‘Regulations, security bane of shipping industry’

SOME maritime issues presently facing shipping industry globally include regulatory burdens concerning the environment, maritime security and the supply and demand imbalance with new building orders reaching “worrying” levels, global shipping association BIMCO has said.

According to its “Reflections 2014” report,  the association explained that the  steady improvement of the global economy  has improved  outlook for shipping, as demand goes up and “fleet expansion growth cools off, the market fundamentals are expected to improve across the board”.

The group said: “But the regulatory burdens, notably those seeking to address environmental pressures, remain major challenges to the industry’s cost base at a time when resources are limited. This includes massive challenges on sulphur limits, ship efficiency, ballast water treatment and regulation”.

In his accompanying message to Reflections 2014, BIMCO president John Denholm said: “A worrying amount of ordering is taking place, adding tonnage to an already excessive world fleet. This will delay a return to a balance between supply and demand and hence the long awaited market recovery.
“To add insult to injury, the ever increasing regulatory requirements impose significant costs on our industry at a time when it can ill afford them.”

Reflections 2014 also takes a closer look at maritime security, noting that the greatest emphasis is upon the scourge of piracy, but also stresses that there remain many other strands to maritime security, such as the combating of narcotics and terrorism.

“The piracy situation is dynamic, and despite attacks in the Gulf of Aden and Somali basin  dwindling the situation could reverse and the shipping industry must not drop its guard.”

In a related development, accounting firm, Moore Stephens has explained that for the  maritime sector to sustain its global growth, there should be noticeable improvement in 2015
Moore also warned  that the prospects for recovery may still be fragile if the industry fails to meet a number of challenges, including tighter regulation and increased operating costs.

Shipping partner Richard Greiner said: “New Year resolutions are invariably a case of in one year and out the other. Generally speaking, it is wise not to make resolutions which are too ambitious; American troubadour Woody Guthrie had the right idea when he settled for, ‘Wash teeth, if any’.

But the shipping industry can afford to be a little more bullish than previously in its aspirations for 2014”.

Explaining further, Greiner said: “Shipping is in a different space to that which it occupied a year ago. Confidence rose to a three-year high over the course of 2013. Good things are predicted for freight rates in 2014, more companies are starting to consider new investment, and economic and political issues with the potential to hurt shipping are deemed less severe than twelve months previously.

“Over the next twelve months, we can expect to see more shipping money raised in the public and private equity markets. We may see more non-shipping money invested in shipping than for some time, although not necessarily by dentists. Supply and demand levels should come closer into alignment.

“Consequently, freight rates are likely to rise and, with them, vessel values. Increased levels of demolition will be required to offset new tonnage.

China is already offering subsidies to shipping companies to scrap vessels before their operational expiry date and to replace them with new ships which are eco-friendly and which fly the Chinese flag.

So everybody is happy – owners, shipyards, environmentalists (except those worried about the perceived evils of irresponsible recycling) and politicians alike.”

Greiner warns, however, that all the positive indicators remain somewhat fragile, adding that:”Operating costs are expected to go up in 2014. Shipping cannot operate without fuel and skilled manpower.

Meanwhile, increased regulation of crew welfare, fuel quality and ballast water management are big-ticket items.

Environmental regulation is self-perpetuating, witness the news that IMO is to debate plans for ship owners to compile fuel-consumption data to support steps to create carbon dioxide reduction regulations.

“It is to be hoped, however, that the industry can sustain the upturn which began in 2013. If it can, we may see a return to rude health by 2015 although, as John Maynard Keynes warned, ‘The market can stay irrational for longer than you can stay solvent’.”

In terms of regulation, the International Maritime Organization (IMO) had recently unveiled a  new interactive display on Particularly Sensitive Sea Areas (PSSA).

PSSA is an area that needs special protection through action by IMO because of its significance for recognised ecological or socio-economic or scientific reasons and which may be vulnerable to damage by international maritime activities.

The new display and website include videos, pictures, maps, and graphic displays, telling the unique story of each of the 14 PSSAs, together with a special insight on IMO’s work on this topic, past, present and future.

According to IMO, the display and website have been funded with the support of generous contributions from Australia, Finland, Germany, the Netherlands, the Republic of Korea and Sweden.
IMO Secretary-General Koji Sekimizu said the new display would serve as a continual reminder and a celebration of the substantial contribution that has been made to environmental protection through IMO’s PSSA scheme.

“It is my great hope that this ground-breaking display that we are going to formally inaugurate this evening will serve as a continual reminder and a celebration of the substantial contribution that has been made to environmental protection through IMO’s PSSA scheme”, sad Sekimizu, adding “But, more than that, I hope that it will galvanise further efforts to identify, and protect, more of these special areas throughout the world.”

Recently, a draft guidelines  on the preservation and collection of evidence following an allegation of a serious crime having taken place on board a ship, or following a report of a missing person from a ship, and on pastoral and medical care of victims was recently  approved by the Legal Committee of the International Maritime Organisation (IMO) at its 100th session.