Coldharbour Marine is in the business of “mitigating pain” for shipowners. That is because the Nottingham, UK-based company is in the business of making ballast water treatment systems. Coldharbour CEO Andrew Marshall has every sympathy with his customers. They pay for something on their ship that will never make them money, and can only ever make them spend money one way or another. “The best thing we can do is mitigate the pain. That’s what our system is all about: mitigating the pain”, Marshall said during a press event attended by IHS Markit.
In his view, the ballast water management issue has been badly handled. The legislation and implementation of it was poorly drafted, as was the testing, he said. “We’re all playing catch-up and paying the price for bad behaviour early on. If it had been thought through properly then it could have been so much different. But we are where we are.”
Coldharbour’s system uses inert gas to treat ballast water, and is eking out its own niche in a crowded sector. There are about 90 ballast water treatment companies operating at the moment. As of August, 73 have been certified under the IMO’s Ballast Water Management Convention, and 30-40 have registered for United States Coast Guard (USCG) type approval. But Marshall predicts that only 25 of those companies will actually achieve it before they run out of money.
As many as half of the existing ballast water treatment system manufacturers “will have bitten the dust” within five years, Marshall thinks. But whether or not this will be good news for Coldharbour depends on who survives, he added.
A recent notable casualty was Norwegian company Oceansaver, which collapsed in September after running out of money.
Marshall was in no doubt as to why the company did not survive. “It was probably a bloody good system, but it’s a filtration plus a chlorination unit. I can buy a comparative [Chinese BWTS manufacturer] Sunrui system for a third of the unit price. Where’s the product differentiation? How does Oceansaver compete? It doesn’t have [Finnish BWTS manufacturer] Wartsila’s service, and it hasn’t got Sunrui’s price. It might be a brilliant kit but it’s squeezed in the middle.”
Turning to Coldharbour’s fortunes, Marshall insists the company’s investors are committed. He admitted that there will not be a full return on investment for at least five years. Coldharbour has a long-term business plan and its investors are fully up to speed with it, Marshall said. “This is not a quick splash-and-dash. We’re selling systems now. Our business model is not to sell 500 systems a year. Our model was always predicated on 50 systems a year.” Although the company is not yet producing this number, it is doing well enough. “We’re on target. It’s not easy because nobody’s got any money.”
Successful ballast water treatment system manufacturers must either compete on price, or on engineering, or have a clearly differentiated product, Marshall insists. He thinks the industry can support half a dozen manufacturers using ultraviolet technology, half a dozen in electro-chlorination, and a few “freaks and weirdos”. Coldharbour Marine sits in the latter category, Marshall admits. “We don’t do it the same as everyone else.”
Impact of the two-year delay
In July, ballast water manufacturers had to come to terms with a decision to delay the implementation of the Ballast Water Treatment convention on existing tonnage until September 2019. Marshall was initially quick to dismiss the impact this is having and will have, at least for Coldharbour. “There were a few thousand vessels that would have had to have been retrofitted. If you were relying on that bit of the market to make your money, you probably shouldn’t have been in the market in the first place,” he said. “The tragedy is that some good systems will go and some bad systems will remain.”
Where Marshall thinks there might be an impact on the manufacturers from the two-year delay is on those who had been expecting to rely on retrofitting getting them into the newbuildings market.
Many of the larger vessels are, of course, built in Asia, and yards there often had agreements with domestic BWTS manufacturers, Marshall said, and those markets were increasingly hard to break into. Elaborating on the dilemma, Marshall recalled how Coldharbour recently lost out on such an order. A New York-based shipowner wanted to buy the company’s BWTS for an order at a South Korean shipyard, but was “actively blackmailed” into taking the yard’s preferred local manufacturer. When the owner said it wanted the Coldharbour system, the yard insisted on an additional charge. The yard said it had a local supply deal and the customer eventually replied, “OK, don’t fit anything. I’ll wait for my first special survey then I’ll fit my Coldharbour system.” The yard replied, “Certainly sir, that’ll be USD3 million extra,” Marshall recalled.
Marshall, who became CEO in 2010 after the company was spun off from offshore equipment maker Transvac, became aware early on that Coldharbour needed to be a niche player to survive in the market.
“We can’t compete with mass market ‘cheap as chips’ products turned out by the Chinese and Korean manufacturers. The idea is that we provide a better product, more tailored and optimised to perform under the specific operating requirements of the niche market. That market is large tankers, anything bigger than an Aframax, large bulkers, and large LNG/LPG type carriers,” Marshall explains.
Owners have got to do their homework, Marshall insists. “They have to recognise that the ‘it’s cheap, I’ll have it’ approach is not the path to BWT happiness.” He explained that the secret is to look at what the company’s operating parameters are. “Where are you operating? What are you loading? What kind of vessel are you operating? How long are your ballast legs? What space have I got on board for an effective installation?”
Marshall accuses some shipowners of wilful ignorance. “They want the system to be cheaper than it really is, and they are willing to believe that man from XYZ company in South Korea who says if you say a few magic words over [the ballast water treatment system], it will all work. They don’t want to believe evidence to the contrary,” the Coldharbour CEO said, citing the recent ABS report that claimed that only 14% of BWTSs actually did the job they were intended for.
“They just want to get a cheap solution, then hopefully blame somebody else when it doesn’t work and then sell the ship!” he said.
“Shipowners need to be aware of the ballast water treatment requirements, otherwise there’s going to be an awful lot of expensive mistakes made, and an awful lot of tears before bedtime for owners if we aren’t careful. At the end of the day, Marshall sums it up as follows: “You buy a ballast water treatment system because you have to treat the water to the discharge standard. You don’t buy it because it looks nice or the cabinet is painted a pretty colour. You buy it because it’s a legal requirement.”