SIMIC

 F
or the first time in a decade, large numbers of ships are heading for lay-up as the COVID-19 pandemic crushes demand for consumer goods and widespread travel restrictions temporarily end passenger cruising.

Cargoes carried on containerships are set to fall by 10 percent this year, the largest decline in this sector’s 64-year history. Owners of these vessel types, as well as passenger and cruise ships, are among the first in the maritime sector deciding to lay-up and are becoming reacquainted with regulatory and technical measures to prepare and protect vessels whilst out of service.

This volume of lay-up has not been seen since the global financial crisis of 2008 and 2009. Up to 15 percent of the global fleet of bulk carriers and containerships were removed from trading as shipments of dry bulk commodities like iron ore and coal and consumer goods contracted.

This time it’s different. Cruise and short-sea shipping are the first, highest profile casualties with industry leaders publicly stating in April that prolonged lay-ups were being considered following the suspension of cruise services.

The smaller, passenger ferry and ro-ro sector throughout northwest Europe and the Mediterranean is not immune either. There are widespread service reductions and staff retrenchments particularly in Scandinavian countries and northwest Europe. Companies unable to profitably operate their vessel services on a freight-only basis are exploring lay-up options as their vessels remain idle at ports.

The global containership fleet faces similar turbulence with container lines forecast to post billions in collective losses this year. Hundreds of scheduled services were cancelled over March and April, with more set for May. There are reports that some 10 percent of the fleet is already idle.

In Norway, where many of the North Sea’s offshore services, deep sea and rig companies are based, turnover declined by 25 percent by mid-April, according to the Norwegian Shipowners Association. Passenger ship sector turnover was 79 percent lower. Lay-up numbers were anticipated to triple by the year’s end, based on a member survey.

For now, most containership and passenger vessel owners are looking at hot or warm lay-up options, that allow a vessel to be quickly reactivated and returned to service within 24 hours to a week. These restrict ships to lay-up for periods from up to one month to a maximum of a year.

Cold or long-term lay-up applies to vessels spending up to five years out of service, which reduces daily running costs to a bare minimum. The duration of lay-up is a crucial decision and one that is particularly difficult to make in the midst of a pandemic. Yet, when the vessel can be expected to return to service dictates the scale of savings to be made.

Anecdotal reports suggest anchorages provided by specialist lay-up companies are already filling up or booked out. The warmer waters off Malaysia and Indonesia are popular anchorage areas, while in northwest Europe, some ports began have begun advertising availability to host smaller passenger ferry and roll-on roll-off ships, aside from traditional locations in Norway.

Most requests are reportedly for warm lay-ups, which allow for vessels to rapidly return to trading as and when lockdown restrictions ease, which will restart global economic engines and see passengers and consumer goods moving again. Larger passenger ships face stronger headwinds after widespread publicity about COVID-19 cases during 2020’s first quarter and are expected to remain out of service for longer periods.

Class societies alongside the flag state, port authorities and insurers are all involved in lay-up preparations.

For hot lay-ups that allow 24-hour reactivation, ports can grant a temporary permit for ships to moor provided that class and flag surveys are carried out, according to Lloyd’s Register Marine’s guide to ship lay-up. Ships remain within normal class and flag state requirements, and the inspection regime is unchanged, although crew numbers can be reduced if they stay within certified minimum limits. Ships can remain laid up typically for one month under these conditions. For hot lay-up with one-week reactivation which normally allows a 12-month maximum lay-up, crewing can be below numbers needed to trade if class and flag state agree. Some vessel operations may be restricted.

Warm lay-up means a ship’s designation is usually officially changed to ‘laid up’ by classification societies. The “Laid Up” notation means that owners have requested that class continue while the vessel is out of service. To keep this status, if the lay-up extends beyond on the ship’s annual survey, surveyors must attend to examine hull and machinery before it expires. If a Special Survey is due (a survey done every five years), an underwater examination also has to take place. There’s another option to have the vessel de-classed for inspections and maintain a “Laid Up Surveys Overdue’ notation.

If vessels are in warm lay-up for up to six months, the International Safety Management Code (ISM) and International Ship and Port Facilities Security Code (ISPS) certificates are suspended. These codes, included in international maritime conventions, set minimum standards for the safe management and operation of ships and port and security requirements.

Certification is withdrawn if lay-up extends longer than six months. A reactivation audit is required for ISM and ISPS if the vessel is reactivated within six months, and an interim survey required for any longer.

Risk assessment for planned manning levels, maintenance of general machinery, safety equipment, systems and alarms are among a long checklist of steps needed to protect the vessel during layup. Steps to protect against hull fouling and corrosion are also necessary.

Whether lay-ups are greater than 2009 when numbers surpassed 1,000, is uncertain; many owners don’t immediately confirm the status of their ships. But already there are indications that the COVID-19 presents greater challenges for seaborne trade, suggesting that lay-ups will become a feature dominating shipping over 2020.