Nickel ore from Indonesia is loaded in remote ports like Obi Island (in yellow), far from the prying eyes of regulators. The trade is profitable, but is coming at an enormous human cost.
On February 17th of this year, the Harita Bauxite sank off Cape Balinao in the South China Sea. Of the twenty-four men aboard, only nine survived. The sea can be a dangerous place, of course, and things happen out there, but the Harita Bauxite’s sinking is troubling beyond the tragic loss of fifteen men. That’s because the loss wasn’t a huge surprise. Indeed, many in the maritime industry all but knew it would happen.
You see, the 192-meter bulk carrier was bound for China from Indonesia with 47,450 metric tons of nickel ore in her holds. That particular maritime activity – shipping nickel ore from Indonesia to China – has quickly become one of the most dangerous jobs in the world and the deadliest activity in modern shipping.
On October 27th, 2010, the M/V Jian Fu Star sank while carrying nickel ore from Indonesia to China. (13 fatalities)
Fourteen days later, on November 10th, the M/V Nasco Diamond sank while carrying nickel ore from Indonesia to China. (21 fatalities)
Twenty-three days after that, on December 3rd, the M/V Hong Wei sank while carrying nickel ore from Indonesia to China. (10 fatalities)
The next year, things went well until Christmas Day, when the M/V Vinalines Queen went missing. All twenty-three of her crew were thought to have been lost until six days later when the M/V London Courage happened upon Dau Ngoc Hung, a 31-year-old survivor, in a life raft. The Vinalines Queen had sunk while carrying nickel ore from Indonesia to China. (22 fatalities)
In just under fourteen months, sixty-six mariners died in the Indonesia to China nickel ore trade. By January of 2012, that trade made up only .06% of bulk cargo shipments worldwide, but accounted for 80% of the fatalities in bulk shipping.
Put another way, if all bulk trade in the world was as hazardous as the nickel ore trade from Indonesia in those 14 months, there would have been over 100,000 fatalities during the same period. When the Harita Bauxite sank, those numbers worsened. There clearly was a problem and it wasn’t that nickel ore couldn’t be safely shipped, but that it wasn’t being safely shipped.
What is happening
In all four sinkings, from October 2010 to December of 2011, it was determined that the vessels had capsized due to liquefaction of their nickel ore cargo. Simply put, the cargo was too wet. When agitated by the motion of the ship, the otherwise sandy ore turned to a flowing mud that sloshed around in the beam-wide holds, causing the giant ships to list and then roll over.
Nickel ore, and other dry-bulk products prone to liquefaction, are moved safely around the world all the time. Shippers simply have to make sure the product is dry enough to ship. “Dry enough” is known as the TML – Transportable Moisture Limit. Making sure nickel ore is dry enough to ship is a simple matter of testing the moisture content prior to loading, and refusing the cargo if it is too wet. This hasn’t been happening consistently in Indonesia.
That reality caused maritime insurers and the IMO to take note and issue warnings about the hazard. After the Vinalines Queen tragedy, Intercargo – The International Association of Dry Cargo Shipowners – released its Guide for the Safe Loading of Nickel Ore – which warns shippers of the hazard, providing a sort of go/no go chart for the loading of nickel ore that aligned with the IMO’s latest guidance.
The IMO is working on updating the rules again for dry-bulk cargo that may liquefy, but they likely won’t be out until 2015. Even so, rules alone won’t solve the problem. Rules were being broken in late 2010 and new rules were broken and guidelines were ignored in February when the Harita Bauxite loaded her cargo. While regulations may provide more clarity and guidance for lawful bulk carriers, the only paper that can fix the problem in Indonesia is money.
Why it is happening
Nickel pig iron production in China took off in 2006 and so did the demand for nickel ore. The market for nickel ore from Indonesia and the Philippines went from almost zero in 2005 to nearly $5 billion in 2011 according to a report by the International Nickel Study Group. Given the sad state of the bulk cargo market and the sudden realization that their dirt was worth money, the region was thrilled with the new demand. Mining operations sprung up and shippers went to work filling the orders. Some of those mines were legal, and others were, well – less than legal. Either way, business was good and money began flowing into places in the world where there wasn’t much before.
Again, this didn’t automatically make the shipping of nickel ore dangerous, but it may have motivated shippers to bend (or break) rules to ensure that the ore kept moving, and orders got filled. For rules to be enforced (like those for moisture limits), someone has to be enforcing them. In Indonesia, an archipelago of over 17,500 islands, the law doesn’t come around too often to ports where much of the ore is loaded. Given the money involved and the remoteness of the loading, it isn’t hard to imagine that looking the other way and hoping had replaced testing and regulation where the ore was concerned.
These cargoes are stored primarily outdoors and just because the IMO code states that loading is prohibited in the rain (or soon after), that doesn’t actually stop anyone from doing it. There are rumors of false test results, forged documents, and just plain old financial pressure to get vessel captains to accept wet cargo. Well-meaning crews under pressure to make delivery may end up relying on less-than-scientific “drop testing” alone to determine how wet suspect cargo may be, a possibly deadly mistake. While they could insist on an independent lab test (as suggested by Intercargo), in all of Indonesia there is only one lab that sufficiently tests for nickel ore moisture levels. One. In a country of 17,500+ islands covering 1.4 million square miles of ocean, one may not be enough.
An unnamed senior maritime insurance analyst told Singapore’s SeaTrade Asia Week last year that, “We have also heard of surveyors being assaulted or arrested by the police and there seems to be little support from the authorities.” That makes sense. If the rules were properly applied, the shipping of nickel ore from many operations in Indonesia would simply shut down for months due to moisture levels during the rainy season.
How it might end
Keenly aware of its new export value (perhaps because of the attention to the maritime tragedies it caused), the Indonesian government promulgated Regulation Number 7 of 2012 on the 6th of February. The rule made it illegal to ship unrefined ore from Indonesia, instead requiring it to be refined and purified first. This had less to do with the danger of shipping the ore and more to do with raising the value of the export, all part of Indonesia’s plans for growth. But the rule was deferred until 2014 and the export of the precious dirt continues.
Some worry that the delay of the rule will make things much worse – in fact, the Harita Bauxite may have been the first casualty of that delay. Now working to beat the new deadline for the unrefined ore trade, shippers and miners alike are moving all they can before the party is shut down, and another rainy season is fast approaching. The new rules won’t begin until after the rain stops, so if we lose yet another bulk ship and more lives this coming year, none of us are allowed to act surprised.
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