Masamichi Morooka, the chairman of the International Chamber of Shipping (ICS), said this week that new legislation to protect the environment could potentially cost the shipping industry $500 billion between 2015 and 2025.
“As many companies struggle to survive during the difficult years ahead, we must persuade governments to avoid placing yet more straws that risk breaking the shipowner’s back — and the straws to which I refer are the impending costs of environmental legislation,” said Morooka, speaking at the Nor-Shipping conference and trade show in Oslo this week.
He said much of the increase in cost will result from the switch to low-sulfur distillate fuel, assuming that a 0.5-percent global sulphur cap comes into effect in 2020, in addition to the 0.1-percent sulfur requirements that are expected to be enforced in Emission Control Areas in North West Europe and North America from 2015.
The cost of installing new ballast water treatment equipment will also be significant, he said, as well as the cost of potential contributions shipping companies might have to make to the United Nations Framework Convention on Climate Change (UNFCCC) Green Climate Fund.
“The imminent switch to vastly more expensive, low-sulphur distillate fuel is a very serious concern which is compounded by worries about the adequacy of supply and the dangers of modal shift,” said Morooka.
He contended regulators need to focus on the economic sustainability of shipping, backed up by evidence of years of continuous improvement of shipping’s environmental performance.
“Many of the expensive environmental regulations that are about to enter into force were conceived in a different world, at a time when shipping markets were booming and finance for retrofitting had not dried up,” he told Nor-Shipping delegates.
ICS says protection of the environment must always remain a priority for the industry, but that the prevailing economic situation requires that a degree of pragmatism is applied to enforcement as a plethora of new environmental regulations is implemented.
“Unless this is understood, there is a danger of creating real barriers to investment in our industry as we hopefully move closer to recovery,” Morooka said.
More generally, Morooka said he remained positive and optimistic about the shipping industry, but said it was probably unlikely that most sectors and trades will have fundamentally changed before 2015 or 2016.
Unless something very unexpected happens, the ICS Chairman felt it was
unlikely that a lasting recovery in freight rates would begin in earnest
in the immediate future. However, he believed that market forces would
find a solution, which would almost certainly involve large numbers of
ships going to the recycling yards much earlier than their owners had
“However, the decisions taken now, both by shipowners and regulators, will determine whether we are at the end of the beginning of our difficulties, or whether, as I hope, we are at the beginning of the end.”
In order to avoid prolonging the downturn, he said it was important that shipowners take sensible and considered decisions about ordering new tonnage. Noting that shipyards have similar over-capacity problems and are offering cut-price ships, he remarked: “What might be in the rational interest of an individual shipowner might not always be good for the collective health of the industry as a whole.” – Chris Dupin