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‘Shipping must remain energy-efficient despite low price’

By Editor
20 January 2015   |   11:00 pm
SHIP efficiency remains just as relevant and important in a bearish oil market as it does when ship owners have to pay over $600 for a tonne of Heavy Fuel Oil. The Chief Financial Officer of Ecoships, Hakan Ozcan, said : “With crude oil prices at their lowest since April 2009, the temptation is to…

SHIP efficiency remains just as relevant and important in a bearish oil market as it does when ship owners have to pay over $600 for a tonne of Heavy Fuel Oil.

The Chief Financial Officer of Ecoships, Hakan Ozcan, said : “With crude oil prices at their lowest since April 2009, the temptation is to put your foot on the gas and speed up a bit but this is not the way forward. When oil prices are low ship owners can benefit more fully from energy-saving technologies.

“Admittedly, bunker fuel will continue to be the largest single operational cost for ship owners, but with fuel prices continuing to drop, profit and loss accounts will improve, providing owners with the resources needed to re-invest in new ship designs, equipment and technologies capable of reducing fuel consumption even further. It’s a win-win situation for the merchant fleet.”

While Ozcan does not suggest the industry embarks on the kind of newbuilding spending spree that will prolong or perpetuate over-capacity, he believe ship owners have a commercially-viable opportunity to replace ageing, less efficient tonnage with vessels capable of meeting increasingly stringent environmental regulations.

“It just makes economic sense. It is highly unlikely that we will see a return to fast steaming, so vessels designed for low fuel consumption to minimise shipping’s impact on the environment will continue to be an integral part of the ship manager’s business model.”

Harald Lone, Newport Shipping Group’s Chairman and Chief Executive Officer, confirmed that vessels under the company’s management will continue to operate sustainably.

“All our vessels continue to operate to optimum energy-efficiency and have systems installed capable of providing a better return for the owner. The industry must continue to do all it can to operate ships more effectively so that the economics of shipping remain commercially and environmentally viable.”

According to  shipmanagementinternational.com, the energy-efficient bulk carrier design Ecoships unveiled in September last year is indicative of the ship manager’s commitment to sustainable shipping.

UNITED Kingdom firm, Moore Stephens  recently identifies positive approach as the best attitude to tackle the challenges of 2015.

According to Moore Stephens, shipping needs to adopt a can-do attitude in order to successfully meet the challenges, which are likely to come its way in 2015.

Moore Stephens shipping partner Richard Greiner said: “Shipping confidence started 2014 on a six-year high and ended it on a two-year low. It is difficult to predict with any certainty what the next 12 months will bring, beyond further uncertainty. To paraphrase an old adage, shipping goes into 2015 needing to accept the things it cannot change, to change the things it can change, and to make sure it understands the difference between the two.

“Top of the list of things which shipping cannot change is the relentless march of regulation. In 2015, this will assume still more onerous proportions with the inception of new regulations governing Emissions Control Areas, and a further step towards ratification of the BWT Convention.

“Overtonnaging, meanwhile, is top of the list of things which shipping can change. Accelerated scrapping is needed, together with an acknowledgement that there are already too many ships on the market and that, absent some form of rationalisation, freight rates will not pay the bills.

“One area where shipping can demonstrate that it knows the difference between what it can and cannot change is in its attitude to private equity. Does private equity not know what the rest of us know, or does it know something the rest of us do not? Rather than bemoaning the short-term commitment of private equity, shipping should be looking to tick the boxes, which attract such investors.

“Operating costs will go up in 2015, along with the cost of regulation, while it would be no surprise if oil prices were to go up faster than freight rates over the course of the year. Environmentalists will be happier with shipping. There will be increased interest in risk management, without which there will be still more new building disputes of the type currently sitting on the desks of arbitrators, and more companies following the unhappy route into bankruptcy taken at the end of last year by OW Bunker.”

Greiner added: “Shipping embarks on a new year with confidence in a fragile state. The industry is volatile, and will be looking for improved political stability and a stronger global economy. But it should not underestimate its proven ability to endure throughout crises. The biggest danger may lie not in setting the targets too high and falling short, but in setting the targets too low and achieving them.”

 The year 2014 saw the International Maritime Organization (IMO) actively pursuing its targets and objectives in a wide range of subject areas. In these pages we present some of the highlights of what was a busy, varied and successful year for the Organization.

Safety remained a high priority during 2014. IMO adopted the safety provisions of the Polar Code and SOLAS amendments to make it mandatory. Also adopted were important measures addressing container safety and enclosed space entry drills. Several amendments entered into force during the year. Domestic ferry safety was also a topic of concern. 

2014 proved a busy and productive year for IMO on the environmental front. Among the highlights were the adoption of the environmental provisions of the Polar Code and the entry into force of the Emission Control Area for the United States and Caribbean Sea. Further progress was also made on extending and developing energy efficiency measures for ships.

IMO joined other UN bodies in calling for action to address irregular maritime migration, an increasing problem from the point of view of loss of life at sea as well as a burden on shipping. The Facilitation Committee moved forward on e-business and the single window concept, approving a completely revised Annex to the FAL Convention, while the Facilitation and Maritime safety Committees agreed to look into cyber security.  Action against piracy and armed robbery against ships remained a high priority off the coasts of Africa.  

IMO was involved in a series of capacity-building projects across the globe including ship recycling, energy efficiency, counter-piracy and stowaways

 Meanwhile, containership reliability declined for the second month in a row in December, according to Drewry’s enhanced Carrier Performance Insight.

The latest data shows that the aggregate on-time performance for the Asia-Europe, Transpacific and Transatlantic trades dropped to 58% in December, down from 62% in November and 64% in October.

December’s on-time performance was the worst since August (55%) with the monthly decline the result of weaker reliability across all three trades.

Reliability in the Asia-Europe trade (7,475 voyages tracked) declined by 4.5 points month-on- month to 64.3%. In the Transpacific (3,826 voyages), the on-time performance dropped 3.3 points to a new low of 47.4%, while Transatlantic (570 voyages) reliability also slumped to a nadir of 46.3%, down by 12.6 points.

Maersk Line was the most reliable carrier in the October-December period, recording a three- month average on-time performance of 80%, up 3 points on the previous quarter. In second place was Hamburg Sud with 75%, followed by COSCO on 70%.

The biggest improvement in the fourth quarter came from MOL, which gained 11 points to 60%, while MSC jumped by 9 points to 61%. The improvement at MSC suggests that it is striving to meet the standards of Maersk, its partner in the new “2M” vessel sharing agreement that started this month.

The  number of orders won by South Korean shipbuilders fell 36 percent last year as global demand for new ships shrank due to a tumble in oil prices. 

Industry data issued by global market researcher, Clarkson Research Services explained that South Korean shipbuilding companies took orders totaling 11.78 million compensated gross tons (CGTs), or 305 ships, ranking it second in the industry for the fifth consecutive year. 

According to the group, China retained its top ranking for the same period. It explained that the plunge in oil prices caused new orders for ships worldwide to fall 34.7 percent to 39.70 million CGTs last year compared with 2013. 

Market share for South Korean companies came to 29.7 percent in 2014, falling from the preceding year when it was 30.5 percent. Their Chinese rivals won orders of 15.31 million CGTs, or 801 ships, with their market share reaching 41.5 percent. 

Japanese shipbuilders expanded their share in the global ship market. They took up 19.7 percent in 2014 by getting orders of 7.83 million CGTs, up from 17 percent in 2012 and 17.4 percent in 2013. The weakening of the Japanese yen and the Japanese government’s support for the shipbuilding industry contributed to the rise, market watchers said. 

In terms of order backlog, which refers to work waiting to be fulfilled, the South Korean builders posted 32.23 million CGTs last year, down 3.1 percent from a year ago. By comparison, Chinese and Japanese shipbuilders recorded 46.04 million CGTs and 19.91 million CGTs, respectively, up 5.6 percent and 11.7 percent from the previous year.

In a related development, the depreciation of the yen is boosting demand in industries like shipbuilding, where companies are scrambling to hire enough workers, especially in areas where the number of working-age individuals is declining.

The number of people in Japan aged 15 to 64 has steadily declined since the mid-1990s, falling below 80 million, or about 62 percent of the total population, as of October 2013.

Should the trend continue, the ratio could drop to just over 50 percent by 2060 — a level where economic growth can no longer be expected, experts say.

Sanwa Dock Co., a ship repair company with a workforce of around 350 on Innoshima Island in Onomichi, Hiroshima Prefecture, is now busy meeting orders it won — as well as orders other dockyards could not accept due to a labor shortage.

“We began to hear at the end of last year about delays in work at shipyards unable to secure enough workers,” said Isamu Teranishi, the company’s president.

Until a few years ago, many Japanese shipbuilders were facing financial difficulties because the strong yen hurt their competitiveness against Chinese and South Korean rivals.

But the situation has changed drastically due to the aggressive monetary easing pursued since April 2013 by the Bank of Japan. The weaker yen, which has since dropped by about a third in value against the U.S. dollar, has contributed to a sharp increase in orders from Japanese shipbuilders and other companies exposed to global competition.

Yet many companies are struggling to take advantage of the turnaround because they cut personnel when times were bad. Companies short of full-time employees in particular are finding it hard to accept orders.

And the problem isn’t limited to companies exposed to currency exchange rates.

Domestic construction companies, too, are scrambling for workers; given the increased orders ahead of the 2020 Summer Olympic Games in Tokyo and ongoing reconstruction work in Tohoku.

However, Baltic and International Maritime Council (BIMCO) had recently claimed that stronger freight rates in the tanker market might bring about some positive trends for the first quarter of 2015, if lower oil prices can continue to generate higher demand for product tankers.

The stronger freight market has been attributed to the supply side, in particular the new building side of it, because the crude oil tanker demolition segment has contributed very little.

Respectively, the fleets of the three segments of VLCC, Suezmax and Aframax have grown by 1.1%, -0.5% and -1.7%, building on a development that started in 2013. Demand is outstripping supply for the first time since 2010, bringing about stronger freight rates, according to BIMCO.