The annual fuel bill of Danish shipping giant A.P.Moller Maersk is set to increase by USD2 billion a year, at least, amid rising costs from the implementation of the 0.5 percent sulfur cap in 2020.
Simon Bergulf, director for regulatory affairs at A.P. Moller-Maersk A/S, told Bloomberg that the issues stemming from the new regulations have almost created a perfect storm, taking into account the expected tight availability of compliant fuels and required investments in infrastructure and research.
As informed, the company spent USD3.37 billion on fuel last year, meaning the new regulations are likely to almost double these expanses.
Maersk plans to comply with the new rules by using low sulphur fuel. The company said earlier that it was not investing in scrubbers taking into account various operational concerns.
As part of its efforts to ensure availability of compliant fuel, earlier this month Maersk tamed up with Royal Vopak, an independent tank storage operator, on a project aimed at launching 0.5 percent sulphur fuel bunkering facility in Rotterdam.
Under the project, Maersk will be able to supply its ships with compliant fuel at Vopak's modified facilities at Vopak Terminal Europoort.
The 2020 sulphur regulation, which will ban ships from using any marine fuel with a sulphur content above 0.5 pct as of Jan. 1, 2020, is expected to impose a heavy burden on owners as the annual fuel costs for the shipping industry are likely to jump by up to USD60 billion, including by USD10 billion for the containership sector alone.
Fears have been raised that some owners might opt to dodge the regulations and not invest in compliant fuels as paying a fine for non-compliance would be much cheaper. Maersk CEO Soren Skou said earlier this year that the only way for creating a level playing field with the new regulation would be strong enforcement, including banning of non-compliant ships.
The European Council decided on July 30 to lengthen the mandate of EU NAVFOR Somalia's operation till the end of 2020, which won European shipowners' welcome.
The Operation Atalanta is aimed to deter, prevent and repress acts of piracy and armed robbery off the Somali coast, and at the same time, to protect the World Food Program (WFP) and other vulnerable shipping, fishing activities and EU missions and programs in the region.
According to ECSA's Secretary General Martin Dorsman, the Operation and the collaboration with other international forces has greatly contributed to the significant reduction in piracy attacks in this region.
It is worth noting that the number of piracy attacks off the coast of Somalia in the Indian Ocean dropped from 176 in 2011 to 9 in 2017. What's more, no incidents were reported in the second quarter of 2018.
Nearly 3% of world loaded container traffic, or around 4-5 million TEU, could be at risk from becoming landfill following China’s decision to turn away “foreign garbage”.
Having given notice in July 2017, China has placed stricter quality thresholds on a range of waste imports. The new rules were implemented on January 1 and will become enforceable on March 1.
Shipping consultancy Drewry said that China’s policy shift is bad news for ocean carriers that are tasked with moving the waste materials. Concerned that laden boxes of waste paper might stand on the quay in China for lengthy periods of time, pending further investigation of contents, several lines decided to tighten up their procedures for the acceptance of bookings in the first place.
According to one major carrier that Drewry spoke with, the company was braced for some volume loss after China gave notice to the WTO in July, but the impact on backhaul shipments “has been negligible so far.” That situation does not appear to be limited to that single line as trade flow statistics out of the US and Europe did not veer off normal seasonal trends at the back end of 2017.
While the disruption to shipping might have been limited thus far, the carrier source did concede that they remain concerned about the situation as waste products can make up half of backhaul voyages. The carrier is most fearful for the most heavily-exposed westbound Transpacific market.
“It is unclear at this early stage whether China’s new waste quality thresholds can be attained, which puts significantly more tonnage at risk of being incinerated or put into landfill rather than boarding containerships. Other backhaul cargoes, particularly foodstuffs, will ease the pain for shipping lines,” Drewry concluded.
Danish shipping giant Maersk Line has welcomed a very strong signal from the NGOs and industry which called for an explicit ban on non-compliant fuel on board ships from 2020.
“I am very pleased to see this unprecedented and very strong signal from all sides, industry and NGOs, to support a global ban on high-sulphur fuels,” Søren Toft, CEO of Maersk Line, said.
“A ban is the best way to secure simple and robust enforcement. Only this will secure a level playing field and ultimately the health and environment objectives of the IMO Sulphur rules,” Toft added.
The global sulphur cap adopted by UN’s International Maritime Organization enters into force on January 1, 2020. The regulation will limit sulphur emissions from ships from 3.5 percent to 0.5 percent.
However, without robust and effective enforcement the regulation will put the global level playing field at risk, according to Danish Shipping.
Leading environmental organizations and the international shipping industry have joined forces and unitedly call for IMO Member States to support the proposal to ban non-compliant fuel on board unless the ship has a scrubber installation.
Two proposals on such a ban have been tabled by Norway and Cook Islands, as well a united international shipping industry. The proposals will be discussed at the upcoming Pollution, Prevention and Response (PPR) meeting at IMO in the beginning of February.
The European Community Shipowners’ Association (ECSA) has welcomed the recent move by the European Commission that could pave the way for the single market for shipping.
The commission is revising the Reporting Formalities Directive and a European Maritime Single Window environment.
In its impact assessment, the European Commission is analyzing whether it should not only harmonize and simplify reporting of the vessel related reporting obligations but also streamline the customs reporting.
“ECSA fully supports this revision and calls for an ambitious project. It goes without saying that we want the customs reporting to be part of it as well. Only in this way shipping can finally enjoy the single market,” Martin Dorsman, Secretary General of ECSA, pointed out.
“An ambitious European Maritime Single Window environment should do away with all this unnecessary administrative workload which is now a heavy and unnecessary burden on the seafarers and company staff,” Dorsman added.
The single market is a central element of the EU growth agenda. It is, however, clear that the single market remains incomplete and dysfunctional in some sectors. This is particularly true for shipping, ECSA believes.
As explained, shipping remains disadvantaged compared to other transport modes. In many cases, goods transported by ships between EU ports lose union status. This entails a heavy administrative burden, involving several authorities and intermediate parties.
Besides these numerous cargo-related reporting procedures and requirements, there are also a large number of vessel related reporting procedures and requirements to be fulfilled. These are complex, repetitive and unharmonized throughout the EU, according to ECSA.
While the Reporting Formalities Directive aimed to simplify and harmonize the reporting, it, unfortunately, resulted in the opposite outcome. Today, seafarers and company staff are facing an even higher administrative workload, resulting in additional stress for seafarers, decrease in job satisfaction and productivity losses, ECSA said.
“European shipowners believe that the European Maritime Single Window environment can only be a success if all parties, especially all authorities at national, regional and port level, are fully committed to making a success out of this. Their information requirements, strictly limited to data where there is “a need to know”, must all be covered in the one, single EU model,” Dorsman continued.
“There should be no room nor need, for any party to ask anything beyond what is in the one, single model or interface. All relevant authorities and competent bodies at national and EU level must guarantee acceptance of data from the European Maritime Single Window environment,” he concluded.
The European Commission has conditionally approved under EU State aid rules the Maltese tonnage tax scheme for a period of 10 years.
The scheme will ensure a level playing field between Maltese and other European shipping companies, and will encourage ship registration in Europe.
“Tonnage tax systems are meant to promote the competitiveness of the EU shipping industry in a global market without unduly distorting competition. I am pleased that Malta committed to adapt its tonnage tax system to achieve this,” Commissioner Margrethe Vestager, in charge of competition policy, said.
“Moreover, by encouraging the registration of ships in the EU, the scheme will enable the European shipping industry to keep up its high social and environmental standards,” Vestager added.
In 2012, the European Commission opened an in-depth investigation into the Maltese tonnage tax scheme to examine its compatibility with EU State aid rules.
The Commission’s in-depth investigation found certain features of the original scheme, such as tax exemptions applied to Maltese residents and the broad scope of the scheme extending to vessels not carrying out maritime transport activities, to be in breach of EU State aid rules.
As a result, Malta has committed to introduce a number of changes to its scheme to prevent any discrimination between shipping companies and to avoid undue competition distortions. In particular, Malta agreed to restrict the scope of the scheme to maritime transport and to remove those tax exemptions for shareholders which constitute State aid.
Under the Maltese scheme, a shipping company is taxed on the basis of ship net tonnage rather than the actual profits of the company.
If a shipping company wants to benefit from the scheme, a significant part of its fleet must fly the flag of an European Economic Area (EEA) Member State. In addition, any new entrant to the scheme must have at least 25% of its fleet subject to tonnage tax with an EEA flag.
The Indian government has drafted a legislation to ratify the Hong Kong Convention on safe ship-recycling, which was adopted by the International Maritime Organization (IMO) in 2009.
The new bill is to provide for the regulation of ship recycling in a safe and environmentally sounder manner and take care of occupational health and safety risks related to workers engaged in the recycling process.
India’s Ministry of Shipping informed that the matters related to shipping are currently governed by Ship Breaking Code, 2013, as amended. The proposal to introduce the Safe and Environmentally Sound Recycling of Ships Bill, 2017, is open for comments and suggestions of stakeholders until January 7, 2018.
Under the proposal, the government would designate a national authority which is to administer, supervise and monitor all activities related to ship-recycling.
The Hong Kong Convention is to enter into force only 24 months after it is ratified by 15 states, in order to represent 40% of world merchant shipping by gross tonnage. Only six states have acceded so far, including Norway, France, Denmark, Belgium, Panama and Congo.
In September 2017, India signed a loan agreement for a project to upgrade the environment management plan at Alang-Sosiya ship recycling yards.
The total cost of the project, which is likely to be completed by 2022, will be USD 111 million, out of which USD 76 million will be provided as soft loan from Japan International Cooperation Agency (JICA).
Out of the remaining amount, USD 25 million as taxes and fees will be borne by Government of Gujarat and the balance USD 10 million will be shared by Ministry of Shipping and the Government of Gujarat.
The country earlier informed that the project would help the Alang recycling yards to comply with international safety and environmental regulations.
Maritime regulation for autonomous ships should be decided at the international level, a new report published by The Danish Maritime Authority (DMA) recommends.
Such regulation should be made more flexible if it is to support the development of autonomous ships, the report says.
Identifying where changes in maritime regulation are needed, the report will be used as a platform for the future effort of DMA to develop regulation and make it digitalization-ready.
“The development of autonomous ships is fast-moving and we must be at its forefront. However, part of the current regulation is based on traditions dating back to the age of sail. That needs to improve. The regulation of autonomous ships shouldn’t be a hindrance to further advances,” Brian Mikkelsen, Denmark’s Minister for Industry, Business and Financial Affairs, commented.
As explained, the overall approach to regulation of autonomous vessels is that they must be at least as safe as conventional ships. The report provides a recommendation that regulation in this area should be agreed upon internationally and more specifically in the International Maritime Organization (IMO). Denmark is already working hard at getting this topic at the top of the agenda at international level.
“We must be able to seize opportunities created by development of new technology. Denmark has a strong maritime tradition and we want to stay in the lead when it comes to development and testing of technology,” Mikkelsen pointed out.
“In a globalized industry, regulation and standards for autonomous ships must be international. This is the only way to ensure significant global development in this area,” he added.
A new ballast water treatment system (BWTS) specifically designed for large dry bulk and ore carriers has been launched.
Developed by the UK-based Coldharbour Marine, the system uses the company’s existing inert gas based GLDTM treatment plant to meet the needs of large bulk carriers, which often ship large volumes of ballast water in upper wing tanks and discharge it directly into the sea.
The IMO International Convention for the Control and Management of Ships' Ballast Water and Sediments presents specific challenges for operators of bulk carriers by setting out specific discharge standards which must be met, according to Coldharbour Marine.
Most system technologies work by treating the ballast water at the point it is taken on board at the cargo discharge port and usually incorporate a filtration process and chemical dosing. Delays during ballast loading due to filtration issues or system breakdown are only one of the potential pitfalls, as explained by Andrew Marshall, Coldharbour Marine's Chief Executive.
"Big bulk carriers are usually deployed on long-haul routes and lengthy ballast voyages can lead to significant organism regrowth. Ships fitted with in-line BWTS technologies cannot guarantee full compliance with discharge standards at the end of a long ballast voyage," Marshall said.
In contrast, the newly launched system is not an in-line process and does not treat ballast water at uptake. Instead, it is an in-voyage process, so there are no filters and no potential problems relating to flow rates, pressure drops, or power consumption during ballasting.
"Some try to ignore the regrowth issue, but the fact is that no BWTS technology is 100% kill effective. If treatment is only undertaken during uptake, the few organisms that survive will thrive and multiply over a long ballast voyage in the food rich, benign environment of the ballast tank. The longer the ballast leg, the greater the risk of significant regrowth, meaning that ballast water could easily fail to meet discharge standards several weeks later," Marshall continued.
Bulkers sometimes load extra 'heavy weather' ballast water in cargo holds, which inevitably faces contamination by cargo residues. In-line systems would find this water hard to process and could be damaged by it. In this case, the company has developed a pipe circuit to allow ballast to be pumped from the various tanks through robust gas lift diffusion (GLD) units mounted in the machinery space – instead of in-tank, meaning that water can be returned to the tanks via multiple outlets to ensure that contents are stirred and treated.
"Now that the IMO's Ballast Water Convention has entered force, vigilant port states will be watching bulk carrier operators closely. Operators of these vessels have no time to lose in assessing how they will meet convention requirements," Marshall concluded.
THE Alliance is establishing a USD 50 million insolvency contingency fund to ensure smooth cargo flow in the event of another ocean carrier bankruptcy or catastrophic failure.
The parties to THE Alliance agreement submitted an amendment for the creation of the fund with the US Federal Maritime Commission (FMC) on September 14 and the Commission granted the request of petitioning parties for an expedited review. The amendment is effective immediately, the FMC said.
Each of the members of the alliance, including Hapag-Lloyd AG and Hapag-Lloyd USA LLC (acting as one party), Kawasaki Kisen Kaisha, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming Marine Transport, would initially contribute USD 1 million into the contingency trust fund and a further USD 9 million in additional funds or through a letter of credit.
The agreement also establishes procedures for the orderly removal and/or replacement of vessels in case of a bankruptcy and the rights of the remaining parties to negotiate directly with agents and subcontractors of the affected party. The contingency fund would be administered by a trustee, the FMC informed.
"Last year's collapse of Hanjin Shipping was a wake-up call for the entire ocean transportation and logistics chain. Over USD 14 billion worth of cargo was stranded at sea on 100 ships scattered around the globe. It is so important that another Hanjin debacle does not happen again," William P. Doyle, FMC Commissioner, said.
"I applaud the innovative actions taken by carriers of THE Alliance. It is a responsible commercial reaction to the events of last year and it serves to assure the shipping public that its cargo will be delivered in a reliable and timely manner," Doyle added.