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global

What does the 2020 Global Sulphur emissions policy mean in practise?

In little more than 2 years shipping will have to shift to low sulphur fuel. The International Maritime Organisation (IMO) has set a global limit for sulphur in fuel oil used on board ships of 0.50% m/m (mass by mass) from 1 January 2020. This will significantly reduce the amount of sulphur oxide emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts. 

IMO has been working to reduce harmful impacts of shipping on the environment since the 1960s and the regulations for the Prevention of Air Pollution from Ships seek to control airborne emissions from ships (sulphur oxides (SOx), nitrogen oxides (NOx), ozone depleting substances (ODS), volatile organic compounds (VOC) and shipboard incineration) and their contribution to local and global air pollution, human health issues and environmental problems.

Under the new global cap, ships will have to use fuel oil on board with a sulphur content of no more than 0.50% m/m, against the current limit of 3.50%, which has been in effect since 1 January 2012.

The interpretation of “fuel oil used on board” includes use in main and auxiliary engines and boilers.

Exemptions are provided for situations involving the safety of the ship or saving life at sea, or if a ship or its equipment is damaged.

Another exemption allows for a ship to conduct trials for the development of ship emission reduction and control technologies and engine design programmes. This would require a special permit from the Administration(s) (flag State(s)).

Ships can meet the requirement by using low-sulphur compliant fuel oil.

An increasing number of ships are also using gas as a fuel as when ignited it leads to negligible sulphur oxide emissions. This has been recognised in the development by IMO of the International Code for Ships using Gases and other Low Flashpoint Fuels (the IGF Code), which was adopted in 2015. Another alternative fuel is methanol which is being used on some short sea services.

Ships may also meet the SOx emission requirements by using approved equivalent methods, such as exhaust gas cleaning systems or “scrubbers”, which “clean” the emissions before they are released into the atmosphere.

Last month, an ExxonMobil survey highlighted an ongoing sense of confusion and a lack of preparedness, with 70% of respondents saying that they do not believe that the industry is ready for the deadline, when a global limit of 0.5% sulphur will be imposed on marine fuel for vessels trading internationally.

The survey suggests that only 500 ships have been equipped with scrubbers. There has been something of a backlash against scrubber technology, most notably from Maersk and Klaveness, who have said they see the technology as being expensive and immature.

Other respondents to the ExxonMobil survey said they were concerned that shipping companies would cheat and falsify the sulphur content of their marine fuel.

what mix of fuels will be available in 2020 and at what cost for each type? Refiners have not been so forthcoming with information about what new capacity they are adding to deal with the expected rise in demand. If ship operators do switch to gasoil, they will have to compete with truck drivers and SUV owners to buy the fuel, which could drive up prices and possibly lead to shortages in supply.

Meanwhile, there will be a loophole for shipowners in 2020: vessels will be permitted to sail without compliant fuel if none is available, even if they do not have scrubbers installed.

Panos Zachariadis – Technical Director at Atlantic Bulk Carriers Management Ltd doesn’t believe that the industry is ready either.

“The industry is not ready. And by “industry” I mean mostly the fuel producers, by their own admission. That is the main problem. There were two studies submitted to IMO, one by “industry” including refiners.  Industry said there will be no fuel available by 2020 even if we started preparations and the required investments yesterday. In addition a submission by ISO cautioned about the danger of “designer” fuels.  These were simply ignored.  The majority of IMO member-states wanted favourable news headlines for various reasons (to show the EU that they take action etc). It was a “political” decision.  We have seen before what happens when facts are ignored and political decisions are taken (remember Ballast Water Treatment?)

In short I expect a mess and I’ll be very surprised if this goes smoothly and on schedule.  One possibility I see is that, come 2019, IMO will have to face reality (not enough availability of safe fuel) and re-examine the application date.  One other – unfortunate – possibility is that, since MDO cannot be available in such quantities, untested “designer” fuels will be introduced to fill the void.  Current experience with hybrid (desulfurised) fuels is not good; they are very unstable.  But a further fear is that inappropriate blends may also appear pausing a safety threat!  ISO in its submission to IMO warned that cutting heavy fuel with e.g. naptha may show acceptable flash point limit but still may be explosive!  And there will be no ISO or other quality standards for such “designer” fuels by 2020.”

It seems apparent that the information regarding the switch is causing uncertainty with regards to what the choices will be to make sure that ships are properly equipped to deal with the change. It could be a case that companies are waiting for their competitors to go first so that they can then make an informed decision on the best way to go, but with little over 2 years to go this seems a difficult strategy.  Compliance seems to be something of a grey area, but companies should by now have plans in place to make sure that as of 1st January 2020 they are ready to go.

Sources:

Hellinic Shipping News

Green 4 sea.com

Iims.org

Imo.org

digital age

Can container shipping reinvent for the digital age?

In 1967, the British Transport Docks Board (BTDB) commissioned McKinsey & Company to assess the impact of a recent development from the United States: container boxes. The first purpose built ships for them were being launched, and a few US lines were carrying these novelties on their regular service. 

McKinsey & Company predicted:

Containerised cargo is effectively becoming homogenous, like other bulk cargoes, and is subject to the same economies of scale. Economics of scale will result in this concentrated cargo being handled by a small number of large organisations. Efficient use of expensive containers will require extensive route networks under unified control to allow load balancing.”

Now that standardised containers have been introduced in the shipping industry, the rush to ‘get on the bandwagon’ will probably lead to substantial overexpansion.

If container ships follow the tanker trend, ships of more than 10,000-container capacity could be available.

Feeder services will tend to replace direct calls when the large container ships come into service.

Rotterdam is an example of a European port which is in a good position to fill a major transoceanic role.

The role of British ports may tend to become that of feeders to the Continent…. Proximity of British East Coast ports to Europe will dictate their use.

In their October 2017 report they posed the question: In 1967, containers were disrupting the shipping business, so the players had to rethink everything. Now it’s digital, big data, and the Internet of Things. Is it time to rethink everything again? 

In 1956, the first ship to transport containers, named the Ideal X, carried only 58 of them. Since then, container-ship capacity has grown 370-fold: today’s largest vessels can hold more than 20,000 TEUs. Larger vessels provide greater cost efficiencies in fuel and crews, reduce greenhouse-gas emissions per container, and enable hub-and-spoke network strategies. Moreover, as operators collaborate in alliances, putting a single large vessel instead of two small ones on a given route has its advantages.

So, how much longer will this trend toward growth in capacity continue? In the long term, three factors could limit it.

The first is that returns to scale decline with increasing size, so a move from 20,000 to 40,000 TEUs wouldn’t reduce unit costs as much as a move from 10,000 to 20,000 TEUs.

Second, the narrowness and shallowness of some of the world’s waterways impose physical constraints: for example, the Strait of Malacca (between the Malay Peninsula and the Indonesian island of Sumatra) has a minimum depth of 25 meters, the most modern channels of the Suez Canal a depth of 24 meters. The latest designs for vessels that carry 24,000 TEUs have a depth of 16 meters, which leaves scope for further growth in capacity.

Third, over the past decade, the blitz for bigger vessels has strained terminal and port operators, forcing them to invest in new cranes, dredging equipment, reinforced quay walls, and extended berths. Unloading containers from bigger ships takes longer because cranes must reach farther across vessels, thus extending berth occupancy and reducing productivity.

On balance, we do not view 20,000 TEUs as the natural end point for container ships—50,000-TEU ones are not unthinkable in the next half-century. However, progress will probably be much slower than it was in the past decade: overcapacity means that new ordering will be slower over the next five to ten years. Lower slot costs materialise only when demand fills up larger ships, which hasn’t happened recently. But if demand catches up with supply, as it may well do in the early 2020s, the logic of scale will once again drive orders for bigger and bigger ships. Nonetheless, since 40 percent of all shipyard capacity is unutilised, and it’s not conceivable that governments will allow shipyard bankruptcies on a large scale, they could find a way to prompt some level of new ordering.

The size of boxes could also increase. From the original six-foot-long Conex box the US military used in the 1950s, they have grown to 20 and now 40 feet and above. The limitation on box size is compatibility with road, rail, and other modes of transport. On US and Chinese roads, the maximum box length is 53 feet, so containers of this size are common for US domestic trade. As road networks improve and trucking becomes autonomous on major routes, we may well see containers 60 or more feet long, as well as wider and taller containers.

Wholly automated terminal and inland operations, with self-driving trucks (and perhaps even self- driving containers or “hyperloops”) transporting containers to inland distribution centres, will probably become the norm in the next couple of decades. Self-loading trucks, arriving just in time to pick up the next container without waiting or moving around unproductively at terminals, would improve the interface between ports and inland transport. Imagine a terminal with no stacks in the yard; instead, customs would pre-clear boxes digitally, and autonomous trucks would take them straight from ships and out to customers.

Advances in the use of data and analytics will bring further step changes in productivity. Shipping companies could heed the example of today’s state- of-the-art aircraft, which generate up to a terabyte of data per flight. Coupled with the introduction of more sensors, the better usage of the data that ships and containers generate would allow enhancements such as optimising voyages in real time (by taking into account weather, currents, traffic, and other external factors), smarter stowage and terminal operations, and predictive maintenance. Data could also improve the coordination of arrivals at port—a major benefit, since 48 per- cent of container ships arrive more than 12 hours behind schedule, thus wasting the carriers’ fuel and underutilising the terminal operators’ labor and quay space.

Data can create additional value for customers too. Full transparency on shipments, from one end of the value chain to the other, would be an enormous boon to carriers, forwarders, and shippers alike, giving them access to real-time information and enabling them to predict a container’s availability, arrival times, and so forth. Some ports (such as Antwerp, Hamburg, and Singapore) are already starting to share information in real time across data ecosystems, which could eventually extend throughout the whole industry. That would create a truly integrated end-to-end flow of containers and therefore make the industry more productive by reducing handovers, waiting times, and unnecessary handling.

A data-enabled shipping industry could also support its customers’ supply chains in important ways— but that will require a truly new order of performance and efficiency. The real-time visibility of all container movements, reliable forecasts, and integrated flow management will pave the way for flexible, dynamic supply chains that all but eliminate waiting times and inefficiencies. This achievement will be especially beneficial for industries (such as automotive) that have increasingly complex supply chains or for those with special needs (suchas cold chains). It will also allow smart logistics providers to differentiate themselves and earn premiums. But these opportunities won’t appeal to all customers; other sectors will demand only basic logistics services at the lowest possible cost.

By 2067, we believe shipping will have some or all of these characteristics: 

Autonomous 50,000-TEU ships will plow the seas—perhaps alongside modular, dronelike floating containers—in a world where the volume of container trade is anything from two to five times greater than it is today.

Short-haul intraregional traffic will increase as manufacturing footprints disperse more widely because of converging global incomes and the increasing use of automation and robotics. Container flows within the Far East will continue to be huge, and the secondmost significant trade lane may link that region to Africa, with a stopover in South Asia.

After multiple value-destroying cycles of overcapacity and consolidation, three or four major container-shipping companies might emerge. These businesses could be either digitally enabled independents with a strong customer orientation and innovative commercial practices or small subsidiaries of tech giants seamlessly blending the digital and physical realms. Freight forwarding as a stand- alone business will be virtually extinct, since digital interactions will have reduced the need for intermediaries to manage logistics services for multiple participants in the value chain. Across the industry, all winners will have fully digitised their customer interactions and operating systems and will be closely connected via data ecosystems.

A fully autonomous transport chain will extend from initial loading, stowage, and sailing all the way to unloading directly into autonomous trains and trucks and drone-enabled last- mile deliveries.

The needs of customers will diverge: some will expect their shippers to be fully integrated into their supply chains—and be willing to pay a premium for that—while others continue to demand sea freight at the lowest possible cost. Both sets of customers will expect transparency and reliability to be the norm, not the exception.

What therefore has to be done to move shipping and containerisation further into the digital age?

First, invest in digital, which is the main way to differentiate products, disintermediate value chains, improve customer service, raise productivity, and cut costs. The risk is that tech giants and would-be digital disruptors will move faster than incumbents and capture most of the value from customer relationships.

Second, think about consolidation: the industry’s natural end game may involve fewer, larger operators. The past few decades of explosive trade growth created an environment that could sustain many players. Now that growth has slowed, the industry must rationalise overcapacity. Although some companies and investors could be candidates to lead the next wave of consolidation, becoming a target may sometimes be better for shareholders than struggling to be the winner at any cost. McKinsey research shows that from 2000 to 2015, in a range of industries, the value from deals was nine percentage points higher for average target companies than for average acquirers.21

Third, integrate. Some next-generation innovations now on the drawing board require careful orchestration across the value chain. Carriers and terminal operators share a particularly rich agenda: bigger vessels paired with investments in infrastructure for terminals, complete transparency on ship arrivals and berthing (thanks to geospatial analytics), and larger containers. Integrated logistics providers could make today’s freight forwarders largely irrelevant by mastering the complexity and the customer interface.

Fourth, be bold. The shipping industry has been built on the vision of audacious leaders with the per- severance to sail through the storms. It now faces a wave of digital disruption. The ability to convey a sense of purpose for employees, to create optimism about the journey ahead, and to maintain a steady course will be the hallmarks of the leaders shaping the industry for the next.

McKinsey and Company’s 1967 predictions were on point, so their analysis of the next 50 years of evolvement cannot be ignored. These changes seem massive and unachievable at the moment, but that would have been the case 50 years ago as well, and the industry is unrecognisable from then.  It is exciting to watch what the next years have in store, and the advances that can be made to make sure that shipping does truly come alive during the digital age.

To view the full report please go here, where you can download the full report at the bottom of the page.

container port

August was an all time high for container ports

August’s Drewry global container port throughput index reached an all-time high of 126.8 points.

The August figure, the highest since inception of the index in January 2012, was nearly 7 points up on August 2016 (120.0 points) and more than 11 points up on the August 2015 level of around 116 points.

The global index climbed 0.5% from July’s figure of 126.2.

The month-on-month index figures for China and Europe dropped 0.5% in August – totalling 136.1 (down from 136.8) and 114.2 (down from 114.7) respectively, but show more than 5% annual increase.

All regions showed at least 5% annual growth in August 2017. However, 2016 was a weak comparison in many cases, said Drewry.

It added that Africa – with 117.4 points in August, up from 102.7 in August 2016 (107.2 in July 2017) – is showing double digit annual growth. It pointed out, however, that the sample size is small.

North America showed the highest annual change of 7.0%, with 137.7 points, up from 128.7 in August 2016.

Its monthly change of 2.8% is equal to Latin America, which jumped from 110.4 points in July 2017 to 113.5 in August.

Latin America saw the third highest annual change of 6.1%, with 107.0 points in August 2016.

The Drewry Container Port Throughput Indices are a series of volume growth/decline indices based on monthly throughput data for a sample of over 220 ports worldwide, representing over 75% of global volumes.

The Container Throughput Index of the RWI – Leibniz Institute for Economic Research and the ISL – Institute of Shipping Economics and Logistics showed a further substantial increase in September 2017 from 128.5 to 129.7 (revised figures). Compared to the beginning of 2017 it gained almost six points. A similarly strong plus was last achieved in 2010.

The index is based on data continuously collected from world container ports by ISL as part of its market monitoring. Because large parts of international merchandise trade are transported by ship, the development of port handling is a good indicator for world trade.

As many ports release information about their activities only two weeks after the end of the respective month, the RWI/ISL Container Throughput Index is a reliable early indicator for the development of international merchandise trade and hence for the activity of the global economy. Together, the 82 ports covered in the index account for about six out of ten containers handled worldwide. The flash estimate for September is based on data reported by 45 ports, accounting for close to 80% of the total index volume.

The RWI/ISL-Container Throughput Index for October 2017 will be released on 21 November 2017.

•Source ISL / Port Strategy

 

Hanjin

Shockwaves across global trade networks as Hanjin Shipping collapses

Hanjin Shipping, the seventh-largest container shipment firm in the world collapsed in late August after its creditors stopped providing funding and it was forced to request court receivership.

Over $14bn in cargo was left stranded at sea, and shocked global trade networks were faced with unprecedented disruption. Container ships in transit at the time the news broke were forced to remain at sea for up to a week to avoid cargo being seized at the docks by creditors.

While some ships were seized, ports all over the world were forced to deny service to Hanjin ships because agents refused to unload cargo because they feared they would not be paid. The company had no option but to pay for unloading, which has continued into October.

Cho Yang-ho, the chairman of its parent company, Hanjin Group told a court hearing in early October that the Korean firm had reached the point at which it was no longer able compete sustainably against its global competitors in receipt of financial support from their governments.

He said: “What pains me the most is that due to the court receivership many ship crews were in the middle of international waters like orphans. I am very sorry and pained to have created a logistics crisis, but we did everything we could.”

The firm is currently compiling a plan for rehabilitation which it is expected to submit to a Seoul court before the end of the year. However, industry experts anticipate that in spite of its best efforts, the carrier will be liquidated in what will be the largest bankruptcy in the industry’s history.