2020 Global Sulphur Cap

ICS said that it fully supports the new IMO regime, saying that:

It will deliver dramatic reductions to the sector’s sulphur emissions and significant environmental benefits, not least to the health of coastal populations

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However, it added that it will be the regulatory game changer of the decade, with significant consequences on the economics of shipping and the future structure of the industry. Namely, if implementation by governments and bunker suppliers is flawed, there could be serious market distortion.

Another important factor is that the IMO decision to continue in 2020 focused entirely on the potential availability of compliant fuel and took little account of the possible purchase price.

In addition, implementation will be far more complex than for the previous introduction of ECAs. This is due to the magnitude of the switchover and the much larger quantities and different types of fuel involved, as well as continuing uncertainties about the availability of compliant fuels in every port worldwide, immediately before and after 1 January 2020.

Credit: ICS

The Fourth Propulsion Revolution

ICS is confident that the solutions required will to meet the IMO targets will eventually be found. However, it added that the technologies necessary to achieve these goals do not currently exist, in order to be commercially viable.

ICS therefore believes that support for massive research and development activity needs to be at the centre of the implementation of the IMO strategy by Member States

In addition, ICS noted that the GHG reduction targets agreed by IMO are very ambitious. A 50% total cut by 2050, regardless of trade growth, is very challenging, while the industry also has to achieve a 40% efficiency improvement by 2030, which ICS believes it can be achieved using today's technologies.

Nevertheless, in March 2019, along with other international shipowner associations, ICS made a submission to IMO, highlighting the fact that, when considering the projections for future trade growth, the industry will not be able to meet the 2050 GHG reduction target using fossil fuels alone. This would require an efficiency improvement of around 90% compared to 2008, which cannot be delivered with existing technologies. For this reason, if the 2050 reduction target is to be met, commercially viable low emission ships must begin appearing on the market by the 2030s.

Moreover, due to the lack of necessary technology, over the next decade the sector will need massive investment in research and development of zero (or near zero) CO2 emitting fuels, propulsion systems and other new technologies. The review mentions that new and innovative measures to advance research and development must be a key component of the longer term measures that are considered by IMO in 2020, and that work on this needs to be finalized prior to 2023.

STCW training

ICS wants IMO to conduct a comprehensive review of the STCW Convention governing seafarers’ training standards. Namely, in February 2019, ICS endorsed a recommendation by the ICS Manning and Training Sub-Committee that it should request IMO to carry out a comprehensive review of the STCW regime. This is something which has not been undertaken since the early 1990s before the radical rewrite of the STCW Convention that was adopted by IMO Member States in 1995.

ICS decoded that:

A fully revised STCW regime would allow the industry to adapt much more effectively to fast moving technological developments, including increased automation. A revised Convention could provide a structure with sufficient flexibility to meet the demands of a rapidly evolving world fleet, and could permit a far more modular approach to competency accumulation and certification than possible under the current regime

In addition, new technology regarding navigation, engineering and propulsion systems is changing the functions that seafarers conduct on board ship and the competencies and training which they now need.

ICS stated that a comprehensive revision of the STCW Convention and Code must enhance transparency and the robustness of implementation oversight, related to the obligations of IMO Member States that are responsible for the quality of their national training and certification systems. Specifically, this includes ensuring strict compliance by individual training institutes to meeting IMO competence standards, and a tightening of the approval process by governments of training colleges, especially those engaged in operational level ships’ officer training.

UN Law of the Sea Implementing Agreement

ICS supports the targets of high level negotiations at the United Nations to protect the ocean, while seeking to prevent unintended impacts for the future regulation of shipping.

For the last three years, at the United Nations in New York, ICS has been representing the world’s shipowners in a negotiation to agree a new legal instrument for the protection of the ocean. If adopted, this instrument will provide protection to marine Biodiversity in sea areas Beyond National Jurisdiction (BBNJ), namely the High Seas beyond territorial waters and the Exclusive Economic Zones (EEZ) of nations, 200 nautical miles from their coast, over which a state has special rights regarding the exploration and use of marine resources.

Nevertheless, ICS said that there is a risk that this UN work could have unintended consequences and adversely affects on shipping, as it could interfere with principles like freedom of navigation, principles governing IMO pollution liability Conventions, or otherwise cut across the work of IMO. It could also upset the current balance between the rights and obligations of flag states, coastal states and port states.

However, the UN negotiations are at a relatively early stage and the issues are complex as the ocean is already regulated by a large number of different UN and regional agencies.

Piracy and Violence

According to the International Chamber of Commerce’s International Maritime Bureau (IMB) reports of attacks in waters between Côte d’Ivoire and the Democratic Republic of Congo more than doubled in 2018, with six hijackings, 130 seafarers taken hostage and 78 being kidnapped for ransom. These instances have continued in 2019 as well.

Moreover, the number of unsuccessful attacks against shipping by speed boats, many using automatic firearms is higher still, with perhaps as many as 50% of these estimated, by IMB, to be passing unreported.

In March 2019, the Round Table of international shipping associations along with OCIMF announced that the geographic boundaries of the High Risk Area for piracy in the Indian Ocean had been reduced, with new advice issued to merchant ship operators. This came after extensive consultation with the military including the NATO Combined Maritime Forces (CMF), EUNAVFOR and United Kingdom Maritime Trade Operations (UKMTO).

Furthermore, in April 2019, in co-operation with other international shipping associations and the Oil Companies International Marine Forum (OCIMF), ICS made a submission to the IMO Maritime Safety Committee, meeting in June 2019, calling inter alia for a far more co-ordinated response by governments and the worlds’ military navies to support the law enforcement of authorities in the region. As well as presenting an unacceptable threat to the lives of seafarers, piracy also threatens the conduct of global trade.

A year earlier, in June 2018, ICS and other industry organisations launched BMP5. This is a new edition of the Best Management Practices to Deter Piracy and Enhance Maritime Safety in the Red Sea, Gulf of Aden, Indian Ocean and the Arabian Sea to which ships are still strongly encouraged to adhere when trading in the Indian Ocean, where the possibility of a resurgence of Somali piracy is ever present, complicated by the ongoing conflict in Yemen.

Economic Risks

The previous Annual Review suggested that shipping companies needed to restrain when ordering large numbers of new ships to avoid stifling any new recovery, just at the moment when it might be about to get started, ten years after the massive downturn of 2008.

Currently, there are new clouds on the horizon and the avoidance of over ordering is more important than ever. However, while restraint will benefit the collective best interest of the industry as a whole, this may not always be the case for individual operators who will may see investment opportunities which rationally appear to justify ordering new tonnage.

For 2019, the outlook for the global economy and demand for maritime transport is possible to be worse. Considering concerns regarding slowing growth in key economies, including China and the EU, and the possibility that the trade dispute between the United States and China could develop into a full blown global trade war, growth is expected to decelerate in 2019 and further still during 2020.

On the more positive side, ship ordering fell 14% in 2018 according to Clarksons, around 17% below the average since the 2008 downturn. This suggests that many shipowners may indeed be resisting the temptation to over order. In the beginning of 2019, global shipping order book appeared to be stable at around 10% of the fleet. Nonetheless, the reluctance of governments in Asia, where the vast majority of ships are built, to address overcapacity in the shipbuilding sector remains a serious issue.

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