Slow Steaming Panacea for All Industry Ailments?

The implementation of the 2020 sulphur cap, as prescribed by the International Maritime Organization (IMO), has been a hot debated topic by industry majors at the 6th Analyst and Investor Day, organized by Capital Link.

The event, featuring key figures from the shipping industry, has set the tone for this year’s Posidonia exhibition and conference, taking place from 4-8 June in Athens.

Delivering a keynote address before a packed hall, IMO’s Secretary General Kitack Lim, reiterated that there would be no delays in the implementation deadline of the sulphur cap, set for January 1, 2020.

In practice this means that in less than two years, ships across the globe will not be able to burn fuels with a sulfur content above 0.5 pct, unless they have scrubbers installed on board.

There has been a lot of uncertainty regarding the implementation of the regulation, and there have been estimates that by January 1, 2020, only around 5 pct of the global fleet will have installed scrubbers on board their ships making them compliant. For the rest of up to 95 percent of the global fleet a solution needs to be found, and quickly.

Commenting on the 2020 sulphur cap’s implications, Stamatis Tsantanis, CEO of Seanergy Maritime Holdings, said that the 2020 regulations and the prospect of the Annex VI of the IMO MARPOL Convention will be one of the best things happening to the industry in the past 30 years.

As explained, once the gap between the marine gas oil (MGO) and high sulphur fuel oil (HSFO) widens the natural reaction from owners would be to resort to slow steaming to save fuel.

“If the global fleet slows down by 30 pct, which is, in my opinion, the most probable scenario, 300 to 400 Capes would exit the market,” he stressed, voicing his optimism for 2020.

The exclusion of so many ships from service, as a result of slow steaming, would be one of the best things for the Capesize market in the history of the sector.

Commenting on the argument that reducing ship speed is the panacea to all ails in the dry bulk industry, Ian Webber, CEO of Global Ship Lease, said that the same also applies to the container shipping market.

He noted that the container shipping sector has been slow steaming for the past 10 years, particularly on long trade routes like those connecting Asia and Europe.

However, the challenge posed by fuel consumption in the container shipping industry will be multiplied due to the greater capacity of engines powering containerships when compared to the engines in other sectors.

Going forward, speed limitation in the container shipping industry is expected to be more severe than in the dry bulk or tanker market.

Hence, the speakers concluded that the container shipping fleet is expected to slow down substantially.

According to Eddie Valentis, CEO of Pyxis Tankers, 2020 will be a year of disruption for tankers as well as demand for product tankers is expected to soar. Namely, due to the need for greater availability of low sulphur fuel across the globe product tankers are expected to benefit as they would need to transport the cargo to different locations worldwide.

This, in turn, is expected to result in new trade routes and increase the ton mile demand.

Slow steaming in the tanker sector will prevail as well as a result of the new bunker regulation, the panelists from the tanker sector agreed.

Speaking of the industry challenges and the road map ahead, John Platsidakis, Chairman of Intercargo, said that the only way for the industry to meet the strict environmental regulations and meet the commitment for 50 pct reduction of pollution from ships by 2050 is carbon free fuel.

Jasmina Ovcina Mandra