Structural Failure of Large Bulk Ships

BTE Publication Summary
Structural Failure of Large Bulk Ships

Report
Although it is widely known that the risk of failure is high in old ships, old bulk
ships continue to be used. One reason is that until mid 1992 it was financially
viable to maintain an old ship in service rather than dispose of it for demolition.
Even though after mid 1992 it did not pay to keep an old ship in service, it was
even less attractive to purchase a new ship. The BTCE's statistical analysis of
voyage data identified ship age, flag state, commodity carried and voyage route
as important factors influencing the risk of failure. Using this information, the
BTCE has developed a technique for predicting the risk of failure of individual
ships.
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STRUCTURAL FAILURE
OF LARGE BULK SHIPS
B U R E A U OF T R A N S P O R T
AND
COMMUNICATIONS
ECONOMICS
I R E P O R T 8 5
Australian Government Publishing

Service,Canberra
0Commonwealth of Australia1994
I SSN 1034-41 52
ISBN 0 644 33027 9
This work
is copyright. Apart any
from use as permitted under
Copyright
the
Act
7968,no part may be reproduced by any process without prior written
permission from the Australian
Government Publishing Service. Requests and
to the Manager,
inquiries concerning reproduction rights should be addressed
Commonwealth Information Services, Australian
Government Publishing
Service,GPO Box 84,Canberra,A C T 2601.
Produced by The Australian Government Publishing
Service
FOREWORD
The question of what to do about substandard
bulk ships has
become much
more prominentin recent years,The number of bulk ships suffering major
Too lives have
structural failures imore
s than is reasonably acceptable. many
been lost.
SSWgd SkUdi@% have been made in search of the reasons for ship The
losses.
fT!p9f r@.Qent of Australian investigations was that of the House of
Repwoentatives Standing Committee on Transport, Communications and
lRfPl%trUGture:,This broad ranging study considered the commercial and
r@gulatery environment in which bulk ships operate.I t made an important
contribution to understanding the main issues.
Other investigations have
failure.
focused on the technicalof ship
aspects
of
The Department of Transport and Cemmunications requested the Bureau
Transport and Cornmun.jc_a_ticm
Economics (BTCE)to undertake a statistical
analysis to $,S!& if there wet% any factors unique
to Australian bulk trades that
th@ cisk ef structural failure
ofships carrying
our exports. This study
might
in an attempt
to uncover
by th,e B E E also takes a deeper look at the evidence
fuffh@r insights into the issues.
a.@j
Th@ -Study team was lead by Neil Gentle assistedby Stephen Wheatstone and
JQ6gphink 8alrrri,Dr Trevor Breusch of the Department of Statistics at the
Australian National University
provided
valuable toadvice
the team on statistical
methods.
Leo Dobes
Research Manager
iii
CONTENTS
Page
iii
FOREWORD
ABSTRACT
xi
SUMMARY
xiii
CHAPTER 1
INTRODUCTION
Method
The data
CHAPTER 2
FACTORS
CONTRIBUTING
FAILURE
Vessel condition
Commodity
Weather conditions
Operating conditions
Conclusion
CHAPTER 3
CHAPTER 4
RELATIVE
IMPORTANCE
OF THE
FACTORS
Results
Qualifications regarding method
the
Policy experiment
1
2
3
TO
STRUCTURAL
5
5
11
14
16
16
DIFFERENT
17
18
21
22
ECONOMICS
OF
DEMOLITION
AND PURCHASE
OF N E W SHIPS
Demolition of old ships
Purchase of new ships
25
25
31
CHAPTER 5
CONCLUSIONS
37
APPENDIX I
DATA ON
FAILED SHIPS
STRUCTURALLY
41
V
Page
APPENDIX II
ASPECTS
OF
STRUCTURAL
APPENDIX 111
RELATIONSHIPS BETWEEN VARIABLES

AFFECTING SHIP FAILURE
61
CHARACTERISTICS O F SHIPS DEPARTING FROM

AUSTRALIAN
PORTSBULK
65
APPENDIX IV
FAILURE
45
APPENDIX
ANALYSIS
V
LOGIT
71
REFERENCES
75
ABBREVIATIONS
79
vi
FIGURES
Page
7
2.1
Age and failure rate
2.2
Flag and
2.3
Flag and failure rate
2.4
Classification society
and
2.5
and failure rate
10
2.6
Commodity
and
failure rate
11
2.7
Commodity
and
12
2.8
Commodity
and
size
2.9
Size and failure rate
13
2.10
Weather
14
2.11
Route
3.1
Load line zones around
3.2
Estimates of failure probability
20
3.3
Confidence limits for effect

of flag
21
3.4
Proportion of ships that bewould

included
in inspection,
according to inspection threshold level
22
120 000 dwt

Voyage chatter rates
and demolition price afor
bulk carrier
28
age
age
10
age
13
and
failure rate
and
failure rate
15
the
Cape of Good
Hope
19
l
l
4.1
4.2
Break-even
to North
second
chatter ratea 120

for0oO dwt bulk carrier, Brazil
Europe, a function
as
of the number of voyages,
1990
quarter
29
vi i
Page
4.3
4.4
4.5
4.6
Number of voyages Brazil to North

Europe required for
a
120 000 dwt bulk carrier to break
with a even
discount rate
of 10 per cent
30
Secondhand prices and

bulk carrier
31
time
charter
rates
a 120for
000 dwt
Net present value of retaining120an

old
000 dwt
purchasing a new 120 000 dwt ship
ship
Internal rate of return of retaining

an old 120 000 dwt
and purchasing a new 120 000 dwt ship
and
33
ship
34
11.1
46
Flow chart of the factors contributing to ship failure
11.2
Hogging
11.3
Shear
11.4
Side
11.5
Structural
11.6
Typical
11.7
World bulk ship failures,

1989 to 1992
55
IV.1
Australian routes
and
66
IV.2
Australian routes
and ship size
67
IV.3
Australian routes and flag
69
v.1
Typical logistic curve
72
viii
and
47
sagging
47
stress
shell
forces
exerted
dense by and
non-dense
of a typical bulk carrier

cross-section
fatigue
curves
ship
age
cargo 49
50
52
TABLES
Page
3.1
Relative importance
bulk ships
used
for
different in structural
factors
failure
Of
of
18
4.1
Data
demolition
4.2
Operating
4.3
Data for analysisof new ship
purchase
1.1
Bulk ships experiencing

December 1991
structural
26
analysis
costs a for
panamax dry bulk carrier
1.2
Flag
11.1
x2 analysis
27
32
1989 toOctober
failure,
42
44
abbreviations
of iron ore
Hope,by port
of departure
voyages
rounding
Cape of Good
the
57
proxies
in theusedanalysis
59
11.2
Causes of failure
111.1
Ship age
61
111.2
Flag
62
111.3
63
111.4
Commodity carried
63
111.5
Size of ship
64
111.6
Voyage
111.7
Route
IV.1
Australian
routes
and age
ship
IV.2
Australian
routes
and
IV.3
Australian routes and flag
weather
and
possible
64
conditions
64
ship
66
size
68
70
ix
ABSTRACT
Between October 1989 and December 1991 50 dry bulk ships worldwide
(including nine departing from Australia) suffered structural failure.
Currently,it is financiallymore attractive to operate old ships ready for scrapping
than to invest in new ships. Although higher freight would
rates be required to
warrant investment
in new ships, increased freight rates would also Improve the
attractiveness of maintaining old inships
service. Clearly, freight rate increases
on their
own Cannot alter the balance
In favour of improved ship safety.
One option to reduce the risk of structural failure
is to improve inspectionsby
port state surveyors. Australia
and other countries now
are more vigilant in their
inspection programs. Evidence suggests these countries are being
more
successful at detecting
unsound ships, However, port state surveyors have only
limited time ts assess a ship, and
a thorough structural inspection is not normally
pcsslble.
The BTCEsstatistical analysisof voyage
data identified shipage, flag state,
commodity carried and voyage
route as important factors influencing the
of risk
failure. Using this information, theB T C E has developed a technique for
predicting the risk of failure ofindividllal ships.
If the BTCEs technique had been applied over

study period,
the 93 per centOf
ships that failed wouldhave beenidentified in an inspection of one in three
ships. (This is the same proportion of ships as currently inspected by the
Australian Mahtime Safety Authority).
Insurance companies could use similar techniques to assistthem to set
Premiums that more accurately reflect the ofrisk
failure.
Insurance Companies have
a fjfldneisrl stake
in reducing the risk of They
failure.
are already adjusting premiums to reflect the risk associated with different
classes of ships.BTCE analysis suggeststhat premiums set on the basis of
age, commodity carried, voyage route, current flag state,and history of
ownership, fiag state and classtflmtlon society
could in reducing
be instrumental
the number of bulk ships that suffer from structural
damage. Potentially risky
ships would thenattract high premiums, making continued Operation
On risky
voyages commercially unattractive.
xi
SUMMARY
Between October 1989 and December 1991 nine dry bulk ships suffered
structural failure after departing from Australian ports. During
same period
the
50 dry bulk ships (including the nine departing from Australia) failed throughout
the world.Many of these ships sank the
andevidence of thecause of failure
was lost with them.
is in old ships, old
bulk
Although it is widely known that the risk of failurehigh
ships continueto be used.One reason is that until mid 1992 i t was financially
viable to maintain an old ship
in service rather than dispose
of i t for demolition.
to keep an
old shipin service, i t was
Even though
after mid 1992 it did not pay
even less attractive to purchase
a new ship.
Some commentators have proposed

that higher freight rates would improve the
a necessary
financial attractiveness ofnew ships, but, although this is indeed
condition before a large-scale renewal of thebulk fleet can be expected,
increased freight rates would also improve the attractiveness of maintaining old
ships in service.
Clearly, freight rate increases
on their own cannot reduce the
number of bulk
ship failures.
be towould
improve port state
One option to reduce the risk of structural failure
control inspections. Improvements are being implemented in Australia and
elsewhere. There
is some evidence that this is having
an effect in the detection
of unsound ships. However,port state surveyors have only limited timeto
assess a ship,and a thorough structural inspection is not normally possible.
The BTCE has used
statistical techniques
to analyse voyage data
to identify the
most important factors associated
with the risk of failure ofbulk
dryships. The
technique used (logit analysis) allows the relative importance
of the possible
factors to be estimated.
Ship age, flag state,commodity carried and voyageroute were all found to be
important factorsin structural failure of bulk ships. Shipsmost
arelikely to fail
where there is a combination of these factors.
The route taken
was found to be
an especially important factor.
xiii
BTCE Report 85
The flag state of thewasship
found not
to have as great an influence onof risk
#g&#@
frequently suggested. Nevertheless,
a ship registeredwith a flag state
with a high @g@@
rate was found to have the
same risk of failure
as a ship five
yean older regi6itgred with @flagstate with a low casualty rate.
Ofparticular lnter@!s{ ig wk@tR@f{h@@ g@ MnjqFe factors associated

with ships
departing from Australian bulk p@fls that could increase the riskof failure.
Statistical analysisshowed that, @/h@u~hthere were gignificant differencesin
age, @Iz@ and f!?g stale of ships between the varicws route5 anglyggd, the
dlfferanowsdid net in&@$
gmy particular factor likelyto increase the riskof
fallure,When allsw@n@g was made
for commodity carried and voyage
route,na
dgnlflcant difference was found in the risk of failure between individual
Australlan ports ofdeparture.
Can the results help identify the ships at risk?
The Australian Maritime Safety Authority currently inspects
34 per about
cent of
all ships visiting Australian ports.
On the basis of
a method developedby the
BTCE, inspection of that proportion ofbulk ships in the sample of voyages
@n@/ys@g/ woy!g have identified for inspection 93 per cent of ships that
gu$g@$&qqlly
fail@. Even greater certainty couldbe achieved by inspecting
more ships:
A recent change in ownership, flag or classification society is often considered
to be a good indicator of poor ship condition.These factors could not be
included in the BTCE analysis. However, the BTCE method used
in conjunction
with knowledge of recent change of ownership, flag or classification society
could identify
an even
larger proportion of ships at risk of failure.
Similar techniques could assist insurance
'companiesto set premiums that more
~ ~ u r a t e lreflect
y
the risk of failure.
I F ) M ~ ~ R E ~ g~mpgnieshave a financial
stake
in reducing the risk of failure.
They
t&jn$ 8 mu& pore active rolein adjusting premiums to reflect the

risk on@ss~a@d with diffe~e~t
Glasses of ships.
The BTCE analysis suggests that
pr@miume @g?! the basis of age, commoditycarried, route, current'flag state
and history of nwngr&ip, flag state and classification society could be
instrumental in reducing thenumber of bulk ships that suffer

from structural
damage. Potentially risky ships would attractpremiums,
high
making continued
operation on risky
voyages commercially unattractive.
xiv
CHAPTER 1 INTRODUCTION
Six dry bulk ships carrying iron were
ore lost at sea between October
1989 and
December 1991 after loading at Western Australian ports
(Daily Commercial
News 1992;Lloyds Register of Shipping 1992a).
A further three ships suffered
severe structural
damage but were able to reach a port. Over the
same period,
another 41 dry bulk ships throughout the world suffered structural failure.
Although some were able to reach a port for repairs,
many sank.
Classification societies,*such as Lloyds (Lloyds Register
of Shipping 1992a),
Nippon Kaiji Kyokai (NKK 1992) and the American Bureau
of Shipping (ABS
1992),carried out technical investigations
in response to losses of bulk ships,
to
establish the physical
causes of failure.
Australias House of Representatives Standing Committee on Transport,
Communications andInfrastructure (HORSCOTCI) examination of ship safety
took a much broader approach, including the commercial
and regulatory
environment of the industry (HORSCOTCI 1992a, p. X). HORSCOTCI
considered that the underlying cause of the
in the
decline
safety of bulk ships
was the p o o r state of thebulk ship market. Accordingto HORSCOTCI, low
freight rates
have meant
that old ships cannot be replaced profitably,
in resulting
the ageing
of the bulk ship fleet.
Maintenance effort is reduced as owners seek
to reduce costs, eventually contributing
to a loss of structural integrity.
For example,
Feamleys (1992a) reported that the age
average
of drybulk ships
was 11.7years in January 1992,compared with 11.4 years in July 1991. Over
the same period, the average
age of combination ships increased from14.1 to
14.3 years. The ageing of both of these fleetshas aroused concern, as the
old (bloyds
majority of ships have
that been lost since 1989 were over 15 years
Register of Shipping 1992a).
1. Throughout this report
a ship is defined to have suffered
a structural failure
if the damage
is ofa severity that prevents the ship from completing
a voyage. That the
is,ship is either
lost atsea or it must interrupt voyage
its to undergo repairs.
2. Classification societies were originally developed to carry outofsurveys
ships hulls on
behalf of insurance underwriters. Their has
role
since expanded and now
theycarry out
these responsibilities on behalf of owners and as agents for some flag states
(HORSCOTCI1992a,pp. 17-1 8).
3. Combination bulk ships are able
to cany either dry or liquidbulk commodities.
BTCE Repot? 85
H O R S C O T C I also found that there was a general failure in regulatory
arrangements: unsafe ships were being classified as structurally
sound and
allowed to continue operating.
The standards were adequate; the problem
in
enforcing compliance
with the standards.
lay
Insurance companies were alsoas slow

seento react to increased bulk carrier
losses (HORSCOTCI 1992a, p. xvii). The insurance industry hasin the past
relied solely on inspections by the classification societies
to ensure that the
ships they insured were safe.
However, HORSCOTCI found that insurance
companies are now taking a more active interestin the previous record of ships
and their owners before agreeing
to extend insurance.
HORSCOTCI concluded that international

economic conditions and regulatory
been major factors
in the loss of bulk ships in recent years.
failure had
Although HORSCOTClsfindings are relevant

to bulk shipping
as a whole, there
still remains the possibility that other may
factors
have contributed to structural
failure of ships departing from Western Australia.
Of particular interest are the
following questions:
Why have ships carrying iron ore from Western Australia experienced
more
losses than ships carrying
other Australian States?
Are the risksto iron ore ships
trade route?
Are the risks
to iron ore ships
departing from other major
other commodities, and

suchgrain,
as coal
from
departing from Australia
dependent on the
departing from Australia greater than for thos

exporting countries?
METHOD
The B T C E adopted a statistical approach to help isolate factors that may
contribute to the risk of structural infailure
bulk ships.
Reports of engineering studies of structural failure
were usedto identify major
likely physicalcauses. The major problemin analysing structural failure is that
ships frequently sink after suffering structural
so evidence
failure,of the physical
causes of failures is limited.
Where data were not available for variables that
might be considered importantto structural integrity (for example, quality of
maintenance) proxy variables were used.
An especially difficult statistical problem involved the number
small of failures
compared with the overallnumber of voyages undertaken by
bulk ships. For
example, from mid
1989 to mid 1992,out of approximately
47 000 voyages by
large bulk ships 30(over
000 deadweight tonnes) throughout the
50 ships
world,
one ship was lost for every 940
were lost through structural failure; that is,
voyages. Because of the small number of failures, conventional statistical
failure,
techniques can identify the factors that influence ofthe
riskbut cannot
2
Chapter l
estimate the relative strengths of the factors or the interactions between t

Logit analysis
was used to overcome these problems.
it useful to consider structural failures
in the wider context
The BTCE also found
of commercial pressures on bulk ship operators, particularly the continued
operation of sub-standard ships.
THE DATA
The BTCE purchased Lloyds voyage data for

bulk ships departing from
bulk exporting countries of Brazil, India, South
Australia and from the major
Africa and the United States of America, for voyages overMaythe period from
1990 to May 1992. These data allowed
a detailed examination of route and ship
to the ship at the time of the voyage.
characteristics relevant
full period
for which casualty data
Voyage data were not purchased
for the
of,
obtained, or for allbulk ship movements. However, the voyage sample
approximately 29 000 voyages was considered a reasonable compromise
60 per
of the
between costs and effectiveness of the analysis,
and cent
included
I).
known failures examined (see appendix
were
Changes to name,owner, flag

or classification society are frequently suggested
but information was not available on
as strong indicatorsa sub-standard
of
ship,
these variables.To this extent the analysis does not capturefullthe
set of
variables that help determine the risk of failure.
CHAPTER 2 FACTORS
FAILURE
CONTRIBUTING
TO STRUCTURAL
Understanding the interaction between factors contributing

to ship failure is
clearly important in the development of an understanding of the failure
mechanisms. For purposes of analysis, the likely factors influencing risk of
failure can
be classified into four broad categories: vessel condition, commodity,
weather conditions, and operating conditions.
These factors are examined
below. Further details of aspects of structural failurein appendix
are provided
II.
VESSEL CONDITION
In nearly all structural failures bulk

of ships, the failure
was preceded by water
being takenin one or more holds. Loss of side shell plating frequently features
in ship failures (Lloyds Register
Shipping
of 1992a;NKK 1992).
However,the events that are the immediate precursor to failure
have generally
a long gestation period. Lloyds (Lloyds Register of Shipping 1992a) and the
American Bureau
of Shipping (ABS 1992),among others, point
to corrosion and
metal fatigue as major causal factors leading toin the
deterioration
integrity aof
ships structure.
Corrosion
All ships corrode. Preventive systems are therefore normally included

in the
design and construction of ships
to limit the onset and progression of corrosion.
Common methods are the application of protective coatingsand the use of
cathodic protection systems.
I t is also common design practiceto use thicker
plates to allow forsome wastage of metal through corrosion over the
of the
life
vessel.
If protective coatings and other anti-corrosion systems are not maintained,

to
corrosion is likely to weaken structures to the pointwhere they are unable
withstand the stresseswere
they designed
for.
Some cargoes, such as coal,
may accelerate the deterioration of protective
coatings and thus promote corrosion(ABS 1992;Lloyds Register of
Shipping
BTCE Report 85
1992a; N K K 1992). Coal cargoes canbecome hot enough for sulphur
acid.acid condensingon the
compounds and moisture in the coal to form The
inner surfaces of the hold attacks the structuralcomponents of the ship.
Unchecked, the resultant corrosion can leadto serious wastageof metal in
critical structuralcomponents of the ship.
Metal
fatigue
Ships are designed

so that stressesin the ship structures are below the metal
fatigue endurance limit (that is, the level of stress at which the
will faistructure
l
-see appendix II for further
after it has endureda history of cyclic stresses
detail).l Because of this, fatigue failure is not normally a part of design
considerations.
However, corrosion resultingin reduction of metal thickness at points of high
stress loadswill lead to an increasein stress within the structure.I t may not
require much loss of metal to increase stressesa to
level whichexceeds the
endurance limit. Roughening of the surface of the metal, through corrosion or
physical damage,also reduces the endurance
limit.
Unloading procedures bulk
for ships often require the
of heavy
use grabs, which
can be as heavy 35
as tonnes when empty (Lloyds Registerof Shipping
1992a). The grabs, and bulldozers and pneumatic equipment
used
to remove
adhering and inaccessible cargo, can easilydamage the structure. If the
damage is not repaired, it can act as points of stress concentration, thus
creating conditions favourable
to the initiation of fatigue cracks.
Age
With poor maintenance, theinitial damage from corrosion and fatigue can
spread until the structure is seriously
weakened. The effects of corrosionand
fatigue in combination with poor maintenance
may build up over several years
before the risk of becomes
failure unacceptably high. Older may
ships
thus be
at
newer ships.
higher riskof failure than
Figure 2.1 illustrates the influence of
age on the risk of failure bulk
of ships.
Expectedfailure rateswere estimated under the assumption age
thathas no
influence on the riskof failure, and that risk of failure is proportional to the
by the number of voyages.
exposure to riskas measured
The figure indicates that ships older than
14 years experienced many more
failures than expected and those less
10 years
thanold failed less often than
expected. Ships
in the 10-to 14-yearage group failed about as asoften
would
1. Cyclic stresses applied
to steel can eventually result in the failure of the metal. For mild
steel, if the cyclic stress is less
a specific
than
value (the endurance
limit) no failurewill
occur.Above this limit,failure usually occurs 1after
to 10 million stress cycles.
Chapter 2
failures
Expected
failures
Actual
Note Expected failures are calculated by
is proportional tonumber
the of voyages.
Source BTCE estimates based on Lloyds
Services data.
Figure 2.1 Agerate
and failure
assuming
that
risk
Maritime
Information
of
failure
BTCE
be expected on the basis of voyage numbers.The

in appendix analysis
table
111.1
shows that this aisstatistically significant result; that
age isis,
in fact associated
with failures.
years oldwas not
Surprisingly, thenumber of actual failures of ships 24over
111.1).
significantly higher than the expected
number of failures (appendix table
The expected number
of failureswas less thanone, and
in fact there were no
to the relatively small
number of shipsin
actual failures. This may
result
be due
this age~groupin the data sample Ifused.
ships in this age group do have an
elevated risk of failure the
number
actual
of failures would still be relatively small.
with age being a factor.The
The fact that there are none is not inconsistent
relatively small size of these may
older
alsoships
be
a factor.
24 years old also have
a fundamental differencein their structural
Ships over
with newer ships.
In the early
1970s the classification societies
design compared
changed the method
of determining the thickness of the steel components used
to construct the ships structure. toPrior
this period sizes were determined by
rules based on experience.
These rules generally incorporated sizeable safety
factors to reflect the lack of knowledge of the behaviour ofWhen
ship structures.
sophisticated computer analysisbecame available in the early 1970s,
shipbuilders could estimate stresses
in ship structures more accurately.The
improved accuracy of stress calculations reduced the need for allowances for
to more
unknowns, so structural redundancy could be reduced, leading
economical designs
with reduced plate thicknesses. However, the thinner plates
to wastage through corrosion.
have less tolerance
7
BTCE Report 85
Flag state
Flag state2has attracted considerable attention
as apossible indicator of the
risk of ship failure
(DCN 1992). Owners are considered likelyto register their
ships with flag states whose standards are compatiblewith the owners
approach to maintenance. If this is so, then it can be expected that ships
registered with states with poor maintenance standards would be
likely to
exhibit greater than average failure rates.
To test this hypothesis, were

flags ranked according
to casualty experience of all
ships in their fleets. Flags
were then classified into four categories
(A to D), so
that each category contained approximately one-quarter
of the world
bulk fleet
in terms of gross registered tonnage.
The category containing flagswith the
largest loss rate was category D while categoryA contained the flags
with the
smallest loss rate. The categories were determined using
loss ratios foreach
flag state calculated
by the U K Institute ofLondon Underwriters (Commissionof
European Communities
1993)for the period
1987 to 1991,as follows.The loss
ratio is calculated
as the ratio of the total gross tonnage ofa year
the losses fo
divided by total registered grosstonnage of the fleet, expressed as a
percentage. Note thatlossthe
ratio reflects the losses of all ships, not just bul
carriers, in the fleet of each flag state. The world averageloss ratio for the
period was reported as 0.29per cent.
The four groups were:
D >0.44per cent
C >0.23and 10.44per cent
B >0.12and 10.23per cent
A 10.12per cent
Figure 2.2 shows the proportion bulk
of ship voyages
in the BTCE database in
each age group in each flag category.
There appears
to be a clear tendency for
older ships
(15to 24 years) to be registered with flag statesin the D category.
Similarly older ships tend
to be not
registered with flag states
in the A category.
to be a contrary tendency for ships

24 years
over old.
A possible
There appears
explanation is that ships older 24
than
years and
still in service are those most
likely to have beenwell maintained throughout their lives. Poorly maintained
ships registered with D flags are likelyto have been scrapped before they
reached 24 years old,
so that the remaining ships 24
over
years will be more
likely to be those registered
with the other flag categories. Unfortunately, the
data to test this explanation
were not available.
If flag is an indicator of risk of failure bulk

of ships, then the proportion of bulk
ship failures should
be less for Athecategory than forD category.
the
This
is in
fact observed for the actual failures
shown in figure 2.3.The D category had
2. The country in which
a ship is registered
and which undertakes the responsibility for the
(HQRSCOTCI 1992~1,
implementation of international conventions relating to that ship
p. 13).
Chapter 2
100h
.3-
80-
0
L
P)
n
60-
0)
m
>.
0
>
40-
.0
-
g
Q
20-
0-
19-24
15-19
10-14
5-9
>24
Age (Years)
Note See text for definition of flag category.

Source BTCE estimates based on Lloyds Maritime
Services data.
Figure 2.2 Flag and age
Information
BTCE
Flag
Expected failures
category
Actual failures
Notes 1. Expected failures are calculated

by assuming that risk of
failure is proportional to number
the
of voyages.
2. See text for definiti
ofonflag category.
Source BTCE estimates based on Lloyd's Maritime Information
Services data.
BTCE
Figure 2.3 Flag and failure rate
BTCE Report 85
loo
Classification
society category
0-4
5-9
20-24
10-14
-19
15
Age (years)
>24
Note See text for definition of classification society category.

Services data.
Figure 2.4 Classification
society
and age
BTCE
Classification
society category
Expected
failures
Actual

by assuming that risk of
to the number of voyages.
failure is proportional
2. See text for definition of classification society category.
Source BTCE estimates based
on Lloyd's Maritime Information
Services data.
BTCE
Figure 2.5 Classification society
and failure rate
10
Chapter 2
more bulk ship failures thanbe would
expected
if flag had no influence on
of risk
failure. However, this association of flagwith risk of failure is not statistically
significant for the four-way classification
shown in figure 2.3 (see appendix table
111.2).When the A, B and C categories are combined ainto
single category, the
but this effect of flag couldbealso
effect of flag
becomes marginally significant,
related to the influence age,
of
discussed
as
above.
Classification
society
Classification societieshave also been criticised for not adequately inspecting

by them (Stephens
1992).
ships classified
Classification societieswere categorised into four categories
A to D using the
bulk ships aremore likely to be
same procedure as
for flag.As with flag, older
inspected by D category societies compared with A category societies (see
figure 2.4).However, figure 2.5 indicates that,in contrast to the flag analysis,
there is little associationbetween classification societyand risk of failure bulk
of
ships. This
is confirmed by the statistical analysis
in appendix table
111.3.
COMMODITY
Of the 50 bulk ship failures worldwideduring the period October 1989 to

December 1991,33 were carrying iron ore. Figure
2.6 shows that ships carrying
iron ore fail
much more frequently than would be expected
i f commodity had no
Other
0Phosphate
Bauxite &
alurnina
Coal grain
m Iron
ore
Expected
failures
failures
Actual
Note Expected failures are calculated by assumingof failure
that risk
is proportional to the number of voyages.
Source BTCE estimates based on Feamleys (1992a, 1992b).
Figure 2.6 Commodity and
rate
failure
BTCE
11
BTCE Report 85
influence.The analysis in appendix table111.4shows that thecommodity carried
is statistically significant
in explaining ship failures.
Iron ore
has a stowage factor of0.3 to 0.8cubic metres per tonne, and iron
pellets 0.5 cubic metres per tonne
(ACA 1992).This is a muchhigher density
than other majorbulk commodities and can havea marked effect on the
stresses imposed ona ship's structure. Appendix figure11.5 illustrates how
stresses in the ship's structure are influenced
by the commodity carried.
to be older and larger
Figures 2.7 and 2.8 show that iron ore ships are likely
than bulk ships carrying coal, grain or other commodities.
The higher failure rate
of ships carrying iron ore could therefore also
to theirbeage.related
Commodity and size

Figure 2.9 indicates that bulk ships over80 000 dwt failed more often than
would have been expected
if size had no effect on failure
whereas
rates,ships
less than
50 000 dwt exhibited fewer failures than expected.
to be carriedin larger ships,

i t is not clear which is the
Because iron ore tends
more important causal factor, size or type ofcommodity carried. However,
consideration of the mechanisms of failure, as discussed in appendix II,
suggests that commodity
is undoubtedly important.
100,
Commodity
I""""1 Coal&grain
0Other
E Iron
10-14
15-19
20-24
5-9
0-4
ore
>24
Age (years)
Source BTCE estimates

Services
based
Figure 2.7 Commodity and age
12
on
Lloyd's
Maritime
Information
data.
BTCE
ore
Commodity
m Coal&
grain
0Other
m Iron
ore
>
40
.0
-
n
80-100
50-80
30-50
100-150
>l50
Size ('OOOdwt)
Source BTCE estimates based on

Services data.
Lloyd's
Maritime
Information
Figure 2.8 Commodity and size
BTCE
Expected
failures
failures
Actual
Note Expected failures are calculated by assuming

risk of that
failure
is proportional to number
the of voyages.
Source BTCE estimates based Lloyds
on Maritime Information
Services data.
Figure 2.9 Size and failure rate
BTCE
13
BTCE Report 85
WEATHER CONDITIONS
Structural failure occurs mostly during bad weather conditions.Of six ship
failures discussed in the Department of Transport and Communications
submission to the HORSCOTCI inquiry into ship safety, five experienced
heavy
seas and
gale-force winds
at the time of (DTC
failure1992).
Large waves pounding an already

weakened structure can initiate a failure that
might nothave occurred under calmer conditions. Although information on the
weather conditionsat the time of the failures is generally available,ondata
weather conditions experienced during successful voyages are not available.
For this reason, likely weather conditions
in zones transited by ships in the
as a proxy for actual weather conditions.
Bad weather
database were used
zones weredefined as those whereat least 1 in 1000 waves exceeds 14
metres in height during season
the in which the voyage
was undertaken.
Figure 2.10 indicates that
bulk ships traversing
zones likely tohave bad weather
if weather conditions were
conditions fail more often than could be expected
irrelevant.
Weather
zone category
0Bad
Good
0-
Expected
failures
Actual
Note Expected failures are calculated

by assuming that risk of failure
is proportional
Source BTCE estimates based on Lloyds Maritime Information
Services data.
Figure 2.10 Weather and failure rate
14
BTCE
Chapter 2
Route
Voyages are more easily classified according to route rather than of
the areas
the sea through which they pass.
Because of this i t is easier to test for an
association between particular routes and risk of failure than between bad
weather zones risk
and of failure.
The routes in figure 2.11 are those on more
whichthan one ship failed during the
analysis period.
The category 'other routes'
combines all the routes
on which no
ships failed or onlyone ship failed. Figure2.11 supports the hypothesis that
structural failuresmay occur more often onsome routes than can
be attributed
to chance alone.
Most of these routeswhere morethan one ship failed are principally iron ore
routes (South Africa
to Asia and the 'other' category are the exceptions). This
suggests that the combination of the carriage and
of iron
areas
of ore
rough sea
can result in dangerously high stresses
in ship structures.
A further analysisof Australian routescompared with other routesis given in
appendix IV.
100-
Route
0WA-Nth
h
+-a
80
WA-Japan
c
P)
P)
v)
60-
e!
India-Mediterran
Sth Af rica-Asia
Brazil-Europe
Europe
0Brazil-Asia
.=l
'
c
Other
40-
.0
-
r
0
20-
n"
Expected
failures
failures
Actual

by assuming that riskof
failure is proportional
2. 'Other' routes are wiroutes
th zero or
one failure.
on Lloyd's
Services data.
Figure 2.11 Route and failure rate
Maritime
Information
BTCE
15
BTCE Report 85
OPERATING CONDITIONS
H o w a ship is operated duringvoyage
the can have an important influence
its
crew
failure risk. The HORSCOTCI (1992b) inquiry into ship safety identified
training as animportant factorin ship losses.The Australian Coal Association
(ACA)in its submission to HORSCOTCI commented that insufficient training
in
seamanship and
ship operationmay result in vessels being held on course
at
dangerously highspeeds in heavy seas. Investigations
of several recent losses
of bulk carriers would suggest that failure to speed
reduceor to divert around
bad weather
may have been the principle cause of these
(ACA 1992).
disasters
on
Although informationis usually available about

crew qualifications for ships that
fail, similar information is not available for ships that successfully complete
voyages. Nor are data available on the
withspeed
which ships pass through
rough seas. For this it was
reason
not possible examine
to
the influence crew
of
qualifications on the risk of ships failing.
Another important aspect of ship operations
is that of loading
and unloading. For
the loading of iron ore, the important parameters arenumber
the of passes
made during the loading procedure and whetheris loaded
the ship
in alternate
holds orhomogeneously (some cargo in each hold). Alternate hold loading is
often preferredbecause it allows faster loading and raises the ships centre of
gravity, which moderates
its roll motions (Lloyds Register Shipping
of
1992a).
Appendix II has further details on loading
methods.
Statistical analysis of portof loading (appendixII) showed no significant link
between specific ports and the probability of
a ship failing, after allowing for
route and commodity.
If poor loading practices a problem,
are
they appear
to be
a universal problem.An analysis of loading
speed for iron ore ships failed
to
detect any significant link to ship failure. Data for actual averagespeed of
loading or number of passes were not available for all the ships in the
databa~e.~
CONCLUSION
The analysis so far suggests that age, commodity, size, flag, weather and
can all contributeto the risk of failure.
However, the analysis is complicated
by
apparent interactions between the factors. Factors such as age,
size,route,
commodity and
flag may be important individually in or
particular combinations.
For example,iron ore tendsto be carried in older ships and on routes that
appear to present higher than average risk of failure.
3. Some informationwas available for the Western Australian iron ore ports for the last
quarter of 1991.During that period approximately
50 per cent bulk
of ships were loaded
in alternate holds
and
of passes was 2.8.
16
the
remainder
were
loaded
homogeneously.
The average
number
ro
CHAPTER 3 RELATIVE IMPORTANCE OF THE DIFFERENT

FACTORS
The analysis in chapter 2 and appendixIll suggests that the major factors
influencing the risk of failure age,
are commodity, route, sizeand flag state.
These results are generally wellknown, but little analysis appears to have
of the different factors
in contributing to the
been done on the relative strength
risk of structural failure in bulk ships. Nor have the interactions between
different factors
been fully investigated.
This chapterseeks to assess the importance
of the different factors
and their
interactions in the failure bulk
of ships.
Because of the small number of failures, conventional statistical analysis
to assess the interaction between these different factors, nor
cannot be used
can it be usedto measure their relative strengths. Logit analysis provides an
appropriate method that allows the relative strength of the various factors to
be measured and, in principle, the interactionbetween variables to be
explored. The technique can be to
used
estimate the probability of failure.
A
brief discussionon logit techniques is presented in appendix V.
Using logit analysis, the effects
of the different variables on risk of failure can
be obtained by examining results for different combinations of variables.
Variables thatadd little to the resultscan be progressively dropped
until the
most useful combination
for the particular application remains.
The results
obtained.confirm the
Table 3.1 illustrates the most useful of the results
significant role played
by route,age and commodity in failure risk.
The flag state is
but has less of an effect on failure
commodity
risk orthanroute.
also significant,
All of the variables listed
in table 3.1, except age,
for are dummy variables.
That is, theycan take
a value of1 if they areto be included in the estimation
of failure probability 0ori f they areto be excluded.
If all dummy variables are
set to 0,the logit equationwill estimate the probability of failure of
a ship
registered in a flag statewith a good casualty record1 carrying coal or grain on
a route other than those listed 3.1.
in table
1. See chapter 2 for a discussion on the categorisation of flag Instates.
the kgit equation
dummy variible to1 is equivalent toa flag state
represented by table 3.1,setting the flag
2.
in category D as defined in chapter
17
BTCE Report 85
TABLE 3.1 RELATIVE IMPORTANCE
FAILURE O F BULK SHIPS
DIFFERENT
OF
FACTORS IN STRUCTURAL
~~
ameter
Variable
~~
Standard
Intercept
Iron ore
Other commoditiesa
Age
South Africa -Asia
Brazil -Asia
0.54
Western AustraliaNorth Europe
Flag
error
-1 1.82
1.94
1.31
0.88
0.61
0.72
0.19
2.54
2.27
3.46
0.92
0.04
0.66
0.54
0.4
Note Log likelihood ratio for intercept and covariites

353.7;x2 value
is for covariites1 1 7.8.
is
a.
Commodities other than iron

by setting the
failing is estimated
ore,
iron
coaland
The probability
grain. of coal or grain voyages
ore and other commodities variables to
Source BTCE estimates based on Lloyds Maritime Information Services data.
RESULTS
Iron ore isshown by the logit analysis to be less important as a factor
influencing structural failure of bulk ships than the
in chapter
analysis
2 might
suggest. This
is because the routes included
in the results are predominantly
to some
iron ore routes. This
means that the effect of iron ore is represented
extent by the route variables.
Although when ship sizewas examined on
its own in chapter 2 and appendix
Ill i t appeared to have some significant associationwith risk of failure,when
was
examined in combination with other variablesin the logit analysis size
found to be unimportant. Iron ore shipsto be
tendlarger than ships carrying
in chapter 2 and appendix
Ill
other bulk commodities.The size effect detected
may thus be related
to the commodity or the route.
South Africa to Asia, Brazilto Asia,

The analysis reveals that three routes
and WesternAustralia to North Europe
make large contributionsto the
but they added
probability of failure ofbulk ships. Other routes were tested
These three routes all involve
a transit of the
Cape of Good
little to the results.
Hope. Of the 30 failures includedin the database,
16 occurred on these three
the of Good
routes. Of these 16 failures, 13 were either in the vicinity of Cape
Ocean (appendix figure
11.7).
Hope or in the Southern Indian
International Maritime Organisation
(IMO)regulations limit the maximum load
that the ship
can carry (thesummer load line); the winter load and
lineother
load lines effectively reduce the load the shipis permitted to carry in
recognition of additional weather hazards likely
to be encountered. Figure
3.1
illustrates the load line regions by
defined
the IMO in the vicinity of Cape
the
I
18
zero
Chapter 3
BTCE
SOUTHERN WINTER SEASONAL Z O N E
Source Hydrographer of the
Navy
(1987).
Figure 3.1 Load line zones around
the
Cape of Good
Hope
of Good Hope. The current regulations allow vessels rounding Cape

the of
Good Hope to load to the summer load line irrespective of the season.
However, with the elevated risk of failurebulk
forships transiting the
Cape of
Good Hopeidentified by this analysis, the region boundaries
shown in figure
3.1 may not be appropriate for large bulk vessels.The IMO is presently
conducting a review of these regulations.*
2. lnfernafional Convenfion on Load Lines 7966 (IMO) currentty under reviewby IMO
subcommittee on Stability,
Load Lines and Fishing Vessels
19
BTCE Report 85
Figure 3.2illustrates the probability of failure for ships undertaking three t

of voyages. The group with the highest failure probability are those ships
registered with a flag state3with a poor casualty record, carrying iron ore from
with a
Western Australia to northern
Europe.Voyages of bulk ships registered
flag statewith a good casualty record carrying coal or grain over routes that
do not transit Cape
the of Good Hope
face the lowest risk of failure.
The two curves
for iron ore
voyages in figure 3.2 differ onlyin flag category.
One way of interpreting figure
3.2 is that the probability of failure
an iron
of ore
is equivalent to an
ship registeredwith a flag statewith a poor casualty record
with a flag statewith a
identical voyage of a ship five years older registered
good casualty record. That is, ships registered
with a 'good' flag state are not
as likely to fail as early in their livesas others.
in the estimates. This be

can measured
An important issueis the likely error
by the confidence limits for the estimated probabilities. Figure
shows the
3.3
90 per cent confidence limits for
two iron
the orevoyage curves
in figure 3.1
.4
The marginal separation of twothe confidence intervals for ships 10
older than
years indicates that the logit equation is better at predicting failure rates for
BTCE
'1
e!
-mflag) 0.01.?
0.1
c
c
m
$
(good
ore
Iron
0.0001 0.001
a
0.000010.000001
1
1
15
Age (years)
10
20
,
24
Note Iron ore voyages are on the Western

to northern
Australia
Europe route.
The 'coal or grain' voyages do not transit
southem Indian Ocean.
Source BTCE estimates based on Lloyd's Mariiime Information
Services data.
Figure 3.2 Estimatesof failure
probability
3. The flag stateswith the bad casualty record are inthose

the D category in chapter 2.
Those with a good casualty record arein A,those
B and C categories.
4. The method used
to calculate the confidence limits
shown
isin appendix V.
20
the
Chapter 3
BTCE
'1
Western Australia to North Europe route

0.0001
10
15
Age (years)
20
24

Service data.
Figure 3.3 Confidence limits for effect

of flag
these older ships. This is not surprising as most of the ifailures

n the
occur
older ships.The separation of the two confidence intervals provides support
for the view that the influence
of flag is an important factor for the older ships
. confidence intervals also indicate that as
that aremost at risk of failingThe
IMO regulations
the ship ages the policies of the flag state
on enforcingwould
become increasingly more important.
~
A different way of considering the effect

of flag is to estimate the change
in
age required to exactly compensatefor the effect of registering
a ship with a
flag state with a bad casualty record. This differs from an examination of
confidence intervals because only two variables are changing (flag and age),
all other variables being held constant. Appendix
V gives details of
how the
confidence interval for thechange in age required can be estimated.
The
mean effect for iron ore ships (see figure3.2)is about five years.The
estimated confidence interval is from 1.3 to about 9 years. Although the
confidence interval is large,change
the in age to compensate for the effect of
flag is significantly different from zero.
QUALIFICATIONS REGARDING THE METHOD
The logit procedure is based on the assumption that each observation is
independent of all other observations.
However, the almost
29 000 voyages in
the database, were undertaken
by approximately 3000 individual ships. That
is, on average each ship completed about tenduring
voyages
the two-year
period coveredby the database. This large
number of repeated voyages
by
21
BTCE Report 85
individual ships is likely to result in more optimistic confidence limits than
might otherwise
be the case. Appendix
V contains more detail on this point5
POLICY EXPERIMENT
Although the factors
in table 3.1 were all shown to be statistically significantin
ship failures, the essential issue is the ability of the
model
logit
to correctly
identify ships with a high probability of failure. One method of testing the
model is to measure how well it can identify the ships that actually failed.
The test was based on setting

a threshold probability of failure.
Suppose that
with an estimated probability of in
failure
excess of a threshold level
only ships
would be subject
to inspection. The number of ships identified for inspection
using this procedurecan then be
compared with the number of failed ships
that wouldhave been inspected. Figure
3.4 shows how the proportion of failed
ships includedin the inspection group declines as the threshold for inspe
is raised.
34 per cent of all
The Australian Maritime Safety Authority currently inspects
ships trading to Australia, compared with the internationally accepted
"-
Total
~
0
-"
inspected
0.0004
Threshold
0.0008
probability

Services data.
of
on
0.0012
failure
Lloyd's
would
Figure 3.4 Proportion of ships that
inspection, according to
level
Maritime
Information
be included
in
inspection threshold
5. The qualifications in this section were suggested

in a personal communication from
Dr T.
Breusch of the Australian National University Department of Statistics.
22
Chapter 3
inspection target of25 per cent (Stephens 1993).

These are the proportions
which wouldbe inspected i f thresholds of 0.0003 and 0.0005 probability of
failure, respectively,were used to determine whether a ship would be
inspected (seefigure 3.4).At a threshold of0.0003,93 per cent of failed ships
would have beenincluded in the group of ships inspected. At the higher
threshold of 0.0005,only 25 per cent of ships would
have beeninspected,
including only
80 per cent of failed ships.
This approach on its own could therefore capture a large proportion of
structurally deficient ships
in the inspection net. it But
would be better
if used
in conjunction with other information, as
such
recent change of ownership, that
was not includedin the analysisbecause of lack of data.
Used in this way the
results of the
BTCE analysis couldcomplement present methods of selecting
ships for inspection.
Nevertheless, it is important to be aware that no inspection system is

foolproof. Althougha large proportion of ships that subsequently failed would
have beenincluded in an inspection system based on
BTCE
theapproach,it
is not certain that their potential for failure would have been detected.
Thorough inspections that would be certain to detect structural deficiencies ar
time consuming and
may not be possible under operating conditions by faced
port control surveyors.
23
CHAPTER 4 ECONOMICS OF DEMOLITION AND PURCHASE

OF NEW SHIPS
Age is clearly an important factor

in the failureof bulk ships. Some old ships
of safely
undertaking long
have been well maintained and are perfectly
capable
in the marketin which bulk ships operate
ocean voyages. However, conditions
have not generally been conduciveto expenditure on maintenance by
likely
have suffered afrom
lack of
shipowners.As a result,many old ships are to
maintenance or have been operated beyond their design life.
In order to gain some insight into the reasons for the continued
of oldoperation
and possibly substandard ships, the
BTCE analysed some of the factors
involved in scrappage and purchase decisions.
DEMOLITION OF OLD SHIPS
Owners of old ships are continually
with the
faced choice of disposing
of a ship or
of keeping i t in service.The planning horizon for keeping
the ship in service will
depend on the prospects
for finding employment for the ship, and on its condition.
For convenience it is assumed that the decision period
one year.
is
That is, at the
h the
beginning of the year the shipowner wit
is
facedchoice of demolishing the
as many voyages as possibleoneformore year
ship or of committing the toship
it for demolition at the end ofThethe
present
year.value of the cash
and selling
both of these choices can then be 10
compared.
per cent(A discount
flow under
rate is ustoedcalculate the present value of all costs and revenues.)
For purposes of analysis
a typical 120 000 dwt iron ore bulk carrier trading
between Brazil and Europe
was chosen as
a representative ship (tables
4.1 and
4.2).The maximum number
of voyages the representative ship make
couldin
the twelve months at normal operating speeds and port times
but the is eight,
actual number could be less.
Major
assumptions
made were:
All loan capital has been offpaid

.
The ship is employed on
a voyage charter basis.
1. A voyage
charteris a contract to carry

a cargo on a single voyage specified
between two
ports or areas.The shipowner has
to defray all operating expenses, such ascosts,
crew
port charges, bunkers and agency
out offees,
the freight (Packard
1986,p. 25).
25
BTCE Report 85
TABLE 4.1 DATA
USED
FOR DEMOLITION
Voyage
ANALYSIS
Demolition
Quarter
price
Year
Fuel
charter
price
rate
(US$/tonne) (US$million)"(us$/tonne)b
Q1
1988
Q1
Q2
Q3
Q4
7.90
6.20
6.00
7.20
5.0
5.2
5.3
5.3
73
79
70
59
1989
Q1
Q2
Q3
Q4
8.00
8.00
7.20
7.80
5.3
5.6
5.8
5.6
74
95
84
101
1990
Q1
Q2
Q3
Q4
8.00
7.00
5.70
7.00
5.6
5.8
5.4
4.4
97
72
108
138
1991
Q1
Q2
Q3
Q4
7.80
7.40
6.80
6.70
4.1
3.9
3.7
4.0
101
71
70
81
Q2
Q3
Q4
5.40
4.40
4.00
4.23
3.8
3.3
3.3
3.3
69
82
90
92
Q1
4.60
3.4
74
1992
1993
Note The representative ship ais120 000 dwt dry bulk carrier.
a. Price for demolition
in the Far East.
b. Price forhigh viscosity oil in Rotterdam.
Source Quarterly figures are averages

of monthly figures
(1989a, 1989b).
published in Lloyd's Shipping Economist
Operating cost, fuel costs,

new building pricesand demolition prices are those
published in Lloyds Shipping Economist
(1989a, 1989b).
The ship for which
the Lloyd's Shipping Economist
costs are estimated
is manned under an open
registry by Indian officersand Korean ratings. Operating costs include crew,
technical (stores and supplies, running repairs and maintenance,
and
lubricating oils), management and'miscellaneous (management fees,
insurance and communication).
Lloyds Shipping Economist
reports costs for
a Panama2 vessel but not fora 120 000 dwt ship. To convert panamax
the
ship costs to those appropriate toa 120 000 dwt ship, the technical and
management and miscellaneous costs reported
by Lloyd's were increased
by
40 per cent. This increase
was based on the results a of
previous Bureau
2. A panamax ship is usually
in the range
50 000 dwt to 80 000 dwt
bulk ship able to pass Panama
through Canal.
the
26
andis the largest size
3.0
91.4
.4
6
.4
Chapter 4
TABLE 4.2 OPERATING COSTS FOR A P A N A M A X DRY BULK CARRIER

(US$000)
Year
Quarter
Crewa
1988
22.0
38.8
22.0
Q1
17.0
Q2
Q3
17.0
Q4
38.9
38.8
1989
22.8
22.8
42.4
23.5
17.8
Q1
17.8
Q2
Q3
18.5
Q4
42.4
42.4
25.0
1990
25.0
46.4
25.0
20.0
Q1
20.0
Q2
Q3
22.0
Q4
46.4
46.4
1991
25.5
Q1
Q2
26.3
27.6
Q3
Q4
27.6
49.0
49.3
49.3
49.3
Management and
Technicalb
miscellaneous
c
17.5
72.4
Total
16.0
38.8
83.0
42.4
46.4
12.7
14.5
.4
21.0
1992
30.8
31.4
54.2
33.0
28.1
Q1
28.9
Q2
Q3
33.0
Q4
53.8
54.2
126.0
34.7
1993
33.6
Q1
57.7
102.5
105.6
105.6
28.0
28.5
28.7
28.7
104.1
55.0
a. Ship manned under an

open registry with Indian officersand Korean
ratings.
b. Technicalcosts are for stores, supplies, lubricating oil, running
and maintenance.
repairs
c. Management and
miscellaneous costs are management
for
fees, insurance and
communication.
of monthly figures published
in Lloyds Shipping
Source Quarterly figures are averages
Economist (1 989a).
study of bulk ship costs

(BTCE 1988).Crew costs tend
to be independent
of
ship size,
so the crew costs for
120 000
thedwt ship were assumed
to be the
same as those reported panamax
for the
ship.
Revenue is received in twelve equal payments throughout the year. Costs
are also spread evenly throughout the year. This assumption
may not
would bea reasonable
exactly represent the actual receipt of but
revenue
approximation for the payment
of costs.
Operating costs are incurred for
full year
the evenif the ship is not earning
revenue. This
is probably an unrealistic assumption and would overstate
during the year.
The more voyages
costs for ships undertaking few voyages
undertaken during the year the less is the inoverstatement
costs.
The ship is demolished
in Asia.The costs of sailing theto the
ship breakers
yard is deducted from the demolition price.
27
the
BTCE Report 85
The operating costs reported Lloyd's
by Shipping Economist(1989a) are
for a
10-year-old ship.The ship on which this analysisis based is likely to be
considerably older,
but no allowance is made for the highermaintenance and
insurance costs which could
be expected on an
old ship, i f the market and
regulatory systems operated adequately. Thatis, the following additional
assumptions are
made:
Maintenance costs are

assumed to be nodifferent than fora 10-year-old
vessel. Even though an old ship can be expectedto require additional
maintenance, the owner
is assumed to keep maintenance costs
down so as
to maximise the short-term benefits of retaining the ship for an extra y
trading.
Insurance costs are
assumed to be thesame as for a 10-year-old vessel.
This is consistent with the HORSCOTCI (1992a)report, which indicated that
it is only recently that insurance
companies have begun
to arrange their
own
inspections of ships and
to adjust premiums to reflect risk.
The results in figure 4.1 indicate that there is some correlation between
demolition pricesand voyagecharter rates.One possible explanationis that if
demolition prices decline
in response to conditions in the scrap steel market,
alternative option of retaining old inships
service becomes more attractive. As
fewer ships are demolished,
is downward
there pressure on charter rates.
the
BTCE
8Voyage charter
rate
(US$/t)
76.-g
li
-- -
5 - 4""
4-
Demolition price(US$ mil)
*
.
--
-,
c e"
"
"
*
3,
'
I
u ~u um
I
uuuuuuu
1991199019891988
uuuuu
l
um u du
I
uuu
1992
Source Lloyds Shipping Economist (1 989b).

and demolition
Figure 4.1 Voyage charter rates
120 000 dwt bulk carrier
28
price
for a
Chapter 4
An alternative explanation could be that as charter rates decline due to

conditions in the freight market, there is an increased supply ofto ships availab
breakers with a resultant downward pressure on demolition prices.
Both explanations are probably partially correct. Irrespective

of which
explanation better describes causality
in the market, individual shipowners
will
take into account both sets inofmaking
prices
their decisions.
The number of voyages expected to be undertaken in the forthcoming 12
months is a key parameterin deciding thebest course of action.The charter
bulk ship to break evenfor up to eight
rates required for the representative
voyages completed during the year were estimated, for from
each thequarter
first quarterin 1988 to the first quarter
in 1993.A typical result of this analysis is
shown in figure 4.2 forsecond
the quarter of 1990.
The voyage charter rate for carrying iron between
ore
Brazil and North West
Europe averaged US$7.00
per tonne for the
second quarter of 1990 (Lloyd's
Shipping Economist1990).The break-even charter rate for the representative
bulk ship for three
voyages during the following months
twelve was estimated to
be US$6.80 per tonne (figure
4.2).Thus, if the shipowner could be sure of three
or more voyages i t would pay
to retain the iship
n service.
2o
BTCE
4
5
6
Number of voyages

on Lloyds Shipping
(1 989a, 1989b).
Economist
Figure 4.2 Break-even charter frate

or a 120 000 dwt bulk
to North Europe,
as a function
of the
carrier, Brazil
number of voyages, second quarter 1990
29
BTCE Report 85
TABLE 4.3 DATA FOR ANALYSIS OF NEW SHIP PURCHASE
Time
Second-
Year
Quarter
charter
rate
handprice
(UWOOO/day) (US$millionp
1988 196.0
280.0
280.0
280.0
Q1 21.8
Q223.7
Q324.5
Q427.3
14.50
14.40
13.80
15.00
1989308.0
308.0
329.0
329.0
Q1 29.5
Q230.7
Q332.6
Q432.8
16.20
17.10
17.30
17.80
1990 350.0
350.0
367.5
378.0
Q1 32.2
Q230.7
Q328.2
Q427.0
17.30
15.40
13.60
12.20
399.0
1991
3.0
424.0
424.0
1992
439.0
466.5
29.7
9.7
469.0
1993492.5
Q128.3
41Q2
33.7
Q3
36.2
Q435.8
11.8
13.9
15.0
16.0
Q134.7
13.6
454.
Q2
32.3 10.5
Q3
Q4
28.0
9.5
Q128.0
Dry dock
(US$OOO)
10.0
Note The representative ship ais120 000 dwt dry bulk carrier.
a. Five years old.
b. Required at intervalsof30 months. Price estimated
from costs
(1 989)for a panamax
reported by Lloyds Shipping Economist
bulk carrier.
Source Quarterly figures are averages of monthly figures
(1989a, 1989b).
published in Lloyds Shipping Economist
Any money left over after paying for operating costs

and interest payments
is used to reduce the principal of the loan.
Operating costs and time charter ratesassumed
were not to change over
of the analysis. This
assumes degree
a
of optimism on the part of
the period
the shipowner,
as the datain figure 4.4 and in Lloyds Shipping Economist
(1989a, 1989b) indicate that time charter rates
have trendeddownwards
increase.
and operating costs have to
tended
The ship is dry-docked at intervals of
30 months at prices reported
in Lloyds
Shipping Economist
(1 989a).
of the period from

1988 to early1992 it was profitable to retain an old
For most
ship, provided that
more than three voyage charters could be during
arranged
the 12-month analysis period.The net present value estimated at
a discount
32
Chapter 4
rate of10 per cent is

compared for the old ship
(with four voyage charters) and
compared
are
the new ship in figure 4.5and similarly the internal rates of return
in figure 4.6.
Figure 4.5shows that until early 1990the net present value of purchasing
a new
by retaining an old ship. After199early
0
ship was far higher than that obtained
the net present value aat10 per cent discount rate fornewtheship became
negative. Although the net present value of was
the not
old large
ship (negative
in late 1992),it was superior to that of the new ship. Figure
4.6 shows that the
internal rate of return for the oldwithship
four voyage charters is higher than
that of the
new ship for almostof all
the period analysed.
The retention of an old
ship gave a positive return until early 1992.It is not surprising, in these
circumstances, that there so were
many old ships offered for charter contracts.
in late 1992 it was not profitable to retain an old vessel,
The results suggest that
nor to purchase
a new one. Lloyd's Shipping Economist(1990,p. 8) made the
following observation aattime when the prospects for
new bulk carriers began
to become doubtful:
[Elxamples such as these artare
ificial because
always they
look at single vessels
In practice,
it is verycommon for the
as isolated entities rather than part of
a fleet.
modern second-hand
vessels to produce negative
purchase of new buildings and
-- -.
'
,
BTCE
New ship
l
l
l
l
ship
Old
L
-
*r*r\
*
\
1
l
I
I
I
\
\
\ '
\
'
'
4
Discount rate
= 10 per cent
Old ship
makes 4 voyages per annum

(1989a,1989b).
\
l
l
l
l
I
I
.l
*
4
'
-4
based
on Lloyds Shipping Economist
Figure 4.5 Net present

value of retaining an OM 120 000 dwt
ship and purchasing new
a 120 000 dwt ship
33
BTCE Report 85
BTCE
-20
Old
ship
makes 4 voyages per annum

(1989a,1989b).
based Lloyd's
on Shipping Economist
Figure 4.6 Internal rate

of return of retaining an old 120 000 dwt
ship and purchasing new
a 120 000 dwt ship
cash flow after debt service

in the early years.
In a fleet with a well spreadage
profile, these ships are initially subsidised by the strong net cash flow produced
by older vessels on which the debt has been largelydown.
or This
totally
is
paid
a situation to which the industrybecome
has habituated over the years,
but in
fact is most unhealthy, since
it encourages shipping companies
to be content
with a level of remuneration which is too low to support the renewal and growth
of their business.
Market conditions have clearly worsened1990

since
.The results in figures 4.5
and 4.6suggest thatit is not currently worthwhile considering the purchase
a
of
new ship. Sanderson (1993)commented in the Daily Commercial News
that
'[wlith steadily depressed freight rates and sharply rising carrier costs the
necessity fora substantial risein freight rates is the biggest single issue facing
the shipping industry.
A 400 per cent increase over
1992 rates is necessary to
provide a proper reward
to shipping companies to replace aging tonnage
... .'
The results 'inthis chapter indicate that the increase
in freight rates required
to
make i t attractive to replace aging ships, although less than thatby estimated
Sanderson, was substantial, probably
in the order of
80 per cent.However, an
increase in freight rates makes
also retention ofaged vessels more attractive.In
the last quarter 1
of992 an increaseof 80 per centin freight rates would
have
improved the internal rate ofof return
retaining an old ship, from
-20 per cent
to
34
Chapter 4
32 per cent. Clearly, more than inan
freigincrease
ht rates is requto
ireremove
d
old tonnage from the world fleet.
Increased regulatory control of ship standards

one isapproach that has been
r y to reduce the number
of
implemented in Australia andin other countries tto
unsafe ships. Sanderson
(1993)reports that improvements
in control by the port
state are having an effect on which countries substandardto ships are
call at.He reports thatsome ships are
now sailing in ballast from the Pacific
to
South Africa and the Atlantic, rather tothan
Australia
coming where they would
be subjected
to a higher level of inspection.
Now that insurance companies have suffered large losses from marine
insurance, greater attention is being focused on the level of premiums and
Companies now seem to be charging premiums that better reflect the risk
s likely to assist in removing substandard ships
(HORSCOTCI 1992a), and ithis
from the world but
fleet,
the results
in chapter 3 suggest that
it may be possible
to be moreeffective. I t is feasible to set premiums according to the risk
to the add
costs of employing old
associated with particular voyages. This would
ships on risky voyages, such as carrying iron ore Cape
aroundof Good
the
Hope. Old ships could thenbecome uncompetitive on risky voyages, leaving
the potentially hazardous conditions.
them to those ships better tosuited
is beyond
Full consideration.of better insurance and regulatory arrangements
the scope of this paper. However, the
results
in this
and the previous chapter
suggest that
a close alignment of insurance premiums
with risk would assist
in
discouraging continued operation of unsafe ships.
35
pr
CHAPTER 5 CONCLUSIONS
The statistical analysis of Lloyds voyage records indicates

age,route,
that and
commodity (especially iron ore) are major indicators of increased risk of
structural failure.
Although flag state is frequently mentioned
a significant
as
indicator of high
failure probability, the analysis suggests that flagas isimportant
not
as other
with a flag with a bad casualty
factors.The results suggest athat
ship registered
record has same
the probability of failure
a ship
as from
a goodflag that is five
years older.
Classification societies have been frequently criticised for failing to inspect
in the continued operation of sub-standard ships.
ships adequately, resulting
However, the analysis of voyage records
failed any statistical link
to establish
between failure risk and classification societies. This does mean
not that
classification societies are providing an adequate standard What
of it inspection.
does suggestis that the classification societies in the database have been
equally successful (or unsuccessful) at detecting sub-standard ships.
bulk ships travel

was found to bemuch
of greater statistical
The route on which
importance to the risk of structural failure than previously suspected, and
In particular, for Australian exports of iron ore, the
important than flag state.
route to North Europe via South Africa poses especially high failure risks.
carrying iron ore on routes from South Africa and Brazil to Asia also
average risks of structural failure.
Of the 30 bulk
These routes all transit same
the region in the Southern Ocean.
ship failures includedin the database,13 occurred in this region. Weather
conditions in the SouthernOcean can be very severe. International load line
regulations allow shipsto travel around theCape of Good Hopeloaded to
summer load lines,but, given the enhanced risk of failure associated
with this
area of the iocean,
t may be appropriate for the IMO
current
review of load lines
to consider changes for this region.
to have a higher
Although ships departing from
some specific ports appeared
than average probability
of failure, the failures tended to bewithassociated
the
routes identifiedas having high failure When
rates.corrected for the effect
of
37
BTCE Report 85
route, ports, including Australian ports, had no statistical
link with structural
failures.
Although the analysis focused on dry bulk ships, an interesting question is
whether the results would carry over into other ship types. Tankers and
container ships have different types of structure,some
butsimilarities.
there are
The best that can be said is that the cargoes carried by tankers and
to be low density cargoes compared
with iron ore,
so they may be
ships tend
more likely to have similar risks
to dry bulk carriers employed in the carriage of
coal and grain.
The sizes and ages of the ships employed on routes departing from W
Australia differ from those employed on routes from Eastern Australia.
The
differences do not indicate that any specific factor uniqueto Australian
conditions increases risk of structural failure. But the differences support the
conclusions regarding the riskiness of Ocean
the Southern
routes.
Recent change
of ownership,of flag, or of classification society toarebe said
I t would have been
pointers to the possibility ofa ship being sub-standard.
available
Bureau
useful to examine this statistically. Unfortunately the datato the
did not include these variables.
The larger the number of ships inspected, the more likely
a sub-standard
structurally deficient shipwill be caughtin the inspection net.A logit model
developed 'from the data provides
a tool that could be used
to assist in the
to estimate the
selection of ships for inspection.The model can be used
probability of failure for each
ship
in terms
of its characteristics and Aroute.
ship
on a particular voyage that a p
has
robability of failur
above
e
a pre-determined
In practice,some simple decision rules could be
threshold would be inspected.
developed, which
in conjunction with information not able
to be modelled (such
of ownership), would allow inspections
to be directed towards
as recent change
the ships most at risk.
Although an inspection planmay ensure almost all ships that have
a high
in practice the limited time available for
probability of failure are inspected,
inspections by port state surveyors
means that there can still be no certainty
will be prevented from sailing.
sub-standard ships
Improvements to inspections by the port state are part of the tosolution

the
problem of sub-standard ships, but they are notThethe
economic
total solution.
the building
environment in which bulk shipping operates does not favour new
ships. Freight rates need
to be higher than they are at present before ship
operators are likelyto commit themselvesto a substantial number ofnew
n freight rates would make
alsothe continued use
orders. However, an iincrease
rates
of older sub-standard ships more attractive. Clearlyin freight
an increase
would not provide
a solution to the problem of sub-standard ships.
in therole
control of ship quality.
Insurance companies can play an important
There is evidence that insurers now

are taking a more active rolein monitoring
38
Chapter 5
the quality of vessels they insure. Knowing that old ships are more at
that old ships carrying iron ore on specific routes face elevated risks, insurers
to more accurately reflect these factors (OBrien
should adjust their premiums
1 992).
For example, old ships could have premiums

a voyage set
by on
voyage basis,
unless it could beshown that their conditionwas of a high standard.If the
Ocean then the
voyage was intended to carry iron ore through the Southern
premiums could be increased significantly,if the
whereas
voyage
was to carry
grain on
a safer route then the premium would be lower.
Continuing this scenario, freight rates would ultimately reflect the premiums
high failure risk would bemuch less competitive and
charged. Ships facing
would therefore tend
to be used on routes for which they are better suited.
on known safe routes.
example very old ships could to
be carry
used iron ore
Better quality ships become
would
more
competitive on the more risky routes.
It might be thought that an insurance

company adopting this policy would lose
a companycharging high
business to a less discriminating company. But
premiums for old ships carrying iron ore on dangerous routesto would be able
provide lower premiums for good quality ships than the less discriminating
to the
insurer. The better quality and lower risk ships would be attracted
company that discriminated against risky ships.
The other companies would
soon find they were carrying
a greater proportion of risk. Market forces would
adopt similar practices.
then provide incentive for all to companies
In summary,the
major
conclusions
that
can
be
drawn
from
the
analysis
High risk ships are those that are

15 years
over old, carry iron ore, and are
If they also transit the
registered with flag stateswith high casualty rates.
Southern Ocean they face an even higher level of risk.
Consideration should be to
given
amending load line regulations
for the area
in the vicinity
of the Cape of Good Hope,
to reflect the high level of risk faced
by ships transiting this region while carrying iron ore.
Enhanced port state inspections would tohelp
decrease the risk of structural
failure.A more effective means of reducing failures would be for insurance
premiums to closely reflect the degree toofindividual
risk
ships and possibly
voyages.
39
APPENDIX I DATA O N STRUCTURALLY FAILED
SHIPS
41
P
N
TABLE 1.1 BULK SHIPS EXPERIENCING STRUCTURAL FAILURE, OCTOBER 1989 TO DECEMBER 1991
Size
Destination Departure
Year
Name
no. Lloyds
Flag built GRT
date
Failure
port
TVpe
Ademontasa
6807747
26 271 BC
BC
AI Taludi
7041 0 4 1
24 956
Alexandre P
6803222
54
566 oc
Alexita
60 846
BC
7227229
Algarrobo
89 178 oc
7327665
8 0 1 0453
74 729
BC
Amazon
731591 1 112 306
Atlas Pride
OB0
6916366
44 276
oc
Azalea
734301 1
Berlisa
80 174
BC
70 872
BC
Blooming Orchard 7027435
71 17084
Cape North
41 565
OB0
29 966
BC
Continental Lotus 6717899
20
966 BC
7328542
Elounda Day
35 104 BC
7329596
Entrust Faith
64 967
BC
7389637
Gallant Dragon
70371 55
Juliana
32 521 BC
7372892
OB0
71 739
Kashee
King William
7330234
42 236 BC
Kiwi Arrow
7909865
26 191 BC
Manila Transporter 7533018
67
624BC
Marmara S
7021
302 58 785 BC
Me1 Gui Hai
BC
7002306
21 508
7343059
BC
Melete
35 516
8 0 1 5726
BC
Mineral Diamond
75 330
BC
36 330
7233723
Mineral Star
7039452
51 506
BC
Orient Pioneer
55 084
Pacific S
71 17474
OB0
Pan Dynasty
BC
21 567
6902951
Pankar Indomitable7205740
39 219 BC
oc
Pasithea
7045607
80 225
Apr-90
Feb-90
15-Mar-90
D=-90
18-Sep-90
Aug-90
Aug-91
22-Mar-90
May-91
Aug-91
Jan-90
21 -Jaw91
23-Dec-90
27-Nov-91
23-0ct-90
Nov-90
May-91
Aug-91
30-Apr-91
7-JuI-91
D=-91
Nov-90
24-Aug-91
17-Apr-91
25-Jan-90
7-Jan-90
Jun-90
4-Oct-89
Jan-91
4-Aug-90
1968
1970
1967
1972
1973
1981
1973
1969
1975
1970
1971
1967
1973
1973
1976
1971
1973
1974
1981
1976
1970
1969
1975
1982
1973
1971
1971
1968
1971
1971
Lib
port
Cargo
Barytesa
Zhenjiang
New Orleans
Ballast
Ningbo
San Nicolas
Iron ore
Dampier
Gijon
Port Cartier
Europoort
Iron ore
Nor
Iron ore
Lib
Kawasaki
Huasco
Chiba
Tubarao
Iron ore
Nor
Angra dos ReisOil
Ras Tanura
Lib
Iron ore
Bremerhaven
Krs
Narvik
Nor
Tubarao
SE Asia
Iron ore
Tubarao
SE Asia
Iron ore
Cht
Iron ore
Ponta do
Bremerhaven
Ubu
CYP
Iron ore
I nd
Motmugao
Geno
Potash
Vancouver
Pan
SE Asia
Iron ore
G rc
Puerto Ordaz
Bremen
Iron ore
Pan
Tubarao
Kakogawa
Dutch Harbour
lnchon
Ballast
CYP
Iron ore
Rotterdam
Port Hedland
CYP
G bi
Hampton Roads Ballast
Setubal
Steel
Bah
Taichung
Cape Town
Port Talbot
Iron ore
Phi
Dampier
Iron ore
Trk
Sepetiba Terminal Las Palmas
New Orleans
Bauxite
Chr
Zhenjiang
G rc
Dampier
Port Talbot
Iron ore
Iron ore
Ymuiden
HKg Dampier
Coal
Hampton
Roads
Belem
CYP
Lib
Tubarao
Kaohsiung
Iron ore
Oil
Trk
United Emirates
Japan
Phosphate
Krs
Tampa
Kwangyang
G rc
Ironore
Polt Cartier
Oxelosund
Ironore
G rc Walcott
Port
Wakayarna
Mta
Pan
(dW
55118
41 300
94 532
122 544
135 466
140 832
248 604
78 571
154 489
1 4 0 440
85 180
53 346
38 250
65 533
123 126
65 455
138 673
79 304
38 695
115 960
121 552
37 326
72 063
141 028
66 350
108 504
103 480
36 650
77 996
155 407
93
TABLE 1.1
Size
BULK SHIPS EXPERIENCING STRUCTURAL FAILURE,OCTOBER 1989 TO DECEMBER 1991 (CONT.)
Destination Departure
Name
Lloyds no.
Petingo
Protektor
Pythia
Rokko San
Rollon
Salvia
Scandinavian Pine
Shensi
Shou An Hai
Silirnna
Snestad
Sonata
Starfish
Tao Yuan Hai
Theanoula
Tribulus
Vallabhbai Pate1
Vasso
Vulca
Walter Leonhardt
Note
BC
dwt
GRT
OB0
OG
Year
Failure
GRT
date Type
6702662
38 997 BC
6704957
43 218
BC
64 355
7235343
BC
7118753
71 877
OB0
BC
7301764
38 611
7027386
82 014 OB0
7409023
34 157
Wood
7522320
88 675
BC
7340980
62 811
BC
32 508
7525944
BC
71241 80 28 656 BC
6829719
25 597
BC
7007100
BC
28 147
7389675
64 920
BC
7341336
35 1 0 0
BC
68 619
7917850
BC
7391563
62 563
CB0
6801705
34591
BC
19 699 BC
6814049
6608725
23 570
BC
9-Jut-90
1 l-Jan-91
Oct-90
15-Jun-90
Jan-91
9-Feb-91
Jan-90
15-May-90
Mar-91
12-May-90
Sep-90
13-Nov-91
8-Apr-91
23-May-90
Apr-91
Feb-90
Jan-90
4-Apr-91
31-Dec-89
18-Feb-90
built
port
Flag
port
1967
1967
1973
1971
1972
1970
1976
1977
1974
1978
1972
1969
1970
1977
1974
1981
1977
1967
1968
1966
Van
Sng
Cyp
Pan
Grc
Krs
Nor
Pan
Chr
Lib
Nor
Pan
Pan
Chr
Cyp
loM
Ind
Bah
SVC
Cyp
Saldanha Bay
Port Cartier
Port Walcott
Unknown
Tubarao
Huasco
Unknown
Dampier
Hampton Roads
Morrnugao
Cape Town
Kirkenes
Port Walcott
Puerto Ordaz
Trombetas
Seven Islands
Tubarao
Saldanha Bay
New York
Tampa
Cargo
China
Oxelosund
Dunkirk
Richards Bay
Las Palmas
Pohang
Unknown
Yokohama
St Michael's
Italy
Barcelona
Bremerhaven
Swinoujscie
Port Kembla
New Orleans
Rotterdam
Mizushima
China
Busan
Antwerp
(dW
Ironore
80 580
Ironore
80 185
Ironore
120 143
Ballast
150 900
Ironore
67 826
Ironore
153 256
Unknown
41 203
Ironore
169 999
Grain
119500
Ironore
69 165
Grain
62 503
Ironore79681
Ironore
56 277
Ironore
122 734
Bauxite
72
063
Ironore
127 907
Ironore
113 925
Ironore
57 181
Scrap steel 42 245
Phosphate 42 805
Flag abbreviations are explained

in table 1.2.
Bulk carrier
Deadweight tonnes
Gross registered tonnage
Oil or bulk ore carrier
Ore
carrier
b
Wood Woodchip carrier
a. Sulphate of barium.
!%L
Sources ABS (1 992);AMSA (1 992);DTC (1 990,1991 a, 1991 b, 1991c, 1991d); Lloyds
ofLondon (1 992a, 1992b, 1992c, 1993b); Lloyd's Register
G.
of Shipping (1992b,1992~);
NKK (1992).
%
p
0
BTCE Report 85
TABLE 1.2 FLAG
ABBREVIATIONS
Flag code
Flag code Country
Countw
~~
Bah
Bahamas
Chr
China
Sng
Cht
South
Korea
Krs
Lib
Liberia
Singapore
Taiwan
Mta
Malta
Nor
Norway
CYP
Gbi
Cyprus
United Kingdom
Pan
Panama
Phi
Philippines
G rc
Greece
svc
St Vincent
Trk
Turkey
Vanuatu
Isle
loM
of
Peoples
Republic
Man
Ind
India
HKg
Hong
Kong
Source Lloyds Register Shipping

of
(1992b).
44
Van
APPENDIX II ASPECTS OF STRUCTURAL FAILURE
Bulk ship failures are normally the aculmination

long slow ofprocess involving
a
combination of events and circumstances throughout
a ship's working life.
The
events that started the failure
may have
processoccurred years earlier.
Figure 11.1 shows the major factors which can contribute to ship structural fai
MODES OF FAILURE
Ferguson (1991,pp. 7-9) and Nippon Kaiji Kyokai
(NKK 1992,p. I) both agree
that,in the majority of reported ship losses
to structural
due
failures, the final
with 'the loss of side shell platiinng'the cargo holds' (Ferguson
stages started
1991,appendix 1).Over 50 per cent of the ship structural failures inanalysed
these studies were
lost. Survivors reported that their ships ibroke
n two and
sank rapidly.
Most engineers agree that
beam failure is the most likely
mechanism causing
ships to break in two.The only alternative mechanism is shear failure.
Beam failure occurs to a ship when i t fails through bending, normally
in heavy
2
seas when
the ship isin an extreme hogging or sagging condition.11.Figure
shows extreme hogging and sagging conditions,
when the length ofwave is
roughly equivalentto the ship's length.Beam failure often involves some
to twisting.A ship which is missing large areas of side
torsional stresses due
plating, or has largein the
cracks
side shell, is particularly tovulnerable
torsional
stresses caused by crossing seas.
Shear failure normally occurs at bulkheads2when one hold becomes
the adjacent hold
overloaded through flooding or poorly distributedwith
cargo
nearly empty.
The difference between the upward buoyancy forces on
full hold
in ship
hold and downward forces on
the acts like scissors slicing the
two, close
to the bulkhead (see 11
figure
.3).
Shell platingis the steel plating forming the outer side
of the
and
hull.bottom
2. Bulkheads are 'the vertical partition walls which subdivide the interior
of a ship into
compartments' (D'Arcangelo
1969,p. 594).
1.
45
the
BTCE Report 85
BTCE
wind
and
MODES OF FAILURE
Beam failure
Shear failure
DIRECT
CAUSES
OF FAILURE
Figure 11.1
Flow chart of the factors contributing

to ship failure
Shear failure is likelyto occur when the hull beam3 cross-sectional area has
as
been reduced by severe corrosion.
Damage to the hold structure, such
cracking, can also increase shear stresses. Failure is usually sudden, and
with extreme overloading due
to green watefl on the
would probably occur
weather deck or major flooding of the holds.
However, such high overload forces usually cause localised failures such a
loss of side shell plating,will iwhich
n turn lead to beam failure (AMSA 1993).
CORROSION
Corrosion occurswhen a structure reacts chemicallywith its surrounding
environment resulting
in a deterioration of the structure.
Traditionally ships were designed
with extra thickness
to allow for0.07 to 0.15
mm per yearto be lost to corrosion on all steel surfaces over the life of the
vessel. However, pitting and abrasion can leadto much higher rates of
1969).
corrosion, particularlyin the wind and waterline5 region (DArcangelo
NKK (1992)has documented corrosion
2.8mm
of over a two-year period, which
is well over traditional expectations.
3. The hull beam is
the structural body of the ship (including shelldecks

plating,
andframes,
bulkheads) which
is considered in its entiret
as
y beam.
a
4. Solid unbroken waves on deck, not frothy white water.
5. The wind and waterline region
is the area of hull
thebetween the lightship waterline and
the loaded waterline.
46
Appendix II
BTCE
Sagging
B
W Weight of vessel
B Bouyancy forces
Figure 11.2
Hogging
Hogging and sagging
BTCE
Effect on girder
Source Bendall (1 993).
Figure 11.3
Shear stress
47
BTCE Repolt 85
Present design rules do not includea corrosion rate. Instead, classification
societies require scantlings6 ofnew ships to allow for about 20 per cent
corrosion. Steel
is requiredto be replacedwhen this allowance has been used
up (AMSA 1993;Parker 1992).
The speed and degree
of deterioration
depend on:
ship maintenance and corrosion protection;
type of cargo carried;
and
methods and procedures inused
loading and unloading cargo.
The available data that
can best represent these factors age,
are commodity
carried, classification society, flagandstate
type
of cargo carried
in the past.
Age
A ship startsto corrode from the time theis created
steel in the steelmill, and
continues to corrode throughoutits entire life.Ships are designed built
and to
counter corrosion.
A ships corrosion prevention system includes control

systems such as
paint
schemes and cathodic protection, as well as design allowances for wastage
is not maintained, then the
over the ships If the
life. corrosion prevention system
rate of corrosion can increase considerably.
In particular,where barrier systems
such aspaint are employed, anydamaged area of the barrier will result in
corrosion.
Most corrosion prevention systems are atdesigned
the time of building the ship.
They are based on the likely between
interval scheduled maintenance dockings
expected at the time of construction.
However, as underwater
paint schemes
have improved, the interval between regular planned dockings hasto tended
increase. Docking every
two years was once the normbut every four years
is
now common.
Protection systems on older ships were for
designed
the shorter
periods between docking many
and have not been updated.
As a result many
older ships original protection
systems are unlikelyto be functioning properly
towards the ofend the periods
between dockings.
Because corrosion occurs progressively over time,
age is the best available
variable to represent the possible extent of corrosion.
Commodity
The type of commodity andthe way a cargo is shipped can also resultin
structural failure.
Dense cargoes (such

as iron ore).The carriage of iron ore is most
the
severe
cargo in terms of loading on the ship (Ferguson
1991). Irrespective of the
6. Scantlings
48
are
the
dimensions
a ships
of frames, girders, plating etc.
Appendix I/
BTCE
Dense carao
Non-dense
cargo
Typical
cross-section
of hold
Forces
diagram
of side
shell
Source NKK (1992).
Figure 11.4
Side shell forces exerted

by dense
and
nondense cargo
loading method used,

iron ore cargoes
do not occupy a large volume of thehull,
hence the cargo does not exert any direct loads onto the side shell. This
is no force, other than that provided by
increases thehull stresses since there
to counteract the external hydrostatic pressures11.4)(figure
.
the structure itself,
Temperature.Cargo loaded ata high temperature cause

can damage to the hull
structure by affecting the metallurgical properties of the steel. In certain
high temperatures can lead
to hull degradation.
pelletised oreand coal cargoes,
Davies (1988)notes the effect
of ores coming straight out of furnaces and being
loaded at well above the recommended temperature of 65C.
49
BTCE Report 85
Cargo hold
Section 'AA'
Source NKK (1992).

Figure 11.5
Structural cross-section
of a typical bulk carrier
Coal. Studies by bothNKK (1992)and Lloyd's Register of Shipping(1992a)

indicate that high sulphur coals
can initiate corrosion,with cracks appearing
within six months of carrying coal.
Sulphur compounds from the coal
and water
vapour combine to form acid whichcondenses onthe internal surface of the
side shell structures, which are cooled
by the lower temperature
of the sea
water outside hull.
the The acid then trickles
down the side shell frames causing
localised corrosion
where the frame
is welded to the side shell (figure
11.5).
Abrasion. Cargo abrasion also promotes corrosion.I f the paint system is

breached, corrosion sets
in. When a ship 'is loaded
with lighter cargoes such as
50
Appendix II
coal or grain, the side shell and side

in direct
frames contact
arewith the cargo
11.4).An abrasive cargo can remove both the paint and
(see figure
of corrosion. Ironically iron ore rarely causes any mechanical
damage to the
protective coating because
it normally doesnot reach the side frames (NKK
1992)(figure 11.4).
any
evide
Classification societies
and flag states
Flag states and classification societies, through their respective regulations,
influence a ships seaworthiness and structural integrity, although ultimately the
owner is responsible for the condition
of the ship.
in ship
Unfortunately i t was not possibleto study the effect of different owners
failures.Of the approximately
3000 ships in the database there762were
different
owners, owning from 1 to 44 ships each. There is no statistically satisfactory
a large, diverse group given the relatively
numbersmall
method to analyse such
of failures. Data on past owners, or the number of a past
ship, owners
were of
also not available.
someTo
degree flag state and classification society provide an
maintenance.
alternative measure of owners to approach
market forces since
Classification societies and flag states are both to
subject
within each group there is competition for ship registrations.
It has been claimed
that poor quality ships migrate from traditional flag states and classification
societies to flagsof convenience and
to second-rate registers, because owners
with safety and maintenance inspection standards
are able to select societies
that match their approachto maintenance and the conditionof their ships
(HORSCOTCI1992a).
FATIGUE
Fatigue is a phenomenon that leadsto failure under conditions of repeated,
fluctuating or interrupted loads.As the number of cycles or fluctuations
ch fatigue failure is likelyto occur is
increases, the critical stress levelwhiat
reduced. Fatigue failure occurs well below the stress levels at which failure
would occur under monotonic7 loading.
Stress cycles for ships vary from the long-period
cyclesloading
caused
by ship
and unloading
to the very rapid cycles bycaused
machinery vibration.
The rate
at which fatigue normally develops depends upon the type and magnitude of
these various stress cycles.
The most common stress cycles affecting the ships
hull are those dueto
passing waves. These cycles occur approximately every
12 to 24 seconds
depending on the sea conditions (British Maritime Technology
1986). In the
up to 3 million cycles, depending on
space of a year,a ship could experience
the time at sea and the wavelength
of in.
theSince
seas most waves
it operates
7. Unvaried, non-changing load.
51
BTCE Report 85
BTCE
\
\
\
\Typical
U)
mild steel fatigue curve
v)
92
Endurance limit
typical for mild
v)
.f
-
steel
LL
1 o4
Figure 11.6
1 o5
etc
1 06
1 o7
Cycles of stress
polymer
curve
- -- -- -----
Endurance stre_ngt_h
typical for polymers
"
"
"
"
"
"
"
"
Typical
fatigue
1 oo
Typical fatigue curves
encountered are not large and their dowavelengths

not correspond
to the ship's
length, the magnitude of the stresswillcycles
be small.However, because
of
the large
number of cycles, their effect be cannot
ignored.
Fatigue failure usually starts
with micro-cracks whichgrow over timeuntil the
stresses within the structure increase
to such an extent that the structure fails
(Blodgett 1975,pp. 2.1-5,2.Sl).
I t is very hard to separate corrosion failureand fatigue failurebecause they
usually occur together.
Mild steel8 members with low stresseswill experience
fatigue failure once they have corroded sufficiently to increase the stress
endured during cyclic fluctuations
to levels at which fatigue failurebecomes
probable. Likewise, fatigue cracks provide an excellent environment for
corrosion to develop.
In some materials, particularly ferrousg

and titanium alloys, the stress at which
fatigue failure occurs reaches
a minimum at l@ cycles and falls
no further. This
stress is called the fatigue
endurance
or limit (see figure
11.6).
There is no fatigue limit for most other metals, polymers and composites.
The
allowable stress for these materials continuesto fall beyond 108 cycles,
gradually getting lower
and lower. For design purposes, the stress that allows
strength
failure-free operation 107
for cr 108cycles is often called the fatigue to
distinguis,h i t from endurance limit. (Often, in expressing the data the terms
8. The steel most

commonly used
in structure.
9. For steels whereuts is
the less than or toequal
1.4GPa.
52
Appendix I1
endurance limit and fatigue strengtht0 are interchanged it and
is left to the
reader to determine which is appropriate.)
to the number of load cycles for
Figure 11.6shows failure stresses according
various materials.
Historically, ships were considered tonot

suffer from fatigue since they were
primarily constructed out of mild steels, and themild steel structures were
did not exceed
210 MPa (30 000 psi),which is thesame
designed so the stress
(in this case the endurance
limit) at 106
level of stress as the fatigue strength
cycles for bending loads (Blodgett
p. 2.1-5).
1975, Butin reality the endurance
limit of mild steel ship structures is aactually
lot lower.
In designing structuresto withstand fatigue, there are three major types of
All three act upon
a
fluctuating loadsto consider: axial, bending and torsional.
ship. The endurance limitsor fatigue strengths quoted for axial and torsional
loads are lower than for bending loads:
85 per cent of the bending endurance
limit,for axial loads, and
58 per cent of the bending endurance

limit,for torsional loads.
Fatigue strength is also by:

reduced
Surface condition.
The normal endurance
limit quoted is for
a polished steel
80
round bar.
The endurance limit for hot rollemdild steel is approximately
per cent of the endurance limita polished
for
mild steel bar.
For corroded
steels in salt water, the endurance
limit is further reduced, 50
from
per cent
d steel,down to 10 per cent for the strongest
of the endurance limit mil
for
high tensile steels (Sharpe
1989,pp. B3/55-B3/56).
Notches and sfress concentrations.These can occurin places such as
frames, brackets, repairs, cracks and 1989,
tearsp. B3/56).
(Sharpe
All these influences reduce the ofstrength

the ships structure.
The extent of the
which
reduction can be sufficient for fatigue
a major toproblem
be for structures
were considered to be fatigue-free. For example, the lifatigue
mit for endurance
in old ships is not 210
the MPa for which they were
corroded steel structures
designed but may actually be less60than
MPa.
For shipsbuilt in mild steel, fatigue failure
becomes a real possibility as they
age.
Fatigue can be delayed
by maintenance activity
to reduce the detrimental effect
but every ships structure
will eventually fail.
Thus, as
of poor surface condition,
with corrosion, age
is a reasonable proxy
to measure the fatigue process.
10. The endurance limit or
fatigue strength quoted for commercial

is usually
steelsfor bending
using a polished steel round (Shape
bar 1989,p. B3/55).
11. Normal bending endurance
limit X 0.58(changefor torsional load)
X 0.5(conoded surface)
X corrections for notches etc.
53
BTCE Report 85
High tensile steels

Although traditionally only small quantities of high tensilewere
steels
usedin
ship building, primarily around the bottom and weather deck plating an
of side plating adjoining these regions (that is, and
the bilge
shear strakes12),
increasingly they are being used more
for highly
the
stressedmembers of the
hull in large ships
to keep down weight and
to reduce the use of extremely
thick
members (DArcangelo 1969).New buildings today have
up to 90 per cent of
their hull constructed in high tensile steels (Parker
1992).
High tensile steelsdo not have a fatigue endurance limit (Sharpe 1989, p.
63/55). Ship designers presumably were aware
well that ships constructed from
high tensile steels would eventually
be at high risk of fatigue failure
and so have
a finite life.
CREW TRAINING
Poorly trainedcrews andlack of a common language between crew,
officers
and land based workersmay result in inefficient ship operations
(HORSCOTCI
1992b). It has been argued
that poorly trained crews lose ships whilegood
crews save ships
(HORSCOTCI 1992a). Other things being equal, isthere
a
good deal of merit
in this argument. During
a crisis, such
as a ship encountering
bad weatheror beginningto break up, crew training and communicationmay
well be critical
to the safety aof
ship.
Since there were no data on crew nationality or training standards, the on

available proxy
was flag state. But thisa poor
is proxy since crew nationality is
not necessarily related
to flag.
Further work may be warranted to determine the importanceof training in
helping save ships that suffer structural
damage during a voyage.
HEAVY
SEAS
Heavy seas can

act as a catalyst for failure. Both Lloyds
and N K K note the
concurrence of heavy seas failure
and
(Lloyds Register of Shipping
1992a;N K K
1992). The stresses imposedby waves are discussed in the fatigue section
above.
Proxies thatmay be usedto measure extreme heavy
areas, season, and wavelength relationships.
seas
are
route,
bad
Of the 50 world fleet failures examined, many experienced heavy weather

before and during failure(NKK 1992; Ferguson 1991; Beresford & Dobson
12. A strake isa course orrow of shell,deck, bulkhead or other plating (DArcangelo 1969,
p. 600).
54
se
Appendix II
55
BTCE Repod 85
1989;DTC 1990,1991a, 1991b, 1991c, 1991d). The majority of the ships failed
in well known bad weatherzones (figure 11.7).For example, the
loss of the
Daeyang Honey in late 1992 occurred duringa typhoon 300 nautical miles east
of the Philippines. Most of the Australian departure failures occurredin the
Of the ships which sank,
Southern IndianOcean, where
storms are prevalent.
four experienced gale-force witwinds
h rough seas and
swell prior
to failure.
Bad weather can place extra stress

on areas already
weakened by corrosion
and fatigue. Wave-induced load and hammering in rough seas cantrigger
cracks and detachments of hold frames, especially those weakened by
corrosion and wastage (Lloyds Register
of Shipping1992a;N K K 1992).
As discussed above, under
modes of failure, the riskbeam
of failure is highin
heavy seas when a ship isin extreme hogging or sagging conditions,
when the
length ofwave is roughly equivalent to the ships length11.2(see
figure
).If beam
failure is the primary failure
mechanism it could be expected that there would
a strong correlation
between the size of failed
and route.
ships
be
Alternatively, i f shear failure is the primary cause then size would not be
important, and there should
a strong
be correlationwith alternate hold loading
(seefigure ll.3),but not with size of the ship.
Although
150 000
expected
size and
is not
ships in the size ranges80 000 to 100 000 dwt and 100 000 to
dwt13 were found to have failure rates significantly higher than
lll.5),there is also a strong correlationbetween ship
(appendix table
with beam failure but
route.
The statistical evidence is thus consistent
conclusive.
LOADING A N D UNLOADING
Recent research into structural failure has focused on the condition of th

In the past,
many papers on structural failure aplaced
heavy emphasis ship
on
loading and unloading practices. According to the N S W Coal Association
(1992),IMO research during the
1980s into causes of ship losses concentrated
trimming procedures.
on cargo characteristics, loading and unloading,
and
in the both
Cargo loading and unloading procedures can affect ship structures,
loads exerted on hull
the and in damage caused to the hull. Ferguson (1991)
ways the cargo can overloadhullthe
structure
and N K K (1992)both detail the
and cause
damage.
Loading practices
Three loading issues may
that
affect the risk of failure are:
13. Deadweight was used as a proxy for size.
56
Appendix I1
TABLE 11.1
x2 ANALYSIS OF IRON O R E
THE
C A P EGOOD
O FHOPE,
DEPARTURE
Eipected
Port
failures
V O Y A G ROUNDING
ES
PORT
BY OF
Actual
failures
Dampier, Australia
2.2
1.2
Port Hedland, Australia
1.3
Port Walcott, Australia
Saldanha Bay, South Africa 1.8
1.7
Sepetiba, Brazil
3.7
Tubarao,Brazil
3.0
Other
15.0
Total
?3
1.5
1
2
2
1
0.0
0.4
0.0
0.3
0.0
1.3
4
1
15
3.6a

by assuming that risk
of failure is proportional number
to theof voyages.
2. Figures may not add to totals due to rounding.
3. Significant x2 for 6 degrees of freedom is 12.5at the
0.05level of significance
a. Includesx2 for successful voyages.
Services data.
bad loading practices, including

trimming,and poor adherence to loading
procedures;
loading speed; and
homogeneous versus alternate hold loading.
Bad loading practice. I f bad loading practices (for example, cargo loaded too
for ballastpumps to keep up, and not keeping to loading plans) at the port of
loading are a major cause of failure then there should be
a statistical link
between ships that faila few
and particular ports of loading. However, although
a 2 analysis of the Lloyds voyage
showeddata
a strong statistical relationship
between port of departure14 and failures, the relationship
became marginal
when the analysiswas extended to allow for the effect commodity
of
carried.
When route as well as commodity werein table
used,
11.1, fas
or example, the
relationship was found to be insignificant. Table
11.1 results show that, for iron ore
voyages which round Cape
the of Good Hope,
if bad loading practices are
a
problem, then
i t is a universal problem, and one
not that can be attributed
to
particular ports.
hull
Loading or unloading operations can damage
cause or weakening of the
structure which is not apparent go
andunnoticed.
can
This
damage may only
become apparent when the vessel is undertakinga voyage whenit is fully
14. In the
absence
of data on port of loading, port of
was departure
used for port of loading.
57
fa
BTCE Report 85
loaded, particularlywith dense cargoes, and encounters bad weather.
Hence
be the true culprit,
but there were no
data
damage from past ports of call could
available to analyse this effect.
Some proponents of loading practices
as a cause
of structural failure note the
practice of dropping cargo from heights
in excess of 20 metres onto the hold
floor. Although this practice
may cause some localised high stresses on the hold
floor for a short period until the floor is covered by cargo, hold floors are
specifically reinforced to accommodate the high stress produced by falling
cargo.
Loading speed.Another hypothesis relates ship failures
to high speed of
loading. Iron ore loading rates are intypically
the range
6000 to 16 000
tonnes
per hour (Lloyds of
London 1993a).A X* analysis did not demonstrate any
link between rated speed
of loaderand ship failure.
statistically significant
Homogeneous versus alternate loading.
A third hypothesis is that the order of
loading the holds and the amount placed in each hold are important
determinants of structural damage. Cargo may be loaded in several ways
(Lloyds Register of Shipping 1992a):
homogeneously (evenly distributed over all the holds);

alternate holds (distributed odd-numbered
over
holds); or
combinations or variations ofabove.
the
Not all ships are designed

to be operated using
all of theabove methods.
The
ship may not be strong enough for some loading practices (Lloyds Register
of
Shipping 1992a). A mismatch between designand loading practice may
therefore resultin unwarranted stresses.
Very little information is available to analyse loading practices. Low density
cargoes such asgrains and coal are usually loaded homogeneously to
maximise the of
use the ships
volume capacity. Iron orea very
has high specific
gravity,and ship
a
loaded
with iron ore
will reach its mass capacity long before
it
reaches its volume capacity. It is for dense cargoes such as
iron ore that
alternate hold loading and its variants are often used (Lloyds Registerof
Shipping 1992a).
A M S A (1992)collected some load configuration data on ships leaving Western
Australian iron ore ports for threemonths in 1991. Both homogeneous and
alternate hold loading
methods were used
(49 per centhomogeneous, 51 per
cent alternate) during the threemonths. Department of Transport and
Communications ship failure reports have found that both types of cargo
distribution have been used amongst ships which have failed.
58
Appendix I1
Unloadingpractices
Poor unloading practices have been hypothesisedamong
as the
beingreasons
why ships suffer structural
damage. If this were the only reason for failure then
there should
be some correlation with particular previous types of cargo carried,
or ports visited. Unfortunately, the data available did not allow the effect
of
previous ports or cargoes
to be tested.
PROXIES FOR FACTORS

Table 11.2 summarises the
CAUSING
FAILURE
proxies
used
in the BTCE analysis.
TABLE 11.2 CAUSES OF FAILURE A N D PROXIES USED IN THE ANALYSIS

Causes
Proxv of failure
Corrosion and
Fatigue
Crew
Heavy seas
Loading
Unloading
poor
maintenance
Age,commodity,flag and classification society

Age
Flag and classification society
Route, deadweight, and sea regions
Commodity,ports
Previous commodities poand
rts
59
APPENDIX 111 RELATIONSHIPS BETWEEN VARIABLES

AFFECTING SHIP FAILURE
Although a relationship between

bulk ship failures and various ship and voyage
characteristics may be suspected,
it is important to establish
if the relationship
has statistical significance.
A chi-square(X2)analysis is used
in this appendix
to
test for this significance.
As anillustrative example, in table 111.1 we examine the hypothesis thata
relationship exists between ship age and ship structural failures. First, the
f failurisk
re
being analysed (ship age)
assumed
is to have no influence on othe
(the null hypothesis). On this basis the expected
number of failuresin each age
group is assumed to be proportional tonumber
the of voyages the ships
in this
age group have undertaken. inThat
table 111.1is,we assume that a 25-year-old
ship is just as likely during
to faialvoyage as
a new
ship on its maiden voyage
(age has
no influence). In the X* analysis we compare the number
of failures
null hypothesis) with the actual
expected where no relationship exists (the
TABLE 111.1
SHIP AGE
Age
(Years)
4 554
10 335
5 413
5 781
2 079
0-4
5-9
10-14
15-19
20-24
224
Total
30.0
Actual
Eipecfed
Voyagesfailures
failures
435
597
4.8
10.8
5.7
2
5
12
11
6.1
2.2
0.5
28
30
~
2
4.8
7.2
0.1
5.8
35.7
0.5
54.3a
~~~
Notes 1. Numbers may not add to totals

due to rounding.
2. Significantx2 value for
5 degrees of freedom and
5 per
of significance is 11.07.
cent level
from successful voyages (see text).
a. Includes contribution
Source BTCE estimates based on Lloyd's Mariiime Information

Services
data.
61
BTCE Report 85
number of failures recorded. The x2 score is a measure of the difference
between the expected and actual failures.
If the pattern of actual failures is similar to the pattern of expected failures

the totalsum of thex2 will be less than the significant
x2 value andw e have
111.2 is an exampleof this
proved that no significant relationship exists. Table
result (6.1is less than the significant 7.81).
value of
I f the totalsum of thex2 exceeds the significant

x2 value thenw e are satisfied
of this result(54.3
that a significant relationship exists. 111.1
Tableis an example
is greater than the significant 1value
1.07). of
The tables in this appendix (usually referredto as contingency tables) are
limited toone-way classifications.The number of failures aretoo few to allow
valid results to be obtained from two-way classifications. Multi-variate
classifications are effectively carried out through use of ilogit
analysis
n (chapter
3).Logit methodology
is discussed in appendix V.
In calculating thex2 score in a contingency table, the

number of actual and
expected successful voyages should be compared as well as the actual and
expected unsuccessful voyages. However,
in this analysis the comparison of
actual and expected successful voyages generallylittleadded
to the x2 score.
TABLE 111.2 FLAG

Actual
Expected
failures
failures
Voyages Flag
Four-wayflag
D
C
B
A
Total
597
classification
9 860
7 853
5 161
5 723
28
16
4
2
3.1
0.0
0.4
2.7
30.0
30
6.1a
10.34
19.66
16
14
3.1
1.6
30.0
30
4.7a
Two-wayflag
D
A, B,C
Total
~~
classification
9 860
18 737
597
28
10.3
8.2
5.4
6.0
Notes 1. Numbers m a y not add to totals due to rounding.

2. Significant x2 value for
5 per
7.81isand for 1 degree of
cent level of significance
freedom is 3.84.
a. Includes contribution from successful voyages (see text).
on Lloyds Maritime Information

Services data.
62
Appendix 111
TABLE 111.3 CLASSIFICATION SOCIETY
Society
category
fipecfed
Voyages failures
failures
D
C
B
A
6 850
7 239
6 808
7 700
Total
597
28
10
Actual
7.2
7.6
7.1
8.1
6
7
7
30.0
30
2
1 .l
0.3
0.0
0.1
1 .6a

due to rounding.
2. SignificantX* value for
3 degrees of freedom
cent level of significance is 7.81.
and
5 per

Services data.
TABLE 111.4 COMMODITY CARRIED

Average
fipecfed
Actual
failures
failures
Commodity
voyages
ore Iron
grain
and
Coal
Bauxite
alumina
Phosphate
Other
Total
3 373
9 332
9.8
27.0
33
1 193
974
1 039
3.5
2.8
3.0
3
3
4
0.0
15 911
46.0
46
77.4a
55.4
21.3
and
0.1
0.3
Notes 1. Numbers may not add to totalsdue to rounding.

X* value for
5 per
2. Significant
of significance is 9.49.
cent level
Sources Fearnleys (1992a, 1992b); Lloyds of
Register
Shipping
(1 992b).
All but one of the tables are based on voyage and ship data purchased from
Lloyd's Maritime Information Services.
The one
exception is table
111.4,which is
1992b)data, which allows
a more disaggregated
based on Fearnleys (1992a,
analysis of commodities.
63
BTCE Report 85
TABLE 111.5 SIZE OF SHIP
Expected
Size
(000
Voyages
dwt)
33.7a
failures
failures
30-50
5&80
8&100
100-1 50
>l50
30 Total
30.0 597
13
520
9 174
589
3 256
2 058
28
14.2
9.6
0.6
3.4
2.2
4
9
3
11
3
7.3
0.0
9.2
16.8
0.3

due to rounding.
2. Significant X* value for
5 per
9.49.is
Services data.
TABLE 111.6 V O Y A G E
Weather
W E A T H ECONDITIONS
R
Voyages
Good
Bad
Total
Expected
Actual
failures
failures
23
7
30
14
16
30
21 913
6 684
28 597
2
3.5
11.5
15.1a
Notes
1. Numbers may not addto totals due to rounding.

5 per
is
3.84.
Services data.
TABLE 111.7 ROUTE
Route
Brazil-Asia
Brazil-Europe
South Africa-Asia
India-Mediterranean
WA-Japan
WA-North Europe
Other
258.5a 30 Total 30
597
Notes
Expected
Actual
Voyages
failuresfailures
646
1 172
771
78
901
289
24 740
0.7
1.2
0.8
0.1
1 .o
0.3
25.9
3
6
3
3
2
2
7
7
41.8
2.6
5.9
45.0
1.2
147.9
13.8
28
1. Numbers may not add to totals

due to rounding.
5 per
is
12.59.
Source BTCE estimates based on Lloyds Mariiime Information
Services data.
64
APPENDIX IV CHARACTERISTICS OF SHIPS DEPARTING

FROM AUSTRALIAN BULK
PORTS
There is a substantial difference

in the number of structural failuresbulk
of ships
departing from the eastern Australian seaboard
and those departing from the
western seaboard. Between October
1989 and December
1991 there were nine
failures of ships departing from Western Australianbut ports
no failures of ships
departing from eastern Australian ports.
The larger number of failures ofbulk ships departing from Western Australian
ports raises the question of whether differences
in the ships serving the
two
coasts might explain the divergence
in failure rates. Also of interest is whether
bulk ships serving Australian ports differ from those serving
in other
portsbulk
exporting countries.
Chapter.3 suggests that route, commodity, flag age
andof the ship are the
major factors influencing the
risk
of structural
failure.
The analysis here therefore
focuses on these characteristics as well as examining
in the ship
contextsize
of
the Australian routes.
AGE
Figure IV.l illustrates theage distribution ofbulk ships departing from Australia
on major routes.
The age distributions are significantly differentbetween the
different routes (table
IV.l).It is clear that Western
the
Australia
to North Europe
route (which
has higher
a
failure rate) involves older
(31 per
ships cent are older
to Japan and Asia route
(12per cent
than 15 years) than the eastern Australia
are older than
15 years). The age difference would partly explain the difference
in failure rates.However, the Western Australia
to Asia route (mainly Chinese
destinations) has an even higher proportion of old ships(57 per cent) but
recorded no failures during the study period.
The routes from South Africa
to Asia and Brazil to Asia
shown
(not
in figure lV.l
and table IV.1)have comparable
proportions of ships older than
15 years to the
Western Australia to Japan and WesternAustralia to North Europe routes,
namely 24 and 33 p e r cent, respectively. Figure
2.11 shows that these routes
also have comparable elevated failure patterns.
65
BTCE Report 85
loo
Age (years)
m ,24
2&24
80-
015-19
010-14
5
n
60-
m5-9
m04
S
>
c
40-
.-0
e 20a
01
Eastern
Australia to
Asia &Japan
Western
Australia
to Japan
Western
Australia to
Nth Europe
Note Asia excludes Japan.

Source BTCE estimates based on Lloyds
Services data.
and ship age
Figure IV.l Australian routes
Western
Australia
to Asia
Maritime
Information
BTCE
TABLE IV.l AUSTRALIAN R O U T E S
A NSHIP
D AGE
(vovages)
Aae
"
5-9
10-14
75-19
Asia Japan
including
31 1
20-24
> 24
Total
Eastern Australia to
3 276
67
5
Actual
545 1511 837
Western Australia Japan
to
901
145
42
1
157
Actual 320
236
901
18
1
86
Expected 41 230
6
150
94.1
41.30.1
30.2
0.3
x2 22.0
0.1
Western Australia to
North Europe
77
13
0
289
Actual
71
87
41
289
6
0
27
48
74
Expected133
0.4
8.5
115.7
89.6
1
6
.
1
0
.
1
1
.o
x2
Western Australia to Asia excluding
Japan
1 006
172
175
229
107
Actual 183
140
1
1 006
96
21
Expected
167 464 257
21
348
66.2
2111
18925
21.8
x2 170.2 53.3
Notes 1. 'Expected'number of voyages is calculated on the basis number
that the
of
voyages by each age group would be proportional
number oto
f voyages
the by
ships in that age group on the Eastern Australia to Asia and Japan
2. Figures may not add to totalsdue to rounding.
3. See appendix 111 for an explanation of
x2.
Source BTCE estimates based on Lloyds Mariiime Information Services data.
66
route.
Appendix IV
SIZE
Figure IV.2 illustrates the sizes of
bulk ships on the major Australian routes.
Ships departing from Western Australiato Japan and to North Europe are
significantly larger than ships departing on the other routes
IV.2).
(table
These
ships are mainly large ships carrying iron ore.
The route from Western Australia
to Asia hasa high proportion of small ships,
which also tend
to be older ships.
The eastern Australia
to Japan route isused by both coaland grain ships. Grain
ships on Australian trade routes rarely panamax
exceed size. Coal ships are
more likely tobe larger thanpanamax size.The combined size distributions of
to be tend
the ships carrying grain
and coal from eastern Australian ports would
more balanced compared
with the distribution of ship sizes on the other routes.
In appendix Ill, ships in the size range

80 000 to 150 000 dwt were found
to be
overrepresented in structural failures.
The proportion of ships
in this size range
on the Western Australia
to North Europe route
(35 per cent)was considerably
larger than any
on of the other routes, the next largest being theto South Africa
Asia routewith 29 per cent. However, the relationship between size and failure
Il).
risk is inconclusive (see appendix
100-
-E
Size (000dwt)
> l 50
0100-150
m 80-100
[
50-80
m 30-50
80-
kQ
0)
P)
60-
>
5 40C
0
._
20-
Q-
Eastern
Australia to
Asia &Japan
Western
Australia
to Japan
Western
Australia to
Nth Europe
Western
Australia
to Asia
Note Asia excludes Japan.

on LloydsMaritime Information
Services data.
routes
and ship size
Figure IV.2 Australian
BTCE
1. Panamax size refers to ships between 50 000 and 80 000 dwt. They are the maximum
sized
bulk
ships
that
can Panama
transit Canal.
the
67
BTCE Report 85
TABLE IV.2 AUSTRALIAN R O U T E S
A SHIP
N D SIZE
fvovages)
Size (000)
3&50
50-80
Eastern Australia to Asia Japan

including
Actual
1 258
1 164
Japan
Actual
128
84
Expected 320
346
x2
174.2
Western Australia
Actual
Expected
x2
116.9
to
100-150
> 150
Total
165
544
145
3 276
7
45
32.5
247
150
63.4
435
40
3 914.8
901
901
4 322.2
4
15
7.7.
98
48
52.1
131
13
1 092.4
289
289
1 269.4
127
167
9.6
134
45
179.8
1 006
1 006
466.5
North
Europe
22
111
71.3
45.9
Western Australia
Actual 153
Expected 357
x2
137.3
to
80-100
34
103
As;#
592
386
109.5
51
50.7
Notes 1. Expectednumber of voyages is calculatedon the basis that number

the of
voyages by each age group would be proportionalnumber
to othe
f voyages by
ships in thatage group on the Eastern Australia
to Asia and Japan
route.
2. Figures may not add to totals due to rounding.
3. See appendix I l l for an explanation of x2.
a. Excluding Japan.
FLAG STATE
Figure IV.3 shows the flag state of
bulk ships employed on the major routes.
There is a significant differencebetween the flag distributions on the different
routes (see table
IV.3).The eastern Australian routes have
a higher proportion
of voyages of ships registeredwith flags with poor casualty records (category
D).The Western Australian routesto Japan and
North Europe both have higher
proportions of voyages of ships registeredwith flags with low casualty rates
(category A).
Because the two routes with the highest failure rates Western Australiato
Japan and
to NorthEurope -have relatively low proportions of ships registered
with flags with high casualty rates,it appears that flag is not as important a
factor indicating risk of failure as is often suggested. The evidence here
suggests that route might
a muchbemore important factor than flag.
The routes from Brazil and South Africa havea much higher proportion of
voyages by ships registered
with flags with high casualty rates (category
D)than
the Australian routes.
The proportions for the South to
Africa
Asia and Brazil to
Asia routes are both
34 per centand the Brazilto Europe route
is 37 per cent,
68
Appendix /V
Eastern
Australia to
Asia &Japan
Western
Australia
to Japan
Western
Australia to
Nth Europe
Western
Australia
to Asia
Notes 1. Asia excludes Japan.

2.Flag category
A has the lowest casualty rate and
D
category
has the highest casualty
Seerate.
chapter 2 for the method
of allocating flags to categories.
Source BTCE estimates based Lloyds
on Maritime Information
Services data.
Figure IV.3 Australian
routes
and flag
BTCE
compared with 14 and 23 per cent, respectively, on the Western Australia

to
Japan and
North Europe routes, although they have similar proportions of older
ships,as noted above.
CONCLUSION
Although there are significant differences between the ships serving the vario
routes departing from Australian
bulk ports, the differences
do not suggest that
there are any factors unique
to Australian ports that contribute
to failure. The
difference in failure rates between ships departing from eastern and western
seaboards can beexplained by differences in age of the ships and the
commodities carried.
The Australian iron ore routes are servicedwithbya ships
similar proportion of
old ships to other comparable international iron ore routes,
and the flag distribution favours the Australian
The analysis
routes. discussed
in
appendix I l l found no port effect.
The larger size of ships
one on
of theWestern
Australian routes was the only factor where an Australian route showed a
significant difference that
might influence risk of failure.
However, the statistical
to risk of failure is not conclusive.
evidence relating size
69
BTCE Report 85
TABLE IV.3 AUSTRALIAN ROUTES
AND
FLAG
(voyages)
Flag
D
Eastern Australia to Asia including
Japan
Actual
294 590 1 080
Western Australia toJapan
Actual
162
297
Expected
0.4
98.5
x2
126
Western Australia
Actual
Expected
332
503
Actual
183
Expected
361
81
0.3
Total
1 312
3 276
84.1
901
183.3
to North
Europe
66
95 289
9.020.7
x2
170
categotf
51
289
52
116
0.0
1.8
42
26
9.9
130
Asid.'
150
99.5
0.0
100690
1 886.7
403
134.6
2 120.8
Flag category
A has the lowest casualty rate and
D has
category
the highest casualty
rate.See chapter 2 for the
method of allocating flag states
to categories.
b. Excluding Japan.
Notes 1. 'Expected'number of voyages is calculatedon the basis that
number
theof
to the number of voyages by
voyages by each
age group would be proportional
ships in that age group on the Easternto Asia
Australia
and Japan route.
2. Figures
may not add to totals
due to rounding.
of
3. See appendix 1 1 1 for an explanation x2.
a.
The evidence supports the conclusion

in chapter 3 that weather conditions on
particular routes play a major role in structural failure of bulk ships, in
conjunction with commodity carried, and the condition of the ship as m
by age and
flag state.
70
APPENDIX V LOGIT
ANALYSIS
The analysis of structural failures of

bulk ships is essentially an analysis of
voyages that have one of two outcomes: the voyage
is either completed
fails). Chapter2 highlights the main
successfully orit is unsuccessful (that it is,
factors influencing ship failure. To understand the factors better and their
a technique which reflects the binary response
interrelationship with each other,
to predict which ships are
is needed.Also needed is a tool that allows surveyors
more likely to fail.
The logit technique
statistical tool which
a ship that fails
coded 0,then the
The logistic
is well to
suited
the analysis of binary response
It is data.
a
permits estimation of the probability of an If event occurring
is coded
1 and aas
ship that successfully completes
a voyage is
model represents the probability of failure.
n the
curve iused
analysis
has
the
form:
Pr (Shipfails)=l/(I+e-)
to be estimated
where p is a vector of coefficients
variables.
and
X is a vector of explanatory
Figure V.l illustrates a typical logistic curve.

The vector p is estimatedby maximum likelihood methods.
The theory of logit
analysis is described
in several books such as (1991).
Collett
One method of examining the usefulness of the model isto calculate the
confidence limits for the predicted logistics curve. However, the confidence
of the data.
may be affected by an inherent characteristic
The logit procedure, and regression analysis
in general, is based on the
of all other observations.
assumption that each observation is independent
29 OOO voyages in the database were undertaken
However, the approximately
by about 3000 ships. That is, each of the ships, on average,
10
completed
voyages departing from the five origin icountries
n the database. There
is very
71
BTCE Report 85
BTCE
10.9
m 0.8
c
S> 0.70) 0.6c
055 0.40.30.2-
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 l l l l l l l l l l l l l l l l l l l l
10
25
20
15
30
35
40
45
50
Explanatory variable
Figure V.l
Typical logistic curve
likely to be some correlation between repeated voyages undertaken by the

same ship on the same route but at different dates. The assumption of
independence between observations
is, therefore, at least questionable.
The logit proceduredoes not allow for the possible correlation
between repeated
voyages, although its existence can affect the accuracy of thecomputed
sts31dard errors.
In theory, the effect of correlation
between voyages either
can
In practice,errors.
it is more
increase or decrease the magnitude of the standard
likely to lead to standard errors that are smaller than those calculated taking
account of the correlation. Unfortunately i t is not possible to estimate the
magnitude of the effectto confirm
or
its direction.
Although the standard errors are affected,
is no there
bias in the estimationof
the coefficients.
CONFIDENCE LIMITS
Confidence limits for the main parameters can be calculated
(SAS Institute
1989,p. 1091)as follows.
.:B
7 = P?, is estimated by fi =
The standard deviation,
The linear predictor,
e($, can be computed the
as square root
of ?V,? where V, is the estimated
covariance matrix of the parameter P.estimates
The confidence interval around

fi is given byfi k za,,6(fi),
where ZaI2is the
100(1-a/2)percentile point of the normal distribution.
The upper and lower
confidence limits are then given by:
l/{l+exp[-(fi+z,,,ii(fi))])
72
and l/{l+exp[-(fi-z,,,~(fi))]}
Appendix V
Confidence interval for change in age that

different flag
implies
same risk as a
The results in chapter 3 indicate that ships registeredwith a flag with high
casualty rates are subject to same
the risk of failureas ships registered
with
flags with low casualty rates
but which are 5 years older.
The confidence limit for
in age that is equivalent
to a change in flag is not same
the as the
the difference
were
confidence limits for6.In the previous section, the confidence limits
calculated on the assumption allthat
variables can
change. The full covariance
matrix is therefore inused
the calculation.
th all other variables

The problem examined here concerns only two wivariables,
held constant.
Only the variance oftwothe
variables and the covariance between
them are needed in the calculation of the confidenceThe
limits.
following is from
notes on logit
model predictions suppliedby Dr T.S. Breusch of the Department
of Statistics, Australian National University
comm.
(pers.
1993).
The model is given by:
Pr (Shipfails)= f(X1P2+..,)
where f(Z)= l / l(l+e-')
The aim is to find a confidence interval fora change in X, that exactly
is,
compensates for a one unit change in X, leaving X,Pl+ X2P2unchanged. That
a confidence interval 8for
= -p, /p2.There are two methods
that can be used.
Method l
-Linear
Approximation
-5.
Then:
Let 6 =
PP
6-e=(-;;1-e)=--(~~+ep,)
1 P2
P2
The variance is approximately:

-
var(8) =T(v,, +2evI2+e
P2
si a, obtained
where vu is the covariance betweenand
from
vb .
'12
The standard error6(0)is [var (6)]
A symmetric 100(1-a/2) per cent confidence interval can then be formed

with end points 6 k ~~,~6.(6).
73
BTCE Report 85
Method 2 Fiellers Method

The following statement has probablity contenta/2)
lOO(1:
The end points of the confidence interval for8 values

the
are defined by the
roots of the quadratic equation:
The confidence interval

will generally notbe
6 = -p1
/p2.
symmetric
about
the
point
estimate
Method 2 is preferred by many users because i t is exact if the coefficient

estimates are exactly normally distributed, although they are only
normal here. Neither approach
is to be trusted i f the results are not roughly
similar. Both
methods are discussed
by Collett (1991,pp. 96-101).
The confidence limits for change
the in age to compensate for a change
in flag
category is 1.2to 8.7years usingmethod 1, and 1.6to 9.7years usingmethod
2.The results using the
two methods
are sufficiently similar
to allow some trust
to be placed
in them.
The two methodscould be usedin a similar way to estimate confidence
intervals for
changes in age to compensate for changes in route or commodity.
74
approx
REFERENCES
ABS
ACA
AGPS
AMSA
BTCE
DTC
HORSCOTCI
NKK
NSW
UK
American Bureau
Of Shipping
Australian Coal Association
Australian Government Publishing Service
Australian Maritime Safety Authority
Bureau of Transport and Communications Economics
Department of Transport and Communications
House of Representatives Standing
Committee Transport,
on
Communications and
lnfrastructure
Nippon Kaiji Kyokai
N e w South Wales
United Kingdom
A B S 1992,Submission by the American Bureau

of Shipping to the
House of
Representatives Standing Committee on Transport, Communications and
lnfrastructure lnquiry into Ship Safety,HORSCOTCI Submission no.39,
HORSCOTCI,Canberra.
A C A 1992, Submission by the Australian Coal Association to the
House of
Representatives Standing Committee on Transport, Communications and
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ABBREVIATIONS
ABS
ACA
AMSA
BTCE
DTC
dwt
GPa
GRT
HORSCOTCI
IMO
MPa
NSW
NKK
OECD
psi
uts
American Bureau
of Shipping
Australian Coal Association
Australian Maritime Safety Authority
Bureau of Transport and Communications Economics
Department of Transport and Communications
Deadweight tonnage
Gigapascals
Gross registered tonnage
House of Representatives Standing Committee on Transport,
Communications and Infrastructure
International Maritime Organisation
Megapascals
New South Wales
Nippon Kaiji Kyokai
Organisation for Economic Co-operation and Development
Pounds per square inch
Ultimate tensile stress
79

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BTE Publication Summary

Structural Failure of Large Bulk Ships

Australian Government Publishing

Produced by The Australian Government Publishing

RELATIONSHIPS BETWEEN VARIABLES

CHARACTERISTICS O F SHIPS DEPARTING FROM

Age and failure rate

Flag and failure rate

Size and failure rate

Load line zones around

Estimates of failure probability

Confidence limits for effect

Proportion of ships that bewould

120 000 dwt

chatter ratea 120

Number of voyages Brazil to North

Secondhand prices and

Net present value of retaining120an

Internal rate of return of retaining

World bulk ship failures,

Australian routes and flag

Typical logistic curve

of a typical bulk carrier

Data for analysisof new ship

Bulk ships experiencing

Australian routes and flag

If the BTCEs technique had been applied over

Some commentators have proposed

Ofparticular lnter@!s{ ig wk@tR@f{h@@ g@ MnjqFe factors associated

t&jn$ 8 mu& pore active rolein adjusting premiums to reflect the

instrumental in reducing thenumber of bulk ships that suffer

Insurance companies were alsoas slow

HORSCOTCI concluded that international

Although HORSCOTClsfindings are relevant

other commodities, and

departing from Australia greater than for thos

estimate the relative strengths of the factors or the interactions between t

The BTCE purchased Lloyds voyage data for

Changes to name,owner, flag

Understanding the interaction between factors contributing

In nearly all structural failures bulk

All ships corrode. Preventive systems are therefore normally included

If protective coatings and other anti-corrosion systems are not maintained,

Ships are designed

be expected on the basis of voyage numbers.The

To test this hypothesis, were

to be a contrary tendency for ships

If flag is an indicator of risk of failure bulk

Note See text for definition of flag category.

Notes 1. Expected failures are calculated

Note See text for definition of classification society category.

Notes 1. Expected failures are calculated

Classification societieshave also been criticised for not adequately inspecting

Of the 50 bulk ship failures worldwideduring the period October 1989 to

Commodity and size

to be carriedin larger ships,

Source BTCE estimates

Figure 2.7 Commodity and age

Source BTCE estimates based on

Figure 2.8 Commodity and size

Note Expected failures are calculated by assuming

Figure 2.9 Size and failure rate

Large waves pounding an already

Note Expected failures are calculated