“Every Sulphur Cloud has a Silver Lining.”
Of late there has been talk of a return to slow steaming, last seen when bunker prices were last at their highest (around 2013-1H 2014). For the Shipowning/Operating community this seems to tackle a number of issues; absorbing tonnage and reducing the amount of fuel needed and thereby bunker costs – the latter of which has an added bonus – cutting sulphur emissions.
The shipping industry, which currently accounts for around 2.2% of global CO2 emissions, is under pressure to reduce this. If nothing was to change, emissions from ships is projected to increase by between 50% and 250% by 2050. The International Maritime Organisation (IMO) has set out a strategy to cut the industry’s emissions by 40% come 2030, and by 50% come 2050 against the baseline of 2008. To do this they have involved in improving operational energy efficiencies and developing technologies for zero-carbon fuels. The imminent IMO 2020 regulations that everyone is talking about with regards to either using fuels capped at 0.5% sulphur or utilising a sc
rubber in conjunction with higher sulphur fuel oil, is a big step forward, but also a major cost to Owners/Operators. Slow steaming might be a cost-effective method of compliance – although it may be challenging to enforce and police on an individual basis, there are already some ideas floating about. And digital technology is allowing for better real-time communication and monitoring.
With all these imminent regulatory compliance costs amid low freight rates and excess capacity, Owners are seriously re-considering slow-steaming as an option. Although it is currently optional, there are a couple of proposals being put forward to the IMO that could potentially see
speed limits being put on the global fleet. Greece is calling for some form of speed restriction or management to achieve lower carbon emissions. France has now put slow-steaming on the agenda at the IMO with it suggesting the speed limits differentiated by shipping sectors should be implemented “as soon as possible” and going further they want to bring in a maximum annual fuel consumption per ship ruling. Mandatory slow-steaming could help reduce greenhouse gas emissions in the short term while new technology is being developed.
However, there are a couple of arguments against this. The main downside has and continues to be time – the just-in-time logistical supply chain is a delicate balance, which if elongated becomes a cost to charterers with inventories being held for longer, that in turn becomes and issue and a cost for end customers. Plus, this would take away from the flexibility afforded Owners to speed up when the markets are better and compete for cargos. And a side note, ships that have already invested in less-carbon-intensive fuel, such as LNG will not gain any benefit from reducing their speed as well.
Extrapolating from France’s idea to set an annual consumption limit per ship could work which would encourage the industry to look at fuel-efficient technologies.
It is worth noting, the law of diminishing returns applies to slow-steaming, whereby there is a point when it becomes inefficient and unsafe to reduce speed too far. Even so, slow-steaming is a perfect equilibrium of where economic and environmental benefits meets. And as long as there isn’t an influx of new orders placed to fill the gap, tonnage can easily be absorbed. In conjunction with IMO 2020 compliance, if a slow-steaming becomes universally adopted, this will put additional pressure on capacity and freight, at a time when rates are already
expected to firm. [April 2019, SPI Marine].