Sailing towards a carbon-neutral future.
To mitigate the environmental impact of this increase, the International Maritime Organization (IMO) recently adopted a new strategy aimed at reducing greenhouse gases (GHG) from shipping by 50% by 2050 compared to 2008 levels. This comes on top of the previously established NOx and SOx caps that should be in place by 2020. The shipping industry needs to quickly explore new solutions to cut emissions.
The challenge is that there is no panacea yet that will create such a zero-emissions shipping ecosystem. Instead, available opportunities and acknowledged trends include large scale roll-outs of alternative fuels, (fully electric ships and hydrogen fuel cells, as popularised in the media), and increased digitalisation of the industry and the on-board utilisation of wind and solar energy.
The inside (industry) and Wärtsilä’s perspective, in particular, include exploring these opportunities while bearing in mind profitability, scalability and the urgency. It is increasingly understood that the internal combustion engine together with fossil (and later bio or synthetic) LNG provides an excellent platform for actually achieving the set emission targets for 2050 and beyond.
If the industry really wants to address emissions, the consensus is that the internal combustion engine still offers the most realistic emissions-reduction potential. Additionally, this solution requires only existing infrastructure, minimising the amount of investment needed. Generally speaking, a de-fossilised future could take this path: LNG->bioLNG->synthetic LNG, which would maximise the utilization of existing infrastructure.
The estimated cost of synthetic LNG in 2030 is on par, or lower, than other alternative fuels, and this combined with the world’s decade-long experience with marine LNG fuel makes it a safe and reliable bet. Bare in mind that other alternative fuels would take between 10-20 years to be accepted by marine classification societies, not to mention the time required to develop infrastructure and bunkering facilities etc…
Regardless of the potential of future fuels, the internal combustion engine still has the flexibility to burn most combustible substances. By burning LNG in a modern combustion engine we can immediately reduce the GHG emissions by 20-25% compared to the diesel engine. Methane leakage during production and combustion is still a challenge that negatively impacts the GHG footprint of using LNG, being 28 times more potent than CO2. At the same time, this is an opportunity for the industry to improve, something Wärtsilä, Shell and others have committed to doing.
Trends of the future
Recent efforts have successfully reduced local emissions of nitrogen, sulphur oxides and particle matter from ship engines across different regions of the world — a result of ongoing and increasingly stringent emission regulations by the IMO which began in the 1990s and continue to the present.
But GHG emissions are widely acknowledged as the primary source of global warming, with all their well-publicised consequences to the planet. Thus far, there has not been a large-scale industrialised solution to solving the emissions problem. In the short- and medium-term, there is no known single solution to the challenge. There is more potential for the long-term, however.
There are currently four long-term technology trends that can help mitigate climate change.
– Alternative fuels using internal combustion engines;
– Fully electrical propulsion enabled by batteries, applicable mostly for smaller vessels;
– Hydrogen-based operations using fuel cells;
– Optimised vessel operation through digitalisation
Alternative fuels using internal combustion engines
There is a plethora of fuels that can be used in marine engines. But with carbon-neutral biofuels, it’s necessary to consider what renewable energy sources are used in the production to start with. Other critical aspects to consider in the selection of fuel for a new vessel are its availability and energy density. For fuels based on biomaterial, the main challenge is the local availability of sustainable feedstock. For most fuels, the current supply chain is unevenly developed and will require substantial investment to accommodate future needs.
Bio-LNG has a big advantage in that many different kinds of sustainable feedstocks can be used, from manure via sewage residue to forest residue and many other types of waste.
Fully electric propulsion enabled by batteries
There are many challenges in developing battery technology. First, capacity and cost are still not at a feasible level for the marine industry. In 2018, the first fully electric cargo ship was launched in China. It had a range of 80 km after two hours of charging. This example demonstrates that battery operation for larger vessels today is mainly restricted to port areas for tugs and ferries, or for peak-shaving operations.
We believe this will remain true for the foreseeable future, meaning that other solutions are needed for the business of long-distance shipping which also is responsible for the bulk of total shipping emissions.
Secondly, charging batteries is time-consuming and requires high charging power and related infrastructure to limit charging times. Another challenge with respect to emissions is that any pollution from the on-shore generated electricity must be attributed to operating the vessel. Therefore, the electricity used should stem from hydro, solar and/or wind power to achieve zero-emissions in a true sense.
Finally, many of the materials used to produce batteries are precious metals. Cobalt, an integral component of the lithium-ion battery, for example, is being hailed as the ‘new gold,’ a cause for alarm since scarcity may create vulnerability in the supply chain. In addition, batteries are often categorised as hazardous, requiring special disposal procedures.
Hydrogen fuel cells
The almost too-good-to-be-true proposition of providing energy without emissions from hydrogen fuel cells is attracting the attention of the entire world. As renewable energy sources are already today the cheapest energy source in many places, hydrogen can be used and produced in a sustainable way.
This great potential is offset by some serious challenges, however. As with other renewables, one of the main issues related to developing this fuel cell is cost. Significant progress has been made within the automotive industry that could eventually improve the feasibility of marine applications as well, though recent developments in the automotive industry indicate a preference for batteries over fuel cells for most applications; this can possibly curb further fuel cell development. But as in the case of large-capacity batteries, the investment cost likely will plateau at a higher level than for automotive applications, due to the need for technology to mature and lower sales volumes.
The availability of hydrogen is another problem. Large-scale hydrogen production based on electrolysis demands large amounts of energy and has low total efficiency. This is perhaps the biggest challenge for hydrogen as a fuel itself, and for any other synthetic fuels based on hydrogen.
If renewable energy is available with even lower costs, the production of hydrogen is not the biggest challenge, unless the electrolysis is difficult to scale up. Another, if not even bigger challenge is the storage of hydrogen as fuel, as well as the operations: bunkering and transportation.
Therefore, synthetic fuels are actually more attractive than H2 and can be considered as a hydrogen carrier, when bound to CO2 or N2 in the form of CH4 (methane) or NH3 (ammonia).
Onboard hydrogen storage solutions pose another problem. High-energy density hydrogen can be stored physically as either gas or liquid. As a gas, it typically requires high-pressure tanks, while storage as a liquid requires cryogenic temperatures because the boiling point of hydrogen at one atmosphere is -253 degrees Celsius. Some applications centre around linking it with solids or within solids. Storing hydrogen in liquid form moreover will require storage of the fuel below – 253 C, under normal pressure, which adds to the complexity.
The most probable use of Hydrogen is as a component in producing synthetic fuels such as synthetic LNG, ammonia or methanol. However, large scale adoption of the hydrogen fuel cell as the primary energy source is unlikely for many years to come and cannot be considered a solution for meeting the IMO 2050 GHG targets.
Optimised vessel operation through digitalisation
Shipping is by far the most cost-effective way to move goods around the world, and yet it is characterised by waste, pollution, and a multitude of inefficiencies, all of which present opportunities. A major reason for these inefficiencies is the lack of transparency between the huge number of actors involved in shipping goods today. The complexity and lack of real-time communication create congestion in high traffic areas, leading to increased emissions, operational costs, and significant delays.
Eliminating this waste is the basis for Wärtsilä’s Smart Marine Ecosystem. It focuses on connecting all agents and parties in the shipping industry to create the needed transparency and dynamics to optimise the complete logistic chain rather than sub-optimising the individual steps. This involves taking joint responsibility for operations, working together, ensuring that the right parties have access to the necessary information, and can access it at the right time. Smart Marine is about understanding that ships are only one element within the complete logistics chain. Vessels have to interact with ports, and they, in turn, have to interact with land-based transportation modes, all the way to the end customer. In the end, the main driver for this development is the end customers’ need for transparency, Just-in-Time arrival delivery, and low costs.
Optimising the connections between these elements will reduce fuel consumption and the related emissions significantly for the whole logistics chain as well as reduce delays in the deliveries. Digitalisation will not by itself create zero-emission vessels, but it will significantly lower the energy needed for transporting goods.
As the Smart Marine Ecosystem becomes the industry’s preeminent operating model, shared capacity will improve fill rates and reduce unit costs, big data analytics will optimise both operations and energy management, intelligent vessels will enable automated and optimised processes and smart ports will deliver smoother and faster port operations.
Despite the significant challenges, a roadmap towards zero-emissions shipping is beginning to crystallise. Already, sulfur, particle or black carbon emissions and NOx emissions of a low-pressure engine are already compliant with Tier III. But in order to reach the 2050 target set by the IMO, the industry must focus on rooting out inefficiencies, utilizing on board wind and solar power, increasing LNG investments globally, working on fuel flexibility for engines, expanding capacity investments for biogas and synthetic fuels to be mixed with LNG.
To reach the targets of the Paris agreement and IMO 2050 we need to start acting NOW and today the only established fuel that takes us towards these goals is LNG. Fossil LNG is however only an intermediate fuel and a parallel increase in production capacity for making bio- and synthetic-LNG using renewable energy sources is imperative as we recover waste/side streams from agriculture, food industry, landfills and waste water treatment and turn that into biogas or bio-LNG (LBG). In the future, there will be other fuels and technologies that will help us de-fossilise the shipping industry, such as Ammonia, Methanol, fuel cells, etc. However, today the combustion engine with LNG is the only way to put a real concrete dent in the GHG emissions. And the longer we wait, the bigger the challenge will become. We have the means, we know the goal, so the time to act is now.
To comply with the IMO targets, radical change is needed – both in vessel design and power generation. However, the main challenge is fuel, and the related global investments in its production and infrastructure.
Steps towards new treaty to protect marine biodiversity
The IMO Secretariat is attending the latest in a series of conferences to develop a legally binding international instrument, under the UN Convention on the Law of the Sea (UNCLOS), on the conservation and sustainable use of marine biological diversity in areas beyond national jurisdiction – known as ‘BBNJ’. The 3rd Intergovernmental Conference (IGC) is being held at UN Headquarters in New York, United States (19-30 August). The current Conference session is the third in a series, with the fourth (final session) set to take place in the first half of 2020.
The current conference session is discussing the draft treaty text. IMO representatives are attending the plenary sessions and working groups on area-based management tools, environmental impact assessments, capacity building and technology transfer and cross-cutting issues. IMO has been present throughout the process of developing the BBNJ agreement, through the preparatory phase as well as the IGC, to provide the negotiating States with information and assistance in developing the new instrument.
IMO’s has experience in developing universal binding regulations for international shipping to ensure shipping’s sustainable use of the oceans, through more than 50 globally-binding treaties. IMO regulations are enforced throughout the world’s oceans through a well-established system of flag, coastal and port State control. Many IMO measures actively contribute to the conservation of marine biological diversity in areas beyond national jurisdiction, including the International Convention for the Prevention of Pollution by ships (MARPOL) and the International Ballast Water Management Convention – which aims to prevent the transfer of potentially invasive aquatic species – as well as the London Convention and Protocol regulating the dumping of wastes at sea. IMO has adopted numerous protective measures, which all ships must adhere to, both in and outside designated sensitive sea areas (PSSAs) and in special areas and emission control areas. These include strict rules on operational discharges as well as areas to be avoided and other ship routeing systems, including those aimed at keeping shipping away from whales’ breeding grounds. IMO’s Polar Code is mandatory for ships for operating in the Arctic and Antarctic. IMO has also issued guidance on protecting marine life from underwater ship noise.
In June 2019, the President of the Intergovernmental Conference, Mrs. Rena Lee of Singapore, addressed IMO Member State representatives at an event at IMO Headquarters in London, United Kingdom, to heighten awareness of the interplay between the BBNJ instrument and the IMO mandate. The IMO Secretariat has also provided Member States with an analysis of relevant provisions of the draft BBNJ instrument with respect to the IMO mandate.
Shipping Industry Expresses Concern Over Recent Trade Developments.
A delegation from the International Chamber of Shipping (ICS), the Asian Shipowners’ Association (ASA) and the European Community Shipowners’ Associations (ECSA) has, at the World Trade Organization (WTO) in Geneva, expressed concern over recent increases in protectionist measures. Presenting two position papers to the WTO, the shipping sector has “fully committed to the preservation and promotion of free trade policies and principles around the world.”
This comes at a time when trade barriers are becoming more prevalent and represent a worrying trend for the delivery of sustainable economic growth. The papers highlight that there has been a seven fold increase in import-restrictive trade measures since 2017. This represents an additional USD 588.3 billion of additional costs to global trade. The importance of this representation has been given heightened relevance following the decision by the United States of America to increase import tariffs on certain goods from China.
Addressing the WTO Simon Bennett, ICS Deputy Secretary General said: “It is no coincidence that the massive growth in the global economy and thus the demand for maritime services that has been seen over the past 25 years has followed the WTO’s establishment in 1995. Global maritime trade now exceeds ten billion tonnes of cargo a year, but the efficiency of the shipping sector is dependent on a rules based trading system. This requires the negotiation and adherence to multilateral trade agreements under the auspices of the WTO. Recently this success story has been the subject of unwarranted criticism and threat by certain governments, including the United States, undermining the WTO’s role as the regulator of international trade. There are no winners when you increase unilateral tariffs, which is why the best place to address disputes is at the WTO.”
137 new trade-restrictive measures were put in place between 2017 and 2018 which have added significant burden and cost to the free movement of goods.
Speaking in the margins of the WTO negotiations on e-commerce, Lieselot Marinus, Director of Shipping & Trade Policy at ECSA said: “We are concerned at the growth of sector specific protectionist measures, particularly cargo reservation whereby the carriage of international cargoes is restricted to national flag ships, undermining fair competition and a global level playing field.”
Captain Ang Chin Eng, Secretary General of the ASA added: “The global shipping sector is calling on the global community and WTO Member States to continue to support the WTO and its various functions, which help to govern and maintain the efficient operation of global trade in the best interests of all nations.”
ICS, ASA and ECSA representing the shipping industry which is responsible for the carriage of about 90% of world trade, asserted that the shipping sector still needs to see progress being made under the General Agreement on Trade in Services (GATS).
Shipowners are encouraging WTO Member States to ensure that bilateral agreements and regional agreements – including those which relate to shipping and maritime transport services – do not conflict with their current national schedules of commitments, as agreed within the framework of the WTO.
Smart shipping and the human element
The term “Autonomous” is one of the buzzwords within the shipping community today. But what do we mean by autonomous vessels? And how might this impact our industry, particularly, in terms of the human element.
But, what do we mean, when we talk about autonomous ships. Are we talking about fully automated ships or merely levels of autonomy that will change the need of crews both onboard and ashore? The latter is a much more realistic scenario that is indeed likely to take place soon enough. And it will be ship types and trade lanes that will be the main parameters to define the crew still needed onboard, when it will be needed especially close to shore, what kind of crew and with what qualifications, etc.
Furthermore, it will also need to be assessed which current functions could be moved to shore-based control centres as well as what new functions would need to be developed according to the STCW as it is now or as it will evolve in the future.
This will greatly depend on our understanding of the human element in shipping. It has been stressed for years that the human element is responsible for over 80% of errors and accidents. On the other hand, it has never been stressed enough that the human element is also responsible for the vast number of safe voyages, goods transported on time and accidents prevented.
Levels of autonomy are already in place through digitization and digitalization, leading to what is known as “smart shipping”. It is, of course, digitalization – the transformation of process and models due to digital changes – that may impose disruptions and certainly require significant change management.
In order for companies to embrace these changes, one needs to consider how disruptive this could be to the company’s approach in terms of roles, procedures and human capital. Roles may need to be redefined, skills developed and assessed, changes communicated effectively, and people trained in a way that will enable them to take up their new responsibilities and tasks aiming at commercial viability and safety. At the end of the day what counts is that any change must make economic sense and lead to enhanced safety.
The true challenge regarding autonomous ships is not whether we can technologically achieve the maximum level of autonomy. This can be done and has already taken place at a large degree. The issue is to ensure that they are sufficiently safe or have a tolerable risk level. This will need to be defined by the International Maritime Organization (IMO) and flag states for any given operation. Furthermore, we will need to support this with regulations and instruments that will address the complexity of the topic.
We, in DNV GL, have published a position paper on “REMOTE-CONTROLLED AND AUTONOMOUS SHIPS” explaining how we address the issue in an effort to assist the maritime community take the optimum decisions having considered all aspects, technological, economic, safety and social.
We must ensure that our drives towards technological achievements include besides efficiency and costs savings, safety and responsibility concerns.
Progress cannot be stopped and actually, we should not want to stop it but rather use it to our benefit.
How to achieve crew travel efficiency in your business
As World Maritime Day was celebrated across the shipping sector on 27 September, the IMO’s chosen theme ‘better shipping for a better future’ applies across the industry. With mission critical travel of crew representing the second highest cost for vessels, we look at the measures that should be considered in achieving improved global efficiency for maritime organisations.
The working nature of maritime organisations means they often require complex group travel arrangements, and it’s critical that time is not lost in the travel booking process. The undisrupted movement of crew is essential to any shipping company and although travel is one of the highest vessel costs, it’s important to note that it’s also the highest controllable cost, and so it’s imperative that a travel programme can deliver in the most efficient way possible – without compromising on safety, compliance and accuracy.
Through our extensive experience and expertise of arranging global travel in the marine industry, we’ve identified three areas of consideration where costs can be managed to deliver efficiencies in the long term through effective planning, booking and reporting
The best of consistency and flexibility
Most organisations have several crew coordinators based in locations around the world and they often have varying processes between them. If you’re making bookings with a TMC, they will be on hand to provide a tailor made and consultative approach when creating a travel policy to achieve efficiencies on a global scale for your business, allowing for local market flexibility. It’s important to communicate any changes to the policy so they can ensure it is implemented globally and that travel arrangements are always compliant.
Effective travel management can be mission critical in the maritime industry and so shipping organisations shouldn’t find themselves dealing with incorrect bookings being made due to simple but detrimental errors, such as a name on a passport or misjudged visa requirements. Sometimes, travel arrangements can be at risk of human error when companies have outdated processes involving manual transfer of information across multiple platforms.
End-to-end workflow management systems can be incorporated to alleviate this risk, such as ATPI’s CrewLink™, a platform that has been specifically designed for managing the complexities of travel in the maritime industry. ATPI’s CrewLink™ seamlessly integrates with your HR and finance systems to capture all personal data including visa information. However, it’s important to note that whilst integration can help streamline the booking process, in order to reap the benefits of a workflow system, organisations must utilise profiling tools, for instance ATPI’s eProfile, to keep personnel data accurate, consistent and complete.
Finally, full visibility surrounding the cost of a port call is essential for commercial organisations. Without complete transparency, it is difficult to identify opportunities for improving on efficiencies, as well as running smoother crew changes.
There is a vast amount of data involved in crew changes and maritime personnel travel, and it’s necessary to have this data reported in one place so it can be used strategically as part of future cost and time saving initiatives. Consistent reporting results in valuable data that can be easily understood and effectively used to drive costs down in various elements of the travel policy.
Stakeholders across the maritime industry have the common goal of achieving ‘better shipping for a better future’ and with crew travel being such an crucial part of the industries’ operations, it’s never been a better time to cast a critical eye over your existing travel programmes to ensure they are working hard to improve efficiencies.
Manning costs rising on trade recovery and officer supply shorta
Cost growth returned to seafaring in 2018 and is projected to accelerate moderately on recovering vessel earnings and continued shortfall in officer numbers, according to the latest Manning Annual Review and Forecast report published by global shipping consultancy Drewry.
Manning costs have risen moderately in 2018 following several years of stagnation as a recovery in most cargo shipping markets has taken some pressure off vessel operators, enabling employers to lift wage levels, particularly amongst the market-related officer ranks.
“This follows several years when average seafarer pay had flat lined because the depressed state of most cargo markets had made wage increases almost unaffordable,” said Drewry’s director of research products Martin Dixon. “Owners were forced to make all attempts to stem rising financial losses.”
Drewry estimates that aggregate manning costs rose by around 1% in 2018 with both ratings and officer pay rising by the same margin. This contrasted with 2017 when average costs rose by just 0.2%, dragged down by a 0.75% decline in overall officer wage rates (see graph).
The return to wage growth has occurred despite the shortfall in officer numbers receding to more manageable levels. But the shortage is expected to continue for the foreseeable future despite projected stagnation in the vessel fleet, as longer leave and shorter tours of duty increase man-berth ratio requirements. Meanwhile, officer supply growth is projected to slow further. By contrast, ratings supply has always been in surplus and is anticipated to remain so.
“The growth in supply of seafarers has been slowing and is projected to slacken further over the next five years,” added Dixon. “This slowdown in the available maritime workforce has important implications for shipowners, particularly in terms of recruitment, retention and wage costs.”
Looking ahead Drewry expects the pressure on vessel operators’ costs to continue to dampen wage inflation. The International Transport Workers’ Federation (ITF) are yet to agree new wage scales with employer organisations, to take effect from January 2019. But Drewry does not expect the award to lead to a notable rise in average salaries as many seafarers are already paid above these minimum levels.
Drewry expects average manning costs will rise moderately over the next five years, with some acceleration anticipated towards the end of the forecast period as backup ratios rise to cope with longer leave periods. Stronger vessel earnings and competition for scarce officers certified to crew specialist ships will also be drivers of slightly higher wage growth in this period.
2017: Difficult Conditions Again, But Some Improved Signals
In 2017, there were some positive changes in the contracting arena, with ordering in all of the major sectors surpassing 2016 levels. Bulkcarrier contracting increased significantly year-on-year, while ordering at the larger end supported improved newbuild activity in the tanker sector. However, overall contracting was still well below 2015 levels and remained subdued in historical terms.
What Was On The Radar?
In 2017, 902 units of 23.3m CGT were ordered (based on contracts reported up until 1st January), representing an increase of 49% and 79% year-on-year in numerical and CGT terms respectively; moreover newbuild investment increased by 57% year-on-year in value terms to an estimated $58.7bn. However, the increases follow record low contracting in 2016. Compared to 2015, there were 48% and 43% fewer orders in 2017 in numerical and CGT terms respectively.
A Clear Transmission?
Against a backdrop of improved market conditions, bulker ordering increased by 235% year-on-year in 2017 in CGT terms to reach 286 units of 6.5m CGT and 32.7m dwt. Bulker ordering also compared favourably to 2015 levels, up by 3% and 32% in CGT and dwt terms respectively. In numerical terms, 42% of bulker contracts were for Kamsarmaxes, with 119 units ordered in 2017. 67% of them were placed at Chinese yards, reportedly driven in part by the availability of Nox Tier II compliant units. Backed by CoAs with Brazilian miner Vale, 27 VLOCs of 325,000+ dwt were reported ordered in 2017, 20 of which were placed in Korea, following 31 orders in 2016.
In 2017, 271 tankers of 6.9m CGT and 30.0m dwt were ordered, up by 118% year-on-year in CGT terms. Encouraged by low newbuild prices, some owners invested in VLCCs, which accounted for 50% of 2017 tanker contracts in dwt terms. However, in CGT terms 2017 tanker ordering was 47% down on 2015 levels, remaining weak in historical terms.
Lots Of Noise
In the boxship sector, 108 units of 3.1m CGT and 0.7m TEU were ordered in 2017, a 57% year-on-year increase in CGT terms, but a 71% decline on 2015 levels. Overall, 71% of 2017 boxship orders in numerical terms were in the sub-3,000 TEU sector. A total of 29 units of 8,000+ TEU were also contracted, with 20 units of 22,000 TEU ordered in Korea and China, the largest boxships ever to be contracted.
Elsewhere, 39 gas carriers of 1.6m CGT were ordered in 2017, a year-on-year increase of 74% in CGT terms, while offshore sector contracting remained weak, with only 37 (ship-shaped) units ordered. Contracting in the cruise sector remained firm, with 31 ships of c.80,000 berths ordered in 2017, compared to 34 units of c.61,000 berths in 2016.
So, in 2017 there was a significant improvement in contracting across a range of sectors, such as bulkcarriers and large crude tankers. However, despite an overall year-on-year increase, ordering remained limited, and well below 2015 levels. As 2018 begins, shipyards will be hoping for further improvement, although a return to historically firm contracting levels could still take some time.