-kits, Ocean Fast Ferries also acquired High Speed Crafts offered to them by competition which quit the HSC field. In 2013, they acquired the Paras Sea Cat which already stopped operations. This was originally a Misamis Oriental-built Medium Speed Craft (MSC) capable only of 17 knots with its hand-me-down Caterpillar engines from SuperCat  and a heavier hull that was not aluminum. As Oceanjet 9, she was recently re-engined and she is now capable of 26 knots and so qualifying her as a true High Speed Craft. Incidentally, her hull design was copied from SuperCat 26 (St. Emmanuel) making them sister ships but Oceanjet will outrun her sister this time.

In 2015, Lite Shipping decided High Speed Crafts is not their cup of tea. So they sold their High Speed Crafts – the Lite Jet 1, Lite Jet 8 and Lite Jet 9 to Ocean Fast Ferries. These became the Oceanjet 11, Oceanjet 10 and Oceanjet 12, respectively. They were re-engined one by one especially the latter whose engines were not that strong after stints in Hongkong and Vietnam. They all can do 25 knots now or better. Golden Dragon Shipyard made alterations to their superstructure including on Oceanjet 9. I do not know but maybe they want a better feng shui.

Very recently, this 2016, the Oceanjet 15 arrived for them from Japan. This is to be used on their new Tuburan-Estancia route. With a growing fleet, the route system of Ocean Fast Ferries is expanding along with the frequencies. They are doing well and giving all that SuperCat can handle in the premier-for-HSCs Batangas-Calapan route along with the Bacolod-Iloilo, Cebu-Tagbilaran and Cebu-Ormoc routes. Their route system also includes Tagbilaran-Dumaguete and Dumaguete-Siquijor plus a Cebu-Tubigon route that they inherited from Lite Ferries. Recently they also opened a Cebu-Camotes route, a successor of their Goldenbridge route where once the Golden Express MSCs were sailing.

So as of today (June 2016), Ocean Fast Ferries has a total of 15 High Speed Crafts and all of those have good engines. One will almost never hear of an Oceanjet HSC having trouble while at sea. That is more than double the six or seven HSCs still sailing for SuperCat and even if the Weesam Express fleet of seven is added to that the Oceanjet fleet will still be bigger. Yes, Ocean Fast Ferries is beginning to be dominant in the HSC sector.

What is their secret? Many one cannot connect that the owning Lua family of Ocean Fast Ferries is simply loaded that they need not take any profits from the operation of Oceanjet and they can simply reinvest all profits. They also don’t have any stockholders to please and so they can take the long-term view. Their main moneymaker is actually the Nature Spring mineral water, the #1 bottle water brand in the Philippines. They have a big reclaimed land in Labogon in the Cansaga Bay of Cebu where the Golden Dragon Shipyard is located. This also hosts there Goldenbridge Shipping which they also own, one of the pioneers in the fast-gaining RORO Cargo LCT sector. That company also carries their bottled water. Part of Goldenbridge was the old Golden Express MSCs that were once Bullet Express HSCs (they were able to purchase the remains of that company after it quit operation).

They are also not new in shipping. Before Oceanjet and Goldenbridge they were already in cargo shipping using trampers. The Lua family owned Unilink Shipping Corporation and Unified Global Shipping Corporation aside from the earlier Socor Shipping Corporation, the forerunner of Goldenbridge Shipping Corporation. In these shipping corporations the Lua family has an additional 15 ships, more or less, and that includes some true cement carriers. The Lua family is big in the construction and hardware industry of Cebu and it seems they are also in trading including cement trading. That is the financial muscle of this group most people are not aware of.

SuperCat is trying to close the gap with them by ordering two new High Speed Crafts from Austal Philippines in Balamban, Cebu. But I wonder if that will be enough. For some time to come I see Oceanjet reigning in the HSC field in the Philippines.

Maybe it’s time for them to make some noise?