Circular to Assureds (no 005 2009) – Carriage of Iron Ore Fines

Subject: Carriage of Iron Ore Fines

Circular to Assureds (no 005 2009) – Refer to page 11 on the attached

Introduction

The purpose of this circular is to alert Assureds to the special risks involved in the
carriage of Iron Ore Fines cargoes. We are grateful to Brookes Bell who have
supplied all technical data and guidance in relation to the application of the
International Maritime Solid Bulk Cargoes Code.

Guidance for Loading Cargoes of Iron Ore Fines

There have been a number of cases during the course of the last few years involving
onboard liquefaction of iron ore fine cargoes loaded from Indian ports. In the least
serious of these incidents, the vessels concerned experienced cargo liquefaction,
shifting and development of slight lists, whereas in the most serious extreme loss of
stability, capsize and sinking occurred. The following is a basic summary of the IMO
requirements for the loading of cargoes prone to liquefaction, such as iron ore fines
which should carefully be noted by all those engaged in the carriage of such
cargoes.

Cargoes not listed in the IMSBC Code

The most recent version of the IMO Code dealing with carriage of bulk materials is
the IMSBC Code (the “Code”). The Code has been available and applied on a
voluntary basis from 1 January 2009, anticipating its envisaged official entry into
force on 1 January 2011, from which date it will be mandatory under the provisions
of the SOLAS Convention.

Although iron ore fines are not listed explicitly in the Code as a material which may
liquefy it defines ‘cargoes which may liquefy’ as those which ‘contain a proportion of
fine particles and a certain amount of moisture’; iron ore fines as a cargo meet this
description, and these cargoes are known to be capable of liquefaction.

The Code states in section 1.3 that if a cargo is not listed in the index but is
proposed for carriage, the shipper should, prior to loading, provide the competent
authority of the port of loading with the characteristics and properties of the cargo.

Assessment of acceptability of consignments for safe shipment

This is dealt with under various sub-sections presented in ‘Section 4’ of the Code,
‘Assessment of acceptability of consignments for safe shipment’. The areas covered by this section include details of the information which must be supplied by the
shipper to the Master of a vessel waiting to load a shipment of such cargo, as well as
the background to that information, which includes sampling procedures and
frequency of sampling in addition to certification.

The section also makes clear that it is the responsibility of the shipper to ensure that
the cargo presented for loading is in a safe condition for shipment. Indeed it is a
requirement of the Code that shippers present to the Master prior to the
commencement of loading all necessary information, by way of certification, to
demonstrate that to the best of their knowledge, the cargo is at that time safe for
carriage.

For cargoes which may undergo liquefaction, data relating to the Flow Moisture Point
(FMP), Transportable Moisture Limit (TML) and the actual Moisture Content (MC)
are required.

Flow Moisture Point (FMP)

This is the moisture content of the material at which it first starts to show fluid
characteristics. For materials produced via a regular and repeatable physical
processing, such as metal ore concentrates, the Code requires that the FMP be
determined once every six months unless the process is changed in any significant
aspect. The FMP for such materials remains more or less constant hence the need
only to carry out checks infrequently. In contrast, physically irregular materials such
as iron ore fines or nickel laterite ores, due to their variable nature (and specifically
the particle size range/distribution) have a Flow Moisture Point which varies
significantly from mine to mine or from cargo to cargo. The Code states that where
the characteristics of the cargo are variable, the TML will need to be re-tested and
experience has shown that with iron ore fines cargoes this needs to be done for each
shipment.

Various laboratory test methods by which the FMP may be determined are described
in the Code in Appendix 2 .

Transportable Moisture Limit (TML)

The TML is defined as 90% of the numerical value of the FMP and is the maximum
moisture content permissible for any defined parcel of cargo within the shipment. It
should be noted that the Code also warns in section 7.2.3 that through moisture
migration it is possible for cargoes to develop a dangerous wet base even if the
average moisture content is less than the TML.

Moisture Content (MC)

The MC is the moisture content of the material at the time of shipment. Unlike
previous versions of the Bulk Cargo Code, the new Code makes clear that the MC
determination (sampling and analysis) should be no more than 1 week prior to the
time of loading, irrespective of whether the stockpile is open to the elements or not.
In the event that there is any rainfall or snowfall on the stockpile, then the suitability of the shipment for carriage must be reassessed by sampling and MC determination.
Only if the MC is still below the TML should the cargo be presented for loading.

Situation in India with Iron Ore Fines

Stockpiles

It appears that the majority of the stockpiles of iron ore fines are located in the open
and thus exposed to the elements. During the summer dry period, this is not such a
problem since the amount of rainfall is low. However, during monsoon time, this
means that the stockpiles are subjected to frequent heavy rainfall with the result that
the iron ore fines can become very wet. Since heavy and persistent rainfall occurs
virtually every day during this period, it becomes much more difficult to ensure that
the cargo is safe for carriage – the problem being that sampling and analysis for
moisture content takes at least a day to complete if done properly, by which time the
stockpiles are likely to have been wetted again by further rain if they have not been
properly covered.

Testing

Until the beginning of 2008 iron ore fines were not regularly tested for FMP, not least
because there was only one flow table in the whole of India, and the certificates
being issued generally stated that the TML was ’13.5% approx’. Since that time,
some laboratories have been set up equipped with the apparatus to determine FMP
and thus to provide better determined TML’s. However, the staff conducting these
new determinations have comparatively little experience and in any event, do not
always follow the correct procedure as set out in the Code, Appendix No. 2.
Consequently, the values being determined for FMP and hence TML are not
necessarily reliable or accurate.

In addition, the method being employed to determine MC is not necessarily in
compliance with the method stated in the Code, leading to other errors and possibly
to an undervalued result.

Certificates

The value of the information stated on the certificates being issued by the
laboratories is of course only as good and reliable as the test methods being used
and samples taken. Given the potential that there are deficiencies in the test
methods from some of the laboratories not all of the test results are necessarily
reliable.

Circular By Government of India Ministry of Shipping Dated 1 October 2009

Assured’s attention is drawn to a Circular dated 1 October 2009 published by the
Government of India Ministry of Shipping. This Circular highlights the current
difficulties and dangers experienced in relation to the carriage of iron ore fine
cargoes and sets out in its central paragraph that;

“Master, Owners and Agents of vessels are therefore advised to exercise due
caution while loading this cargo and ensure that the moisture content of the
cargo loaded on their vessel continues to remain within the transportable limit
before the vessels sails out of the port. To confirm the Moisture content,
Master’s of vessel may ensure that the hatch wise moisture content of the
cargo on the vessel is independently analysed whenever it has not been
possible to confirm that further increase in Moisture content had not taken
place after the cargo was tested for Moisture Content.”

On the face of it this appears to be reasonable advice. However the circular does not
deal with the fact that the normal regime of checks on board a vessel as applied to
other group A cargoes are only capable of detecting gross over moistness. The
reality of liquefaction is that it takes place during ocean transport as a consequence
of both the condition of the cargo and the energy imparted to the cargo from the
vessel’s movement in the seaway, engine vibrations etc. Cargoes which may appear
to be solid at the time of loading can and do take on a wholly different apparent
nature and behaviour when subjected to vibrations. This is the whole purpose of the
various tests for flow properties, energy is imparted into the samples to see whether
they flow. Even the crude can test is a method (albeit limited) of testing flow property.
The real difficulty in relation to the carriage of this cargo is that it is impossible for the
vessel to determine whether a cargo is safe to carry by means of normal visual
checks. Simple taking of samples is wholly inappropriate and most likely contrary to
the provisions of the Code. Assureds should ensure that when carrying such cargoes
owners are aware of the above issues. Proper additional checks should be carried
out if the Master has reason to believe that there is an inaccuracy in the certificates
provided by the shipper when loading the cargo.

Conclusions

Recent dramatic events have again highlighted the dangers associated with carriage
of iron ore fines, particularly from Indian ports, and the failures of the routine
procedures designed to ensure that only safe cargoes are presented for loading.
There is a possibility that the information provided in test certificates presented in
relation to the cargoes concerned could be inaccurate.

Under these circumstances, Masters and crews of ships arriving in Indian ports to
load iron ore fines should be aware of the dangers associated with carriage and
remain vigilant at all times by checking the condition of the cargo being presented
and weather conditions prior to loading onboard where cargo is being taken from
stock piles.

To this end, Section 8 of the Code describes the ‘can-test’ which is a simple spot
check by which the crew and Master can assess the condition of the cargo without
specialist equipment. However, it should be noted that this method does not replace
the laboratory test procedures described in the Code nor should it be relied upon as
an overall guarantee that the cargo is safe for carriage – it is only a spot check
designed to provide the Master with an indication of the condition of the cargo. If the
Master and/or crew have any doubt about the cargo being safe for carriage they
should seek specialist advice and further laboratory testing.

While the Code itself deals with the obligations of Shippers towards Owners when loading such bulk cargo, in practice Owners will look to Charterers to ensure that
they are in compliance with their obligations concerning the presentation of cargo for
carriage and that cargo as delivered is in accordance with the requirements of any
contract of carriage in place between Owners and Charterers. In light of the points
raised in this circular Assureds should pay special regard to their responsibilities
when loading such cargo.

Guidance on Loss Prevention

In view of the potentially dangerous nature of this cargo and technical advice set out
above, Assureds should take all steps to ensure that the requirements of the Code
are followed and all proper safety checks are maintained, including but not limited to
checking the accuracy of certificates. It is recommended that when considering the
carriage of iron ore fines ex India, Assureds appoint and retain an independent cargo
surveyor to monitor the loading operation, check certification and raise any points of
concern with the shipper and Master. If an Assured has any questions regarding the
carriage of iron ore fines they should get in touch with their normal contacts in the
Club’s claims department. Assureds may also wish to incorporate specific provisions
within their charterparties dealing with the risks involved in the carriage of iron ore
fines and to transfer responsibility to the Owners to check and ensure that the Code
requirements are followed. Again, if an Assured needs any assistance with the
review and/or advice in relation to particular clauses they should get in touch with
their normal contacts in the Club’s claims department.

Assureds should carefully check the provisions of their charterparties to ensure that
they are adequately protected in circumstances where the Shipper fails to comply
with the guidance provided in the Code and generally in relation to the carriage of
bulk cargoes.

Assureds attention is drawn to the provisions of the Terms and Conditions which
deal with the obligation at all times to comply with the ISM Code and SOLAS (Class
1 clause 4 (F) and Class 2 clause 13(P), and the exclusions in relation to imprudent
and/or hazardous trading Class 1 clause 4(D) and Class 2 clause 13(I)).

Details of how to purchase copies of the Code can be found at www.imo.org

Michael Else and Company Limited, Managers E. & O.E.

Dated London 26 October 2009