Worldwide shipping industry
“In the doldrums”
International Experts revealed that few new vessels are built and the scrapping rate is high. Times are tough for yards and manufacturers as demand is low. Many of them are on the verge of bankruptcy and competition is fierce. For most of the yards, the main focus is on retrofitting. Prices of HFO and MGO follow the oil price and stay at a high and increasing level in 2020 and beyond. MGO remains the most expensive, at approximately 50 percent above the HFO price, whereas LNG is decoupled from the oil price and trades at approximately 70 percent of the HFO level. Overall, they estimate the size of the 2020 world fleet to be 25-30 percent larger than the 2012 level. With weak economic conditions and fewer market interventions, governments are choosing more protectionist tactics and policies that mainly focus on protecting their own national interests. This has led to less focus on global collaboration with regard to environmental regulations. There are few incentives to introduce new regulations and strengthen existing ones. Many schemes and initiatives are therefore being shelved. The only exception to this is the global cap on SOx emissions, set for 2020. The United States decides not to introduce its own ballast water cleaning standards. Instead, the US ballast water requirements become aligned with the less stringent IMO requirements. MBMs are losing momentum and the EU is unsuccessful in implementing regional mechanisms to reduce CO2 emissions from shipping.
The plans for universal coverage of all vessels trading in Europe are not implemented. In this scenario, ship owners, yards and manufacturers are experiencing tough times and the banks are also concerned. They do not see any prospects of change in the foreseeable future. There is limited capital available for technology, R&D and education due to the weak state of the industry and the low regulatory and stakeholder pressure. Consequently, most innovations remain on the drawing board.
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Coronavirus challenges
Coronavirus has struck at a tough time for the maritime industry as it seeks to reduce its emissions, navigates issues like climate change, political risks and piracy, and deals with ongoing problems such as fires on vessels. Now the sector also faces the task of operating in a very dissimilar world with the uncertain public health and economic implications of the pandemic. The annual AGCS study analyzes reported shipping losses over 100 gross tons (GT) and also identifies challenges of the coronavirus crisis for the shipping industry, which could impact safety and risk management. In 2019, 41 total losses of vessels were reported around the world, down from 53 one year earlier. This represents an approximate 70 percent decline over 10 years and is a result of sustained efforts in the areas of regulation, training and technological advancement, among others. More than 950 shipping losses have been reported since the start of 2010. The shipping industry has continued to operate through the pandemic, despite disruption at ports and to crew changes. While any reduction in sailings due to coronavirus restrictions could see loss activity fall in the interim, the report highlights challenges that could heighten risks. Among these are:
- The inability to change crews is impacting the welfare of sailors, which could lead to an increase in human error on board vessels.
- Disruption of essential maintenance and servicing heightens the risk of machinery damage, which is already one of the major causes of insurance claims.
- Reduced or delayed statutory surveys and port inspections could lead to unsafe practices or defective equipment being undetected.
- Cargo damage and delay are likely as supply chains come under strain.
- The ability to respond quickly to an emergency could also be compromised with consequences for major incidents, which are dependent on external support.
- The growing number of cruise ships and oil tankers in lay-up around the world pose significant financial exposures, due to the potential threat from extreme weather, piracy or political risks.