UNCTAD: Key considerations for a more sustainable trade

Furthermore, Mr. Hoffmann is in favor of putting a price on carbon, suggesting to consider pollution and greenhouse gas emissions as a ‘safety’ issue since they do cause damage to human health. While he notices a significant progress with industry’s initiatives and discussions around decarbonizaztion, he remains optimistic about the future highlighting though, that we need a ‘clear and predictable, and multilateral, global regulatory framework’ to move forward.

SAFETY4SEA: According to latest UNCTAD Review of Maritime Transport, what are the key challenges that the maritime industry is currently facing?

Jan Hoffmann: Our assessment of the current and ongoing maritime supply chain crisis has shown to be accurate: Freight rates continue to be at historically high levels, and congestion and long waiting times constrain the supply capacity of the industry. Although this situation is new for the container shipping industry, we have seen short term boom and bust cycles of freight rates already earlier, in dry bulk, LNG and tankers. As such, once new orders of ships and containers lead to new deliveries, and port and intermodal capacity is back to normal, and the economic stimulus packages lose steam, at some point in time in this or the next year, freight rates and congestion will get back to normal. At that moment, the main longer-term challenges will come back to the forefront of industry concerns. Here, I see above all three challenges: First, there is the continued process of industry consolidation, both, vertical and horizontal. Second, as technologies continue to advance, digitalization will have an ever-bigger impact on the industry. And last – but not least – there is decarbonization. The energy transition in shipping is as important a shift for the industry as was the move from wind to steam, or from steam to oil.

S4S: Has the report revealed any alarming trends to shed our focus on with regards to COVID-19 impact on the maritime industry?

J.H.: Yes. Our analysis has shown that lower port performance, reduced speed in intermodal connections, and a shift in trading patterns which takes time to adjust to, together have lead to a de-facto reduction of the capacity to transport international trade. The median time a container ship spends in port has gone up about 12 per cent compared to pre-covid times, and the typical time a container spends in the system during a door-to-door operation is up by about 20 per cent. This would mean that we need more ships and more containers and more port capacity to transport the same volume of goods – and this capacity is not yet there. In the meantime, given an overall very in-elastic demand at least in the short term, freight rates have gone through the roof.

S4S: In your view, has the industry been successful in enhancing its safety performance? What should be the next steps?

J.H.: The long-term trend in the industry’s safety performance is very positive. Whatever measure you take – accidents, oil spills, lost lives – both in total, and even more if taken per ton-mile produced, we have seen improvements. Still, the industry is not yet fully paying for the total external costs of its business. For this, we would need to put a price on carbon. And still today, port cities are among the most polluted, with populations suffering from avoidable lung diseases resulting from the fuel burned by ships. This is not normally considered a “safety” issue, but perhaps it should be. Pollution and greenhouse gas emissions do cause damage to human health.

S4S: Do you believe the industry is moving in the right direction? What do you see as the defining trends driving maritime toward the future?

J.H.: Over the last very few years – perhaps just a couple of years – I have seen a very positive shift in the attitude of a growing number of industry stakeholders. When you participate in IMO meetings, the latest COP, or the Global Maritime Forum, I believe we can be optimistic that a tipping point can be reached, where the ambition to reach a real zero of carbon emissions by 2050 will be agreed upon, and those who cause the emissions accept that they must pay the true price for the external costs caused by those emissions. The polluter-pays-principle, aka the “internalization of externalities” has to become a global practice in international shipping.

S4S: Are you satisfied with industry stakeholders’ response on the issue of crew welfare until today? Where should ship operators focus on to address seafarers’ crisis?

J.H.: I have seen a lot of very positive collaboration, especially among employers’ and employees’ associations, such as the ICS (International Chamber of Shipping) and the ITF (International Transport Workers Federation). But – unfortunately – we still see that all these efforts have not been enough to ensure that all seafarers can get home in time and as scheduled, and receive their vaccinations. Crew changes have always been complicated for the shipping industry. It is not enough to arrange for a crew to fly back home, but you have to ensure that at the same time the replacement arrives. With every lower schedule reliability, or even in tramp shipping, and with covid-related difficulties in transit, visa, cancelled flights, and vaccination requirements, this has become a big headache. Some countries and ports have put their own interest first, and don’t seem to care about the wellbeing of those whose services we need to receive our internationally traded goods. Also some charterers, unfortunately, do not accept route changes to allow for crew changes. In sum, there have been lots of positive efforts, but the result is still not quite good enough for our seafarers.

S4S: As we move forward, how do you feel the challenges of digitization will impact the maritime industry?

J.H.: If there is one positive thing coming out of the covid-19 pandemic, it is the realization among many stakeholders that digital solutions not only help improve efficiency, but they actually also help protect us from pandemics. Electronic payments, paperless procedures, and better planning and pre-arrival processes all help achieve both: facilitate trade and reduce risks. During the pandemic, at UNCTAD, we have received additional requests for support in programmes like Customs automation, trade information portals, Single Windows, information exchanges along transit and the like. We now need to lock-in the progress made during lockdown.

S4S: Considering the ongoing humanitarian crisis (due to the pandemic) and recent accidents (i.e. Ever Given), how may the young generation think of the shipping industry? How should we work to raise industry’s profile to the next talents?

J.H.: Logistics is a great area to work in. It is international, and it thrives and benefits from collaboration. Creative ideas and human skills are needed as much as technological awareness. With maritime logistics in the international news – thanks to the Ever Given and delayed and more expensive xmas presents – I would hope that young people are more attracted to our industry than before.

S4S: If you could change one thing in the industry from your perspective what would it be and why?

J.H.: The maritime industry has in the past benefitted from being behind the horizon. It seemed to be positive to be beyond the reach of national regulations and the public eye in the national press. Shipping was not included in the initial Paris agreement on reducing greenhouse gas emissions, because supposedly it was not possible to measure and tax such emissions. Today, I see that many industry stakeholders, including pro-active leaders at the IMO, ICS or the GMF, realize that actually the maritime industry could be ahead of the curve. It could be the one industry developing a global fair solution for all. Because the industry is global and can only work with a global level-playing field, it should seize the opportunity to be the first industry where individual countries cannot free-ride, but instead everybody pays for the negative external costs caused by emitting carbon.

S4S: If you could make one wish for the maritime industry for 2022, what would you ask for?

J.H.: We need a clear and predictable, and multilateral, global regulatory framework for the decarbonization of shipping. Currently, we have a shortage of carrying capacity, worsened by the covid-19 pandemic, which has lead to historically high freight rates, in particular in container shipping. In the years to come, we will need more and newer ships. The existing ships will tend to go even slower, because this is the easiest way to reduce emissions per ton-mile. And if ships go slower, in practice we will need even more ships to carry the same volume of trade. So, while we would need more ships, in reality investors are waiting and withholding investments because they do not know the future price of carbon, the technological regulations, and the overall ambition of when and how we want to get to zero emissions. This mismatch between, on the one hand, the need for more ships and, on the other hand, the hesitancy of new investments in view of an uncertain future regulatory requirement, leads to higher freight rates for all of us.

S4S: What is your message to industry stakeholders with regards to the maritime industry? What is your advice to stay competitive amid these challenging times?

J.H.: Technological progress will never be as slow as today. It takes time to plan and adjust to new regulations and technologies, and in view of the ever faster advances in digital solutions and connectivity, I believe that investments in technological capacity, and the corresponding human training and education, will be critical for the competitiveness of any logistics provider.

The views presented are only those of the author and do not necessarily reflect those of SAFETY4SEA and are for information sharing and discussion purposes only.