As the year turns, it is traditional to look back at events of the past year and forward to what may happen in the year ahead. The shipping industry is a complex one that is affected by so many external events as well as decisions by those within the industry itself.
Regulations – especially those connected with exhaust emissions and other environmental considerations – have been driving factors in technology advances in recent years but while the regulations become ever stricter, the ability of technology to come up with solutions is not infinite and limitations are beginning to test the resolve of regulators and players alike.
Ballast water treatment
September 2017, was supposed to have been the month when the 2004 Ballast Water Convention finally entered into force. While it is true that it is now technically in force, the IMO finally came to the pragmatic conclusion that all was not well with the situation as regards equipment capabilities and has effectively agreed to a long extension to the instalment date deadlines.
Looking forward to 2018, the main events will be further USCG approvals to add to the handful already granted and for other systems to be approved to the new IMO G8 guidelines. There will also likely be a greater interest shown in ballast water testing systems. So far there are only a very small number of these but owners will be seeking the reassurance that systems are operating properly and thus no risk of PSC problems.
One of the hot topics for 2017 was the rampant overcapacity in so many sectors not least the container, bulker and offshore PSV markets. All of these sectors have been affected by owners competing for share in a shrinking or at best static market and doing so by ordering new vessels when economic principles would suggest scrapping older ships in the fleet.
The situation in all sectors is fragile but there are signs of growing trade in both containers and bulk cargoes and the price of crude oil having recovered by around 50% over the course of 2017. At $65 per barrel, crude oil is around the break even price for all but the least viable offshore fields which will be some small comfort for operators who have seen good profits turn into massive losses over the last three to four years.
If 2018 is to be a turning point, it is clear that new ordering must be tempered by an increase in scrapping or laying up of vessels. With the ballast treatment situation and the 2020 reduction in permitted sulphur levels in fuels both requiring a large capital outlay or increased operating costs, owners should be attempting an orderly scrapping regime that will keep scrap prices stable so as to build up capital reserves by judicious sales of older end of life tonnage.
Cutting back on new ordering will be hard, not least because of the desire to maintain market share. But there is another factor coming into play with owners aware that a new EDI phase beginning in 2020 means that ships may have to be ordered beforehand if they want vessels that will be identical in performance to the latest deliveries rather than handicapped by the rules of the EEDI phase 3.
Last year (2017) saw accelerating interest in autonomous ships with Finland, Norway and the UK all establishing coastal experimental areas where various aspects of autonomous ships can be tested. In addition, the first commercial orders were placed with the $25m Yara Birkeland arguably the most advanced of the potential prototypes supposed to be entering service in 2019.
At MSC in 2017, the IMO agreed to begin establishing rules and regulations covering autonomous ships and their interactions with conventional vessels. Doubtless 2018 will see some preliminary movement in this area as Item 5 on the agenda for MSC 99 in May is ‘Regulatory scoping exercise for the use of Maritime Autonomous Surface Ships (MASS).
It has to be said that there are many voices opposed to autonomous ships both on the grounds of their effect on seafarer employment and a large degree of scepticism as to their safe operation and acceptability to cargo interests. On the other hand, class societies and the likes of Kongsberg and Rolls-Royce are investing heavily in the R&D and certain governments are also enthused over the concept.
Battery power for ships can no longer be considered something new but it is gradually being considered for vessels beyond ferries and the occasional offshore ship. Batteries are a useful means of energy storage for some ship types but for ships recharged from the shore grid, they will not really reduce pollution unless the energy source is truly clean as for example in Norway where hydropower can satisfy all of the country’s need.
The autonomous ship Yara Birkeland is intended to be fully battery powered but it is planned to run only in Norwegian waters. It is another Norwegian vessel – the Roald Amundsen first of Hurtigruten’s new hybrid exploration cruise ships- that will put battery power in the headlines when it is delivered in October 2018. Cruise ships, and expedition cruise ships in particular, are seen as the ideal platform for battery power on large ships because of lower impact on sensitive environmental areas that they will be visiting.
Hurtigruten has led the way with its two ships but at the end of 2017, French operator Ponant announced an even more ambitious project with a dual-fuel icebreaking cruise ship operating on the double acting concept to be delivered in 2021. Considering how competitive the cruise market is, 2018 will surely bring further announcements of equally innovative ships being ordered.
Exhaust emissions and MVR
Two developments in 2017 will continue to occupy minds through 2018 and into future years as well. Both the 2020 reduction of the global cap for sulphur in fuels and the monitoring, reporting and verification (MRV) of CO2 emissions have an earlier genesis than 2017.
It was at MEPC 70 in October 2016 that the IMO decided to confirm the 2020 date for sulphur levels instead of the option of 2025. That decision was reconfirmed on numerous occasions by IMO officials during 2017. Shipowners and their organisations are not convinced that sufficient compliant fuel will be available but unless the IMO relents they must begin to formulate plans for when the deadline comes around.
For many ships this will mean that if refiners do not produce low sulphur HFO, the choice comes down to burning distillates or fitting a scrubber. Both are expensive options, but scrubbers require access to capital that some owners may find hard to obtain. Even so, the work involved in preparing for and installing a scrubber is something that takes time and to be in good time for 2020 many analysts believe that owners need to act now. For that reason alone, 2018 may prove to be a fortuitous year for scrubber system makers.
MRV is another requirement that dates back to before 2017 but for ships calling to EU and EEA ports it becomes compulsory from 2018. That is something that regular callers will have been aware of but for shipowners that only make occasional calls to European ports, there will be requirements to consider for any calls made from 2018 onwards.
After first becoming mandatory on new passenger vessels of 500gt and above and new tankers over 3,000gt in July 2012, the rollout of ECDIS reaches its finale in 2018. At the first survey after 1 July 2018, all existing cargo ships other than tankers, of between 10,000 and 20,000gt will become liable to fit an ECDIS.
What constitutes the ‘first survey is defined in MSC.1/Circ.1290 and is ‘the first annual survey, the first periodical survey or the first renewal survey whichever is due first after the date specified in the relevant regulation or any other survey if the flag state deems it to be reasonable and practicable.
ECDIS is seen as an essential component of e-navigation and with many countries and the EU pushing for e-navigation and sea traffic management to become mandatory this last roll out date will be significant. However, the fact that no cargo ship under 3,000gt is required to use ECDIS and only those above 3,000gt constructed since 2014 must carry it does mean that thousands of smaller ships will be outside of e-navigation regimes unless new rules are formulated.
IMO Celebrates 70 years
In 2018, the IMO will be celebrating 70 years of maritime regulatory authority. Founded in 1948 as the Intergovernmental Maritime Consultative Organisation, the name was changed in 1975 to its present form.
A series of activities and events are planned to mark the 70 years since the Convention establishing IMO was adopted in March 1948. They will also look ahead, to the future. There will be a ceremony in March 2018 to mark the adoption of the Convention and in May, a high-level forum will be held at IMO Headquarters to discuss the Organization’s history, its future challenges and role within the global trade in a changing world.