Nickel ore exports resume from Indonesia—managing the liquefaction risk
Gard understands that at least one shipper has started to export nickel ore under a government permit which may signal a policy change to the export ban imposed by the Indonesian government in early 2014. This raises obvious concerns given the history of ship losses and tragic crew fatalities due to liquefaction of Indonesian nickel ore.
In Gard’s experience there is a history of Indonesian shippers issuing unreliable moisture content and TML (Transportable Moisture Limit) certificates. Old stockpiles left unmanaged during the export ban and the start of the rainy season in November compound concerns as to whether future cargoes can be carried safely in accordance with the IMSBC Code.
The Club therefore reminds Members who may consider engaging in this trade, of the following key risk management considerations and recommendations.
Mandatory notification to Gard
It is a mandatory requirement for Members to notify Gard, at the earliest opportunity, if they plan to fix or charter a ship to load nickel ore from ports in Indonesia and the Philippines. This enables Gard to provide Members with relevant information on measures that might be taken to reduce the risks. See this International Group circular for additional information.
Consider your charterparty provisions carefully
An important financial safeguard for owners is the contractual terms upon which they agree to accept a fixture/order to load nickel ore from Indonesia. The costs of appointing a surveyor can be relatively high given the remote location and speed of loading (often from barges), which may require a surveyor to be present for more than a week. In addition are costs of taking samples for testing, which Gard recommends in view of the risks (see further below). Time lost due to disputes over cargo safety and time taken to transport samples/obtain test results can involve substantial sums in hire/demurrage.
Gard has seen some charterparty clauses that are poorly drafted in terms of contract certainty. They can put owners in a weak negotiating position and, critically, could prejudice safety. We remind Members that the owner’s obligation to ensure the seaworthiness of the vessel in accordance with SOLAS is non-delegable and remains the owner’s responsibility independent of charterparty wording. Gard is aware of one case where an owner failed to recover from charterers because under the nickel ore clause owners were deemed to have accepted the cargo as safe based on can tests only. Gard therefore recommends that ship owners incorporate into charterparties the BIMCO Solid Bulk Cargoes that Can Liquefy Clause, under which costs and time lost fall on charterers.
Support your Master
The BIMCO clause specifies what IMSBC Code documentation the charterers shall provide, sets out owners’ rights to take samples of cargo for testing and the master’s rights to reject unsafe cargo, all before the commencement of loading. The Code itself makes clear that the shipper shall provide the master with appropriate information about the cargo sufficiently in advance of loading (section 4.2.1). The commercial reality however is that there will often be pressure to start loading, and if unsafe cargo is loaded, shippers/charterers are likely to be critical of the master’s decision. Gard cannot emphasize enough the importance of owners supporting the master’s overriding authority under SOLAS not to start loading if he has any concerns that the condition of the cargo might affect the safety of the ship. Obvious concerns arise if shippers simply refuse access to their stockpiles. Owners tempted to load without that access need to be aware that it can be very difficult to get cargo discharged back to shore particularly in remote locations. Customs and bills of lading complications may also arise. If charterers do not assist it can become a costly fix for the owners.
Avoid over-reliance on the can test
The IMSBC Code makes it clear that the can test is a complementary test for determining the possibility of liquefaction. The Code now includes this warning: “8.4.2. If samples remain dry following a can test, the moisture content of the material may still exceed the Transportable Moisture Limit (TML)”. In Gard’s experience some owners still place too much value on can tests and do not arrange their own laboratory tests, perhaps because of costs and delays and a desire to avoid upsetting charterers in a soft market. Gard understands that one expert’s studies on can tests on a Group A cargo revealed that failure, i.e., when free moisture appeared in the can, only became apparent when the moisture content in the can sample was increased to a level exceeding the TML. This as well as the history of unreliable shipper certificates are why Gard recommends that a surveyor is appointed to take samples for testing at an independent and competent laboratory. That is a more reliable way to check the safety of the cargo and for the reasons mentioned above it should be done before any cargo is loaded. Samples of the cargo taken after it has been loaded may not be representative of the cargo as a whole and IMSBC compliance can therefore be difficult to determine with certainty.
Check the cargo throughout the voyage
The IMSBC schedule for nickel ore and other Group A cargoes states that “The appearance of the surface of this cargo shall be checked regularly during voyage. If free water above the cargo or fluid state of the cargo is observed during voyage, the master shall take appropriate actions to prevent cargo shifting and potential capsize of the ship, and give consideration to seeking emergency entry into a place of refuge”. If a bulk cargo does start to behave like a liquid, a vessel may lose stability very quickly, with the crew helpless to do anything about it. Unlike liquefaction of granular materials, where increased pore water pressure is the trigger, liquefaction of clay-like materials such as nickel ore involves fatigue of the material. Stresses on the material from loading and due to ship motion and vibrations reduce the cohesion and strength of the material. Cargo failure still results in the cargo behaving like a liquid, but this may occur several weeks after loading. Even if the cargo appears solid and stable early in the voyage, the crew cannot assume all is well. They must continue to check it regularly and if the weather is poor, all the more reason to inspect the cargo (if safe to do so) because it will be under greater stress.
Remember the risk of prejudicing P&I and Hull and Machinery insurance covers
All of the International Group Clubs have similar Rules that in essence exclude cover for liabilities, costs and expenses arising from unsafe or unduly hazardous voyages. Similarly, the IMSBC Code may be considered as a safety regulation in relation to hull and machinery policies, whereby a breach of the Code may affect property as well as liability cover. Members have been informed that they are “at significantly greater risk of prejudicing cover if… the Member loads unsafe cargo from a country where there is a history of unreliable shippers’ certificates, doing so solely on the basis of ‘can tests’ and without independent sampling and analysis”. Simply put—the greater the risk the Member takes with their checks, the greater the risk they take with their insurance covers.
Source: GARD (http://www.gard.no/web/updates/content/23974865/nickel-ore-exports-resume-from-indonesiamanaging-the-liquefaction-risk?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BlcMsWoXCTqqLg%2BFB57K%2BPg%3D%3D)