Costs huge factor as shipping scrambles to meet regulations

Nitin Mathur
Nitin Mathur

Shipowners generally want to make shipping better. Their main gripe: spending money while going through an unprecedented, prolonged downturn.

“Shipowners are not really making money [in today’s market]. There’s still a long way to go before we can call it a recovery,” Nitin Mathur, managing director of Wallem Singapore, told IHS Markit.

Ahead of upcoming regulations, shipowners want to do the right thing, he said. But there is no clear advantage or commercial value to making the first move, so everyone adopts a wait-and-see approach.

Furthermore, the industry has witnessed instances of ballast water treatment systems failing to meet discharge standards. In today’s market, this has made shipowners wary of incurring capital expenditure, afraid that they may still be exposed to the risks associated with non-compliance.

Despite that, the shipping industry continues to make progress on some fronts. Charterers are increasingly aware of the value of a well-managed ship, although this trend has not been equal across sectors.

The tanker segment has generally been ahead of the curve, as oil majors are under greater scrutiny and have stricter requirements. Dry bulk, on the other hand, is gradually warming up to this concept.

“At the height of the shipping market, cost was never a factor; efficiency was. People wanted the fast turnaround, to make the maximum money on their ships and cost did not really seem to matter,” Mathur said.

“Shipping is now at a stage where cost is a huge factor. We, as service providers, have to understand that, and provide the same level of efficiency we were aspiring to provide in the high markets, but at the cost levels we are aspiring to provide now.”

Wallem is known as a ship manager, but regards itself more as an integrated services provider that takes care of every aspect across a vessel’s lifecycle. From this vantage point, it endeavours to champion the concept of operational efficiency, while maintaining safety and other standards.

As an example, if a vessel spends less time in port, this improves productivity for the shipowner, which adds up to a substantial amount of money in the long run.

“We’ve had key performance indicators for quite some time, but going forward [we can expect] more of these service level agreements to come into place, where that becomes an expectation from clients and not just an intangible measure.”

With the International Maritime Organization’s 2020 sulphur cap on marine fuels just around the corner, shipowners have no lack of options, but each comes with a laundry list of pros and cons.

In the case of scrubbers, many have opined that retrofitting one poses technological and logistical challenges, while open-loop systems pump out waste materials into the ocean.

From a commercial point of view, the business case for scrubbers is predicated upon a wide fuel price differential, but this is merely an assumption that could change or diminish with time and market conditions.

Meanwhile, shipowners have expressed their concern that there may be insufficient compliant fuel come 1 January 2020, but Douglas Raitt, regional consultancy manager at Lloyd’s Register, dismissed this, boiling it down to “it’s just a matter of how much you’re willing to pay for it”.

The underlying issues are not new, Raitt said at a recent seminar organised by Wilhelmsen Ship Management in Singapore. Shipping has had to deal with different fuel quality for as long as it has been using bunkers.

Instead of hoping for a postponement, Raitt recommends shipowners tackle the issue head on. Assess each fleet and operations, work out the options available, and implement a proper fuel management strategy.

Although the clock keeps ticking, one thing is certain: shipping will not grind to a halt. “Shipping is resilient. There will still be ships [come 2020], and it will bounce back,” Mathur said.

“If shipowners are ready to take ships into the deep oceans, variable weather, gale force winds, these are small matters.”