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January 2020

welcome-2020

Welcome to 2020 the year of change

Welcome to 2020 the year of change 1170 658 La Chang

As we know, Maritime transport is the most cost-effective way to transport goods and represents more than 90% of the world’s trade according to the United Nations.

 

In some numbers it represents:

– more than 10 billion tons of goods and merchandise per year,

– more than 90,000 ships,

– more than 800 million tonnes of CO2 per year, i.e. 3 to 4% of global warming.

Journalist Rose George, author of the book “90% of Everything “, says that while humans have been moving goods on water for 4,000 years, container ships have fuelled globalization in its modern form.

Transporting 90% of the world’s trade is a great responsibility and as with great responsibility comes great pressure. As we welcome 2020, we see the beginning of much stricter regulations enforced in the shipping industry globally. More than 150 years after the opening of the Suez Canal, the environment is at the heart of the concerns and objectives of the shipping industry.

Sustainable shipping for a sustainable planet ” is the World Maritime theme for 2020. This is in line with the new regulation “IMO Sulphur 2020” of the International Maritime Organization (IMO) to achieve the objectives of its 174 member states. The IMO is the United Nations agency responsible for ensuring the safety and security of maritime transport and preventing pollution of the seas from ships.

Effective from the 1st January 2020 the maximum sulphur emission will be drastically reduced in order to protect overall human health and biodiversity.

Sulphur dioxide is an acidifying gaseous pollutant. It contributes to the acidification of the environment, which is detrimental to all ecosystems. Sulphur dioxide emissions are also responsible for the formation of toxic mists known as “SMOG”. Sulphur dioxide also has harmful effects on human health such as on lung function (coughing, respiratory problems, bronchitis, etc.).

A study on the impacts of sulphur dioxide on human health published in 2016 and cited by the IMO, estimates that “more than 570,000 premature deaths will be avoided between 2020 and 2025 thanks to the introduction of new regulations on maritime transport “.

More precisely, the IMO poised to ban shipping vessels using fuel with a sulphur content higher than 0.5%. When compared to the present upper limit of 3.5% this is a significant difference in sulphur content present in the environment. The usual marine fuel is thought to have a sulphur content of around 2.7%. This is the most impressive change in registry in the maritime world ever.

Today it’s imperative for ship owners and operators to consider and adopt various strategies to meet the new IMO regulations:

– Use of a lighter fuel oil such as marine diesel or a low sulphur fuel oil: this solution makes it possible to comply with the new standards planned however, higher fuel purchase costs must be anticipated.

– Installation of a smoke filter called “scrubber” on the ships’ chimneys to purify 99% of exhaust gases.

– Use of fuels such as Liquefied Natural Gas (LNG): LNG refuelling infrastructures remain rare because these ships are very expensive to produce.

– Use of electric power as a means of propulsion by ships.

– Due to this health risk it is evident that the reduction of sulphur oxides is the Maritime Transport Industry’s way of giving back and helping the environment.

This is a real environmental issue and involves major financial and technical investments for shipping companies. Whatever the solution chosen, additional costs and investments are to be anticipated.

Some potential impacts:

– The “IMO Sulphur 2020” regulation may lead to a reduction in the carrying capacity of ships.

– As the price difference between conventional HFO (Heavy Fuel Oil) and LSFO (Low Sulphur Fuel Oil) is very significant, many shipping companies are choosing to install scrubbers which immobilizes the vessel for about a month or invest in environmentally friendly ships.

– The new demand for fuel oil with a low sulphur content is likely to disrupt the market for petrol producers. It will take them a few months to find a balance between quantities of oil with a low or higher amount of sulphur.

– According to Patrik Berglund, CEO and co-founder of XENETA: “This is the opportunity of a lifetime for the shipping lines to jack up prices because the entire industry expects increased costs ”. But we will know more precisely in the coming months how the market will react.

In summary, these regulations will allow the industry to continue to prosper while responding to current environmental issues. And what is certain is that the shipping industry is strong and will remain the leader in the transport market.

world-trade

World trade entering a new normal says UNCTAD

World trade entering a new normal says UNCTAD 1170 658 La Chang

According to the latest United Nations Conference on Trade and Development (UNCTAD), the world trade increase fell below the historical average of 3% in 2018 managing growth of just 2.7% and properly below the 2017 growth rate of 4.7%.

Therefore, global container traffic growth also fell from 6% in 2017 to a modest 2.6% last year while container port throughput growth also declined to 4.7% from 6% over the same period.

Shamika Sirimanne, the director for the division on technology and logistics, said at the launch of the latest UNTAD review, “There has been a shift in globalisation patterns with a regionalisation of trade flows and supply chains.”

Moderated economic and merchandise growth has been accompanied by fundamental changes to China’s economy which has ceased to be the world’s factory and has moved to a more consumption-based demand economy.

According to UNCTAD, “The WTO [World Trade Organization] is in a bit of a funk right now,” and this has led to the proliferation of regional trade agreements, while trade uncertainties, caused by tensions in the Middle East and the trade war between the US and China in particular, have stalled global economic growth. For the maritime sector that lack of growth has been accompanied by “persistent over-supply of [ship] capacity.”

While trade growth in the container shipping industry was under 3% capacity growth was 13.1% in 2018 and is projected to reach 13.4% this year, containerised trade reached more than 150m teu in 2018.

According to the report, overcapacity has caused major fluctuations in freight rates in the major container trade lanes. Eastbound transpacific rates stood at an average of just over $2,300 per feu, but the rates declined nearly 28% to $1,667 per feu the following year. And while rates did recover in 2012 the cost of a 4oft unit out of Shanghai to the west coast of North America had declined to $1,736 per feu on average last year.

Westbound trades out of Asia to Europe were in even greater trouble, probably because the ultra-large container ships, in excess of 18,000 teu, were all deployed on these trades. Though the fluctuations in container costs pre-date the delivery of the first large vessels in 2013. In 2010 a20ft container to Europe from Asia was priced at $1,789 per teu, by 2011 that had declined to $881 per teu. Freight rates recovered to $1,161 per teu by 2014 but collapsed again to $629 per teu by 2016 before rising to a meagre $822 per teu in 2018.

“Imbalances between supply and demand drove down freight rates on mainline container trade routes during the first half of 2018,” according to the UNCTAD report. It went on to say that these routes were faced with low volumes and excess capacity.

With some 25% of vessels deployed on the Transpacific trades being ships larger than 12,000 teu, freight rate decline was “Due to the continual deployment of mega large vessels,” said the UNCTAD report.

US imports from Asia received a boost with the trade dispute between the US and China prompting shippers to increase imports ahead of the introduction of tariffs and that demand raised rates temporarily. While on the Asia to Europe trades the decline in demand, attributable to the slowing European economies, predominantly the UK and Germany, and capacity oversupply are cited as the reasons for the collapse in freight rates.

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