23 October 2018
Your weekly briefing
IMO Secretary-General Ki-tack Lim doesn’t seem quite so cheerful these days, and it’s not hard to guess why. According to rumours, some ship owners will go for deliberate non-compliance with the 2020 sulphur cap to gain competitive advantage, especially in trading areas where enforcement will be weak.
Others speculate that ships will burn compliant fuel to get through the restricted area before reverting to high-sulphur fuel in the open ocean. The second idea can be quickly quashed because ships won’t be able to carry non-compliant fuel – if they do and have no scrubber installed, they will be detailed.
Nor is it likely that serious owners will deliberately fail to comply in a kind of ‘catch me if you can’ manoeuvre. Owners who might do that won’t find it easy to enter port. IMO is now focusing on implementation strategies, which will mean detaining ships. Even if neither suggestion is serious, there appears to be a groundswell of disagreement that is putting Mr Lim under pressure.
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There’s a new organisation you should know about: the Clean Shipping Alliance 2020 has been set up to answer questions about scrubbers. Questions such as: How do scrubbers work? Does the washwater from scrubbers make the seas more acidic? Do scrubbers on ships burning heavy fuel oil reduce Sox emissions as efficiently as the use of compliant fuel? Which companies have fitted scrubbers. All good to know, and timely information. If you want a scrubber fitted on your ship by January 1st, 2020 – when IMO sulphur cap kicks in – you are too late. But ships could burn compliant fuel until they can have a scrubber fitted in 2020, that’s perfectly acceptable. However, bear in mind that only between 1,200 and 1,400 scrubbers will be fitted by January 2020, out of 70,000 merchant ships. Refiners won’t necessarily think of owners who have invested in scrubbers when thinking about what to do about residual fuel.
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A word of warning this week from law firm Clyde & Co that the escalation of trade tariffs could increase supply chain disputes. If the price of a cargo goes up because a higher tariff is imposed, the buyer might refuse to take delivery. This will lead to detention charges which will have knock-on costs all the way through the supply chain.
The lawyers advise that unilateral steps taken without careful review of contracts and competent legal advice could lead to costly multiparty litigation. For smaller cargoes, the cost could be $80-100 per day per container, so the charge would quickly become more than the cargo is worth. Add to that the legal fees involved in solving the dispute, and the trade no longer makes financial sense. It doesn’t seem that higher trade tariffs can be considered as ‘force majeure’ – that is, something we couldn’t do anything about. A US-China trade spat might feed its way through the Just-in-Time supply chain.
Listen to the Lloyd's List Podcast:
The Lloyd’s List Podcast: What’s shaping shipping’s political agenda and how to plug the finance gap On this week’s podcast we’re in London looking ahead to this week’s pivotal IMO meeting on 2020 sulphur enforcement and greenhouse gas strategy. We’re also off to Italy to talk to a Greek shipowner about why the well-publicised woes of German shipping have made it harder for companies from other nations to secure finance.
V.Group has acquired German container ship manager Norddeutscher Reederei H. Schuldt from Norddeutscher Vermögen Group. Norddeutscher Reederei manages 46 ships aggregating 230,000teu. Most of these ships will be transferred to a new business owned jointly by V.Group and Norddeutscher Vermögen. Bringing into the venture a third company, Blue Net Chartering, will optimise the fleet’s financial performance. Meanwhile, V.Group will invest in a centre of excellence for the management of container ships.
This reflects V.Group CEO Ian El-Mokadem’s ambition to thoroughly shake ship management and challenge competitors to follow. This year could be truly transformative for ship management. Under previous management V.Group made unspectacular acquisitions but the time has come for the long term strategy of growth to be exercised. El-Mokadem believes size is an advantage not a disadvantage. Anglo-Eastern Univan, Columbia-Marlow have to respond.
Read more on Lloyd's List:
V.Group acquires German shipowner Norddeutsche Reederei
Lloyd’s List Online’s article entitled “State advances, private sector retreats” is in our Yard Talk section. It’s about the current position of Chinese shipbuilding. In 2009 there were almost 400 Chinese shipyards building at least one ship of at least 1,000 gross tons, it’s now little more than a quarter of that. Yards are being closed or taken over, while the government is pumping money into the state-owned China Shipbuilding Industry Corp and China State Shipbuilding Corp.
These yards build naval vessels as well as merchant ships, so they won’t go under. There are still privately owned Chinese yards able to build ships and deliver then on time and on budget. Yangzijiang Shipbuilding has signed a partnership with Japan’s Mitsui Engineering & Shipbuilding to build LNG carriers, and so far it’s working. This is an excellent piece that gives a great overview of Chinese shipbuilding in 2018 – I recommend it.
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