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IMO’s decision causing further uncertainty
As it affects long-term expectations and solutions to other regulations.
Yet another challenge for the shipping industry after the International Maritime Organization’s greenhouse gas cuts deal, requiring the industry to come up with GHG-free vessel designs over the next decade, while it has been struggling with several other regulations. Last Friday, the IMO's Marine Environment Protection Committee adopted a strategy on the reduction of the shipping industry’s GHG emissions by 50 per cent from 2008 levels by 2050. The measure comes in addition to the cap on sulphur-oxide content in fuel from 2020, which will direct shipowners to cleaner solutions, such as LNG, exhaust-cleaning systems and low-emission fuels. The industry will additionally need to cut carbon dioxide emissions “per transport work” by at least 40 per cent by 2030. The latter could be achieved by slow steaming to maximize fuel efficiency in the global fleet. But as the global fleet is expected to continue growing over the coming decades in parallel to global trade, meeting the cuts “per transport work” could prove a rather tricky task for the shipping industry.
New vessels coming into service in the 2030s will need to run on GHG emission-free power sources. But as it’s not yet clear what these sources should be, this task will prove a real challenge to shipping. Back in 2016, the IMO decided to cut marine fuel sulphur limits to 0.5 per cent in 2020, but the options to implement the cuts were already quite familiar to the industry. At the moment, several untested technologies are on offer. Earlier in March, a report from the OECD's International Transport Forum argued that 100 per cent carbon dioxide cuts were achievable for shipping by 2035. The report suggests efficiency measures such as slow steaming and more hydrodynamic hull designs in the short term, while power sources like methanol, hydrogen, ammonia and wind power could be the solution in the longer run. The question now is whether proponents of more radical cuts are satisfied with this deal. There is hope that harsher measures could be avoided from being imposed at a regional level by authorities unimpressed by the results achieved at the global level.
The commitment to cut carbon emissions “at least” by 50% by 2050 comes secured the support of more ambitious countries, as the words “as least” suggest that the cuts could be later intensified. IMO Secretary General Kitack Lim characterised the deal as “not a final statement but a key starting point". The EU and Marshall Islands wanted an emissions cut of 70 per cent, with the EU previously having threatened to include shipping in its emissions trading system if the IMO would not have a satisfactory GHG emissions strategy in place by 2023. But resistance was strong from the US, Saudi Arabia, Brazil and Panama against such measures. IMO delegates and officials now hope that the EU will try to toughen the cuts in next MEPC meetings rather than imposing its own measures locally.
Major global shipping industry association BIMCO also welcomed the IMO agreement, considering it a success as the IMO “set an absolute target for emissions reductions for an entire industry“, which has been seen as “a landmark achievement in the effort to reduce emissions, and something that every other industry should look to for inspiration".
The GHG strategy will without doubt affect the plans to implement the IMO's 0.5 per cent sulphur cap on marine fuels in 2020. Uncertainty increases, as the latest regulation encourages the "wait-and-see" attitude already dynamically developing among some shipowners and bunker sellers. Refinery owners will need to invest in expensive upgrades to increase their middle distillate production, so that they meet new demand from the shipping industry. But as the industry will have to change much earlier, most of shipowners will turn away from oil within the next two decades, making such investments less rational in the long term. Similar approach is expected by shipowners with high belief in the benefits of LNG bunkering. Burning natural gas will without doubt reduce GHG emissions compared with oil, but these reductions will not be enough to meet the levels set by the IMO's new strategy.
Affinity Research LLP
Dry Cargo
Dry Cargo
Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
Contact: David Oakley
[email protected]
+61 2 9937 8806
Finance
Finance
Affinity Financial Products Ltd is authorised by the FCA to provide advice and execution of regulated activities. We focus our efforts on asset-related transactions often structured as corporate share sales or mergers and acquisitions.
We work in partnership with investment banks providing specific, shipping-related advice.
Contact: Andrew Finn
[email protected]
+44(0)20 3142 0114
LNG
LNG
Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.
Contact: Joni Mackay
[email protected]
+44(0)20 3142 0133
Newbuilding
Newbuilding
Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.
Contact: Nick Wood
[email protected]
+44(0)20 3142 0111
Offshore
Offshore
Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.
Contact: Tor-Øyvind Bjørkli
[email protected]
Research
Research
Our research department combines real time market information with econometric modelling and the latest technology.
Contact: Mark Williams
[email protected]
+44(0)20 3142 0185
S & P
S & P
Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.
Contact: Toby English
[email protected]
+44(0)20 3142 0123
Tankers
Tankers
Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators.
Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.
Contact: Tim Gurdon
[email protected]
+44(0)20 3142 0142
Valuations
Valuations
We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.
Contact: Ben Pusey
[email protected]
+44(0)20 3142 0125
Dry Cargo
Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
Contact: David Oakley
[email protected]
+61 2 9937 8806
Finance
Affinity Financial Products Ltd is authorised by the FCA to provide advice and execution of regulated activities. We focus our efforts on asset-related transactions often structured as corporate share sales or mergers and acquisitions.
We work in partnership with investment banks providing specific, shipping-related advice.
Contact: Andrew Finn
[email protected]
+44(0)20 3142 0114
LNG
Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.
Contact: Joni Mackay
[email protected]
+44(0)20 3142 0133
Newbuilding
Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.
Contact: Nick Wood
[email protected]
+44(0)20 3142 0111
Offshore
Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.
Contact: Tor-Øyvind Bjørkli
[email protected]
Research
Our research department combines real time market information with econometric modelling and the latest technology.
Contact: Mark Williams
[email protected]
+44(0)20 3142 0185
S & P
Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.
Contact: Toby English
[email protected]
+44(0)20 3142 0123
Tankers
Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators.
Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.
Contact: Tim Gurdon
[email protected]
+44(0)20 3142 0142
Valuations
We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.
Contact: Ben Pusey
[email protected]
+44(0)20 3142 0125
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