THE FINANCIAL & OPERATIONAL ASPECTS OF THE DECISION TO BUILD COAL-FIRED BAUXITE CARRIERS, MANNING, TRAINING AND CONSTRUCTION
ASPECTS. Paul Keen BY RICHARD McDONALD)
TNT Bulkships Limited, Australia Introduction IT IS a pleasure to be invited to address this Third Coal-Fired Ships Conference'. Having attended the two previous Conferences, it is gratifying to see the change in emphasis from the largely theoretical thrust of the early discussions on the viability of reintroducing coal-fired ships to the shipping scene, to today's papers concentrating as they do on the practical aspects of the construction and operation of such vessels. It is, of course, more gratifying to be one of those able to speak with the benefit of this practical experience. Both I and my colleagues from Italcantieri look forward later in the week to demonstrating some of these experiences to you in Trieste. As Delegates will be aware, the new generation coal-fired ship, the Australian National Line's "River Boyne", is in service and at the last count there were an additional nine coal-fired ships, either under construction or in the process of being converted, of the new buildings, two are the "TNT Carpentaria" and "TNT Capricornia", nearing completion for this Company at Italcantieri's Monfalcone Shipyard in Trieste, one is the "River Embley" the remaining AN L ship in Japan, another is the self-unloading coal-fired ship under construction in the USA for the New England Power Company, the ships being converted include two so called 'cut and paste' conversions of steam turbine VLCCs which are being converted into dual oil or coal-fired bulk carriers. Equally interesting are the three ex LPG carriers which are also being converted into dual fired ships. There is often a tendency for shipowners, shipbuilders and shippers to examine a problem and devise what each would consider the optimum solution. In these circumstances each of the interested parties can promote a different solution to the same problem. In the case of the coalfired ship, it can be demonstrated (making assumptions on the relative cost of fuel, newbuilding price and operating cost differentials, etc.) that there is a point at which the coal-fired ship becomes economically viable - or more correctly - there is an optimum range in terms of voyage distance and cost differential in which coal-fired vessels have economic advantages over motor ships. This optimum range achieves, depending on the point of view, the required freight rate or the maximum fuel efficiency or the lowest cents per tonne mile. In fact, the practical solution for any given problem will not only consider these criteria but must take into account too, a whole range of physical and strategic factors. Even so, the fluid nature of both the freight and fuel markets render future projections obsolete almost as soon as they are printed. It is certainly anything .but a perfect world in which we have to make decisions with long term impact on our commercial viability.
Day One - Paper No.4
I have entitled my paper "The Financial and Operational Aspects of the Decision to Build Coal-Fired Bauxite Carriers" and I shall therefore, be speaking about a real transport problem and the practical solution that enabled it to be solved, we believe, to the benefit of all parties concerned. As a case study, to demonstrate the general viability of coal-fired ships, ours is far from Nevertheless, I shall attempt to draw some general conclusions from our experiences.
Background In 1979, TNT Bulkships was invited by Queensland Alumina Limited (QAL) to evaluate the options available in respect of shipping services for-their bauxite refinery in Gladstone, Queensland. Due to the projected expansion in demand for alumina both internationally and within Australia, the refinery output was to be increased. It was envisaged by QAL that output of alumina following the stage 3 expansion of the Gladstone Refinery would be about 2.75 million tonnes per annum, requiring shipment in excess of 7 million tonnes per annum of bauxite to the refinery from the mine at Weipa. QAL's existing shipping services comprised one long term contract with Port Curtis Bulk Carriers, a Queensland-based shipping company (which has subsequently been acquired by TNT Bulkships) for the carriage of 3.5 million tonnes per annum of bauxite. This was being undertaken by two vessels, the "Curtis Oceanic", a 56 000 tonne dwt vessel and the "Curtis Capricorn" of 85 000 tonnes dwt, both of which were steam turbine ships. The Australian National Line also had a contract to carry two million tonnes per annum using the 56 000 tonnes steam turbine bulk carrier "Yarra River" and in addition, AN L was contracted to lift any excess cargo for which the 58 000 dwt motor vessel 'Taiga" was used on an occasional basis. TNT Bulkships set themselves (a) the task to consider:-
what would be the largest size of vessel that could be accommodated within the trade, taking into account the various port and route constraints, and hence what maximum yearly tonnage was obtainable? what speed range would be required by the vessel to enable it to cope with the tidal constraints alone the route to ensure consistent and evenly spaced services? what propulsion system should be adopted.ibearinq in mind the use of the existing steam turbine propelled vessels? would Queensland Alumina be better suited by newly constructed replacing their existing services? dedicated vessels
In November 1979 a report was submitted to QAL which presented the case for the adoption of a number of newly constructed purpose-designed coal-fired steam turbine vessels of 75 000 dwt, which would be used to replace their existing services.
In order to present this report to QAL, a detailed analysis was made of the optimum types and size of ships that could be used in the trade. This optimum solution was costed and the resulting freight rate compared with the existing costs to QAL of its bauxite shipping services. Despite the drawback of having to construct new vessels in a fairly buoyant shipbuilding market the increase in capital charges over those applicable to the 7 -8 year old ships already in the trade, were found to be offset by the reduction and stabilisation of fuel costs resulting from the use of coal.
Before turning to the financial analysis that demonstrated these savings, I would like to discuss the technical analysis that in the first instance defined the vessel size and principal characteristics which then enabled accurate cost estimates to be made of the comparative prices involved between 75 000 dwt motor ships and the equivalent coal-fired steam ship. The Queensland Alumina bauxite trade involves shipping bauxite from the port of Weipa, situated inside the Gulf of Carpentaria, around the Northern tip of Australia, through the Torres Strait and then down inside the Barrier Reef to the Central Queensland port of Gladstone. This trade is characterised by constraints and limitations on all major dimensions: length overall, beam, draught, depth and air draught It is worth mention ing here that the shipowner and designer can only fully respond to a client's requirements and provide a vessel which maximises the uplift of cargo to the fullest extent within such constraints where both the shipowner and the client are able to enter into fai rly long-term dedicated charters. In the port of Weipa the limitations are on the vessel's beam and length overall, both of which are basically dictated by the ability of the ship to turn from the inner harbour into the narrower channel on departing the port, as this involves cutting across the current at almost full power. In addition, the maximum draft to which a vessel can load is fixed by tidal variation. The vessel on departing Weipa proceeds North towards Cape York, where it must traverse the Gannet Passage, the only deep draught passage through Torres Strait. The current draught restricti on places a Iimit of 12.2 metres on vessels at a mean high tide of 2.7 metres. In practice this means that 12.2 metre draught vessels are able to obtain passage at least one a day. However, passage through the channel can be likened to a gate which is open for a short period, either once or twice a day through which a fully-laden vessel must pass or else wait for 12 hours for another opportunity. Thus the decision on when to sai I from Weipa and at what draught, depends upon the projected time of arrival at the Gannet Passage. Once clear of the Passage, the vessel proceeds down the coast of Queensland inside the Great Barrier Reef. At Gladstone there is again a restriction of the draught requiring full utilisation of the tide and a limit of the air draught to ensure the vessel's hatch covers do not foul the grabs of the unloading system. In order to fully optimise the cargo deadweight of the vessel, TNT Bulkships devised and conducted a series of computer simulations. The first study was to identify the ideal traffic pattern for the four vessels which would be required to carry the maximum projected trade. This took into consideration the port departures and arrivals, the traverse of the Gannet Passage at high tide without undue delays and the loading and unloading rates at the ports. With the capability of the computer, it was possible to arrive at an optimum vessel speed based on consideration of tidal data at each location over a two-year period. The second computer and thus its deadweight within was taken of the inter-relating on fuel consumption and thus change in block coefficient study considered the overall nett effect of the vessel's block coefficient the limiting vessel dimensional envelope. In doing so, full account effects of hull weight, required propulsion machinery output, effect bunker capacity, ship's speed and vessel cost for each incremental
One result of this exercise was to demonstrate that increasing the block coefficient resulted in a nett total cost reduction even though the accepted hydrodynamic limits for maximum block coefficient were being exceeded. It was from the knowledge gained from these studies and the limits imposed on the physical dimensions of the vessel that the final design of the vessels evolved.
The results of these studies were further refined and supported by the subsequent ship model testing at the Netherlands ship model basin, where the practicality of the high block coefficient was confirmed and where the designs for the bow and stern lines and for the large rudder were finalised with the view of enhancing the vessel's manoeuvrability and optimizing fuel efficiency. It is worth pointing out at thisstape that in ou r opinion, some of the innovations made in terms of the increased block coefficient and the hull lines, particularly at bow and stern, could be considered more revolutionary than the reversion to coal firing, which has stolen all the limelight. I should like to make the point again that shipowners are always willing to spend that little extra time and money to maximise the efficiency of their vessels where shippers who recognise the benefits are prepared to offer security of employment. It is our belief that despite the large fluctuations in the freight markets, and in many cases because of them, there are substantial benefits to shippers in adopting long term policies towards their shipping requirements. I am not advocating that they should abandon altogether the potential benefits available from taking advantage of depressed spot markets, but nevertheless the cost stabilisation achievable through the use of specifically designed vessels optimised for particular trades has significant benefits.
Financial analysis of the decision to opt for coal firing The subject of economic viability of coal firing has been substantially explored in previous Conferences, both from the shipowner's and shipbuilder's point of view. Making what is a personal and perhaps a controversial comment on these points of view, I would say that the shipowner's viewpoint, quite correctly, is how to reduce operating costs and thus maximise return from achievable market freight rates. The shipbuilder conversely, calculates the overall savings achievable to the potential user of the ship through the particular innovation in ship design under consideration and estimates the share in such saving due to him through an increase in the building price. The missing point of view, and of course the most important of all, is that of the shipper, whose only consideration is what it will do to his freight rate or his landed cost. What this means in the context of this paper is that benefits can be demonstrated given certain assumptions and particular circumstances for the viability of coal-fired ships in ocean trades in general. But it is only in particular trades where we will see them first used. This is not so much as a test of their viability, but because it will only be possible in these particular trades to demonstrate to the shipper the benefits to him of the long term practicality of operating such services and the long term and consistent benefits from coal-firing. As a further comment, I have seen some general analyses that clearly show that the Weipa/Gladstone bauxite trade is too short and uses the wrong size of ship to be a real candidate for the adoption of coal-fired ships. in fact, what these analyses are saying is that all things being equal, which of course they are not, there is a range of trades in terms of size of ship, speed and length of voyage in which coal-fired steam ships operate most efficiently. This is not to say, of course, that there are other theoretically less efficient trades, which should not in fact be prime candidates. For the use of coal-fired ships, the Weipa to Gladstone bauxite trade is just such a case in point. The decision to construct the coal-fired ships was taken in 1980, based largely on the results of our 1979 and 1980 analysis of the problem together with the current shipbuilding and operating costs. I shall present this as an example of a real problem and a real solution. As a point of further interest I shall recast the analysis in the light of today's fuel costs and shipbuilding prices to see if the decisions taken then would still be taken today, given the current state of the world economy, energy source demand and prices and future uncertainty.
Our original cost analysis was on a total cost basis looking in great detail at each component of the stockpile to stockpile cost of the transport problem. Some of the information remains confidential particularly in terms of long term coal purchase contracts. To be able to present the results of these studies to you, we ask the question:Determine the operating cost differential of a coal-fired ship compared to state ofthe art motor vessel and determine the capital cost differential we can afford to pay .
. On October 1979 we determined the net operating cost benefit of the coal-fired ship was $1.6 million in the first year. Using my Hewlett Packard financial calculator and an average 12.5 per cent interest rate over 20 years (the term of the vessels' charters) we could afford to pay an additional $11.7 million in capital cost. Let me assure you the premium paid for the vessel was not of that order. Whilst it was impossible to get concensus on future oil and coal real cost increases there was general concensus that the cost oil/coal differential would widen and further benefit the coal-fired proposal. Add to this the strategic consideration of local long term contracted the uncertainty of imported oil supply the argument was compelling. Turning now to a revised economic analysis made on today's coal supplied vis-a-vis
costs and projections. briefly these are:-
Since our first study was made, a number 1.
of factors have altered,
The projected prices of liquid fuel which in 1979/1980 seemed likely to escalate rapidly has for many reasons stabilised and even decreased. Still there would be only few who would argue about the uncertainty of future trends. Major marine diesel engine manufacturers are making exciting thermal efficiency and reducing fuel consumption. progress in improving
The coal consumption and oil consumption figures for the coal-fired vessel have improved as a result of refinement during the construction of the ships and hands-on experience. In fact this has eliminated the need to burn oil during normal operation. (A cost penalty to coal-fired ships in our earlier study). Shipbuilding costs generally have declined dramatically as a result of the world economic climate and the cost of the learning curve in coal-fired ships has been paid, thus reducing the cost differential. An assumed crew penalty of 3 extra has proved unfounded. have operated with one less engineer. A modern diesel vessel may
Using the same analysis as previously, the operating cost differential (October 1982 costs) in favour of the coal-fired vessels in the Gladstone/Weipa bauxite trade is reduced to $1.3 million. My Hewlett Packard says today I can afford an extra $9.5 million in capital. I am convinced that such a proposition to the market in 1980. is relatively easier to obtain than when we went
Since, as I mentioned earlier in the paper, it is ultimately the end user of a service who decides whether a proposal is worthwhile, the end user must be able to clearly identify present and future benefits. In this case the charterers of the vessel have access to what is virtually a
tied source of fuel supply which is both proximate (a)
and of stable price;
this means that.-
they enjoy stable prices and security of supply, both of which are likely to continue well into the future, and they are not faced with the currency risks and volatile transport associated with importing large volumes of oil to Australia. costs
In summary, therefore, I would suggest that the arguments in favour of the adoption coal-fired ships for the Weipa to Gladstone bauxite trade are still extremely convincing.
aspects and their impact on vessel operation
I should like to turn now to a discussion of some of the construction aspects of the vessel and their implications with regard to vessel operation, which will include mention of the manning and training of the crews. I have no wish to steal the thunder of my colleagues from Italcantieri and so will in general confine my remarks in this section to discussing the background to the design of particular aspects of the vessel as they were required to meet particular constraints of the trade or operational requirements.
Hull and propeller
The hull form was of prime importance in view of the need to maximise deadweight capacity within a dimensional envelope. In addition, the relatively shallow water depths experienced at sections along the route, together with the need to manoeuvre in confined spaces, meant that careful consideration was paid to the bow and stern lines and the rudder and propeller design. Extensive testing was carried out by Italcantieri at the Netherlands ship model basin, which included squat, wake surveys and manoeuvring tests, on the basis of which the hull lines were finalised.
Hull structure The hu II structure was determined by the operational requirements of the trade and special attention had to be given to maximise the size of hatch openings and reduce the number of holds and hatches. In addition, the hopper ends and sides were arranged so as to minimise the overhang of the deck and hatch coamings inside the flat of the tank top to place all cargo within reach of the discharge grabs. It will be appreciated by a study of the midships section that these vessels are not "standard" bulk carriers. The innovations in hold design were aimed specifically at improving grab cycle efficiency within the limits of the existing unloading facilities and thus minimise in-port time. With these features established, special attention was paid to provide the best structural arrangement. Once the design had been finalised, the whole hull was subject to a finite element analysis which has further allowed optimisation of steel structure and the results were submitted to Lloyd's Register for their study and approval.
Boiler design The coal burning plant, really the heart of the installation, comprises one single boiler. The choice of one boiler was made based upon a number of criteria including an effective reduction in floor area required of at least 25 per cent compared to two boilers, a reduction in complexity associated with operating two boilers complete with all the connections and services etc. and, of course, a significant cost saving. By comparison with an oil-fired boiler of the same output, the coal-fired boiler requires 60 per cent larger volume to achieve the longer residence times needed for complete gas and coal combustion. This feature can be more easily achieved with one boiler which allows better design balance between volume and grate area required for heat release. Recognising the importance of this project, a proven marine boiler adapted to coal firing, using established land based coal firing techniques, was selected. In addition, a deliberate decision was made to discourage boiler makers from offering highly rated boilers and, in this case, a temperature of 491 0 C and pressure of 6 MPA have been adopted to provide a steam capacity including superheat steam capacity of 62500 kg/hr and a boiler efficiency of 82.7 per cent. The coal fi ri ng of the boi ler is by Detroit Stoker, consisting travelling grate arranged across the face of the boiler. of 6 spreaders and a 5-section
Coal forwarding In the earliest stages of the project we contemplated various mechanical methods, among them belts, drag chains, screws, oscillating plates, all of which were established and proven on land-based installations. However, none could compare with the cleanliness, efficiency and adaptability of a piped pneumatic system to fit within the constraints imposed by the design of a sea-going vessel. Thus we were led to select a dense phase system which transfers small discreet slugs of coal propelled by charges of compressed air. Full scale tests were carried out of the proposed system wh ich have confi rmed its efficiency with a wide variety of coal conditions. Having identified the best method of coal transfer, the next very important step was to design a coal bunker storage configuration which would ensure reliable feed of coal by gravity to the forwarding system, minimise the likelihood of hang-ups, would ensure a clean inner surface with no dead spots and provide an even first-in /first-out feed. The bunker layout was established by our own technical staff but it was a requirement of our specification that the shipbuilders should confirm the design using the Jenicke theories of mass flow. Dr Arnold of the University of Woollongong was commissioned to perform this work, which included both laboratory and theoretical calculations.
Em ission levels Because of the proposed operation of the new vessels, they will for most of their life be subject to the environmental protection legislation of the State of Queensland, especially in view of the Commonwealth Coastal Waters (State Powers Act, 1980). Based on these constitutional powers, there is a fundamental requirement to comply with the Queensland Clean Air Act, 1963 and Clean Air Regulations, 1973. Although not required to be licensed in the same way that an industrial premises ashore is licensed as proof of its compliance with limits on emission levels, a ship is nevertheless subject to the requirements of published regulations. The vessel will, therefore, comply with the stipulated solids emission level and smoke levels as stated in the regulations at all times when in harbour or state territorial waters.
Ash disposal The ash generated by the boiler at normal service speed and in port is about 25 tonnes and 4 tonnes per day, respectively. At maximum output of the boiler the ash would amount to about 35 tonnes per day. Since the ash is inert with negligible chemical impurities or radioactivity, we are satisfied that there is no reason why the ash cannot be dumped overboard without harming the environment. However, the Great Barrier Reef through which the vessels will sail is afforded statutory protection by the MAR POL 1973 Convention from the discharge of all shipboard generate.d waste. In recognition of this, storage has been provided aboard each vessel equivalent to approximately 14 days at sea or 1.7 rou nd voyages. During normal operation of the vessels, it is intended that the stored ash will be discharged overboard whenever the vessel is in unrestricted waters, which essentially occurs from a point just south of Booby Island, south of Cape York to the Port of Weipa. Ash is collected (a) (b) (c) from three locations:fly ash from multi-cyclone; bottom ash from the travelling grate; the grate.
siftings which pass through
This will be all stored together
in two 300 cubic metres hoppers.
It had originally been intended that the fly ash would have been collected separately and marketed to the cement industry. However, the ready availability of large quantities of fly ash in Australia generally indicated that there did not exist a commercial market for the ship's ash sufficient to warrant the added cost and complexity with a separate system. The actual method of disposal at sea is by wetting the dry ash in a mixing chamber, the bottom of the chamber being open to the sea normally located below the waterline. To cover all contingencies, however, provision has also been made to discharge the ash ashore in the form of a slurry.
Control system It was decided early in the vessel design that (a) the coal handling, forwarding 'as if it were oil basis', and system and firing system must operate on an
an unmanned machinery space classification must be obtained if manning levels were to be consistent with those on modern motor vessels.
Our investigations of coal-fired power plants ashore revealed the large advances made in total control systems for all generating activities including power management and it was realised that such applications were ideally suited to the shipborne environment. A Honeywell total distributed control system was adopted to provide a remote centralised monitoring of all engine room functions and also an active control and power management system. Both functions are fully controllable from a single triple redundant display and control console in the engine control room.
This is to the best of our knowledge the first such application and power management system to an ocean-going vessel.
of a total distributed
Manning and training At an early stage in the construction of the vessel the Australian maritime unions were invited to comment upon the design of the vessels, particularly in relation to the accommodation layouts and operating characteristics. Suggestions from the unions regarding improvements in living conditions and operating efficiency were, where practicable, incorporated into the design of the vessels. Thus we are confident' that the vessels wi II be both comfortable to Iive in and provide a pleasant and efficient working environment In order that crew members should become familiar with the operations of the vessel, key personnel have been involved from the beginning of the project in design and approval work and are now present in the shipyard during the final stages of construction to assist with the commissioning of the vessel and the coal handling and firing systems. The Australian crew will sail the vessels from Italy to Australia, a voyage of some 3 weeks, and will be accompanied on the voyage by two shipyard engineers, who will be able to lend any further assistance required in the training of personnel. In addition, the Honeywell total distributed control system allows the simulation of all encounterable situations resulting in thorough training and practice in normal and abnormal operational practices. An operational mann ing of 31 is proposed for the operation of the vessel.
Conclusion I think that my remarks have served to demonstrate that the coal-fired ship is now a reality and that for certain trades can provide a practical and financially beneficial alternative to the conventional motor sh ip. However, the real lesson to be learned from this is not just that coal-fired ships are here again to stay, but that there are still opportunities in this shipping world of ours for shipowners to come up with better technical and financial answers to the needs of shippers. It is incumbent on any shipowner to constantly think ahead of the best ways to serve the needs of his clients. It is not sufficient just to react to market trends, ordering large numbers of standard vessels when the freight market looks healthy in the hope of cashing in on a boom or on a depressed shipbuilding market. Cargoes do not appear just to fill ships! It is, of course, the need to move a cargo that necessitates the existence of the ship but it is also the provision of cost-effective and reliable ships that promotes the movement of more cargoes and more importantly, attracts them to the bottoms of certain owners. Thus it is the ship owner who continually seeks to improve his services that in the long run will survive. At TNT Bulkships, we are proud to have pioneered this return to coal firing. However, this was not meant to be an end in itself, but rather just one of the facets of a solution that we saw would better solve the problems of one of our clients. It is, therefore, in the solution of particular problems in this way that I believe that coal fired ships will play their part. Be they long or short haul trades, for coalor any other commodity, it will only be where a particular combination of circumstances serve to demonstrate to the shipper that coal firing is the optimum solution. Shipowners wishing to participate in this area should be constantly anticipating the needs of shippers with a view to practically demonstrating the effectiveness of the services they offer.
I am sure that we shall see further coal-fired ships of this generation, but the conclusion of what I have just said must be that coal firing is not the definitive answer for the future of the shipping industry, any more than sail was in its day, or oil is today. In fact, all three and other means such as nuclear technology will probably playa part in the future, each in particular areas of application. What is certain is that ships will continue to develop and shipowners continue to look at better ways of shipping and in the long term, the needs of shippers will always be better served.