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Empty cargo ships wait out the economy in Philippine ports

In places like Subic Bay, the horizon is filled with vessels awaiting goods to transport. It's a windfall for the ports but an unwelcome cost for the shipping firms.

March 25, 2009|Paul Watson

SUBIC BAY, PHILIPPINES — The slump in global trade has left a growing armada of empty cargo ships and tankers cruising the seas in search of the cheapest places to drop anchor while they ride out the economic storm.

About 1,000 of the world's shipping vessels are laid up for lack of freight, and the number could swell to several thousand in the next few years, Norwegian risk management foundation Det Norske Veritas reported this month. Popular Southeast Asian ports such as Singapore are turning ships away.

Eager to get more of the lucrative ship-parking business, the Philippines has opened four ports to laid-up vessels and is considering requests to add at least two more.

Shipping companies don't pay by the hour, but by the deadweight ton, a measure of a vessel's carrying capacity. Here in Subic Bay, a former U.S. naval base north of Manila, it costs just over 17 cents a ton to park a ship for a day. Most stay at least a month, and the ticking meter adds up to big bills, not even counting the cost of food and salaries for the crews minding the idle vessels.

Across the broad bay, the horizon is filled with empty tankers, container vessels and car carriers that tower several stories high. More than half the 20 ships anchored in Subic weigh 151,000 deadweight tons.

At least three more empty ships are steaming toward the bay after unloading cargo in other Southeast Asian ports, carrying nothing but hope for better fortune.

"I'm not an economist, but at the rate things are going now, I think it will take time for everybody to recover," said Ferdinand Hernandez, Subic's deputy administrator for operations. "We're happy in the sense that we make extra money. But we want the whole world to rebound, because that will also give lots of opportunities to us."

The boat parking business is so good that it has more than offset losses Subic Bay would have suffered from the drop in freight handling fees and other income. The port's total revenue is up 127% this year, Hernandez said.

Shipping industry experts here say the global trade slowdown is the worst since the 1973 oil crisis, when Philippine dictator Ferdinand Marcos decreed that several of the country's ports had to shelter suddenly useless tankers and other ships.

"Some vessels were tied up here for more than 10 years with no crew," shipping agent Rodolfo Estampador said. "They were bulk carriers, cement carriers -- all types of vessels. Nobody can tell what will happen this time."

On top of economic uncertainties, Philippine authorities have a lot more environmental, labor and other regulations to worry about than did Marcos, who could make things happen with the stroke of a pen.

Subic Bay requires captains to keep a full crew aboard ships, Hernandez said. Such "hot layups" ensure that hands are available to deal with typhoons or other disasters that could cause environmental damage in an area that wants to lure more tourists to its beaches and bars.

Shipping companies normally prefer to lay off most of the crew until business improves. Paying a captain and an average crew of 17 to live on an empty vessel costs more than $30,000 a month, Estampador said.

Three other ports in the southern Philippines have allowed 25 ships to anchor with only skeleton crews, but insurance companies demand higher premiums because the region is fraught with Islamic militants and pirates.

Like many agents in the region, Estampador is getting calls from shipping companies desperate to find an affordable place to park their vessels. He is lobbying the government to open Refugio Pass, along the east coast of Negros Island in the central Philippines, to 30 or more cold layups.

Shipping companies also try slow-steaming, or stretching out the travel time of loaded vessels so freight backs up in warehouses and their ships have a better chance of taking on new cargo.

Another option is to send older vessels to yards to be taken apart for scrap. The Philippines is a small player in what is at times a dirty business -- rife with environmental and labor hazards -- dominated by India, China, Pakistan and Bangladesh.

The Philippines prefers to help keep vessels afloat because it supplies almost 20% of the more than 1.2 million seafarers on merchant ships worldwide, government figures show. Their wages are vital to the Philippine economy.

Protecting some of those Filipino workers is one of the reasons Subic Bay insists that laid-up vessels maintain full crews, Hernandez said. But the jobs saved may be drops in the ocean if Japanese shipping companies go ahead with planned layoffs. The firms have notified Philippine authorities that as many as 40,000 Filipino seamen may be sent home, Labor Secretary Marianito Roque told reporters last week.

But the numbers aren't as dire as they sound, said Nelson Ramirez, head of the United Filipino Seafarers union, which has 35,000 members.

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