Container carriers are rejecting proposed mandatory vessel speed limits, saying the move set to be discussed at the International Maritime Organization (IMO) meeting later this month would undermine climate change goals for shipping.
In an interview with JOC.com, John Butler, World Shipping Council president and CEO, said the proposal by the French delegation to the IMO and reflected in a letter signed by 117 shipping companies last week would force container carriers to build ships to make up for capacity lost through mandatory slow-steaming. And because carbon neutral ship technology is still in its infancy, Butler said any ships ordered in the near future would use old fossil fuel burning technology that would undermine carbion dioxide (CO2) reduction targets.
“Ships on average last 25 years, so if you have this short-term measure of reducing speeds through a mandatory regulation, you are creating the need [for liner operators] to invest in more fossil fuel burning vessels that will be with us for the next 25 years, which is precisely the direction we don't need to go in,” Butler said. “Whatever the merits of a speed reduction might be in the short term, in the long term a speed limit would lock in the very technology that instead needs to be replaced in order to ultimately meet the IMO's long-term objectives in 2030 and 2050.”
He said there are several other reasons why a mandatory slow-steaming regulation would set back decarbonization goals for shipping, which were defined by the IMO last year as a 50 percent reduction in absolute levels by 2050 versus 2008 and a 40 percent reduction in carbon intensity ("emissions per transport work") by 2030. Those reasons include the limited capacity of chronically profit-challenged container carriers to invest in new tonnage and the loss of landside efficiency due to slow-steaming ships having trouble hitting berthing windows at ports.
“There is not an infinite capacity for the industry to invest. So if through speed limits you induce this artificial investment in new ships in order to maintain adequate capacity to maintain weekly services, that is money that will not be available to invest in research, development, and implementation of new technologies to move to a no-carbon future,” Butler said.
Slower ships equate to more ships needed
Industry analyst Lars Jensen of SeaIntelligence Consulting supported this point, “There would not necessarily be a need to order more ships right now, but that logistically means that supply and demand would be getting tight earlier than it would have otherwise; then you will see the industry ordering ships earlier than they otherwise would have. As technology progresses, ships become more and more fuel efficient, so the longer we can wait before we can order ship[s], the better off we will be.”
“If you mandate reductions in speeds, even though you might keep a same-day-of-the-week service, you are going to extend transit times, and that raises questions for our customers, some of whom have expressed concern about those increases in transit times,” Butler said. To that point, Jonathan Gold of the National Retail Federation, representing US retail companies, tweeted recently that “This is the wrong approach and should not be supported.”
The idea of mandatory slow-steaming is tied to the IMO goal to achieve actual reductions in carbon emissions from shipping as soon as possible, that is, well prior to 2050. But given that power sources such as hydrogen, biofuels, or electricity produced from renewable sources are likely years away from being able to replace fossil fuels, more immediate reductions are needed that can only be achieved through purely operational changes such as slow-steaming. The slow-steaming proposal will be taken up at the upcoming meeting of the IMO Marine Environment Protection Committee (MEPC 74) on May 13-17.
The “Open Letter to IMO Member States” released on April 20 ahead of the MEPC meeting included 117 signatories — such as many bulk carriers and non-operating container ship orders — and called for “maximum annual average speeds for container ships.” No container ship operators signed the letter, and they were actively discouraged from doing so, pointing to a key difference between containers and other sectors such as tankers and dry bulk: tanker and dry bulk charterers, not owners, have to bear the cost of fuel, which is a disincentive for shipowners to address vessel efficiency. Container carriers are often both the owner and the operator, and in addition have closer proximity to public opinion because they carry merchandise for retailers and consumer product makers who are under increasing pressure to run eco-friendly supply chains.
According to Butler, “What I would say with respect to this ‘open letter’ is, first of all, it is not a regulatory proposal; it is an endorsement of a very broad concept that is already under discussion at the IMO, and we will be part of that discussion over the next two weeks in considering whether this idea has merit. The letter presents the issue as a very simple one when in fact it's very complex.”
Butler added that container shipping services hinge on same-day-of-the-week services, so a speed limit would force carriers to add more ships to maintain their services. What hasn’t been answered, however, is whether the combination of reducing speeds and adding more vessels cuts down or increases CO2 emissions, he said.
Some point to prior, voluntary slow-steaming by container carriers, particularly during the financial crisis when fuel consumption plummeted following industry-wide slow-steaming by container carriers, as evidence that even with more ships in service the overall reduction in fuel use and by extension CO2 emissions is achieved. “If you slow down, the short-term effect will be less CO2 emissions, even if you have to more ships. The reduction in fuel consumption per ship more than compensates for the additional ships. If that was not the case why did carriers do slow-steaming in the first place,” said Jensen.
But Jensen agreed that mandatory slow-steaming now would ultimately add to the problem. “The carriers are already slow-steaming, so it’s the law of diminishing returns. The effect would not be as dramatic this time around because you get less bang for the buck,” he said.
Analyzing vessel movement data from January 2012 to March 2019, SeaIntelligence found that headhaul speeds from Asia to North Europe have fallen steadily from an average of 17.46 knots in 2012 to an average of 16.61 knots in 2018. During the first three months of this year, the sailing speed on Asia-North Europe fell to about 15.6 knots, and the trend was similar on the Asia-Mediterranean trade. Between Asia and the East Coast of North America revealed a constantly decreasing average sailing speed, although the Asia-US West Coast trade has remained at a relatively consistent 18-19 knots once the massive slowdown in sailing speeds around the US West Coast port labour dispute and resulting congestion in late 2014 and early 2015 is removed.
“If I have to order ships earlier, I will order less efficient ships, and unfortunately those ships have a lifespan of 20-25 years, so that means that even though I get an impact right here and right now, it has the consequence of people ordering less efficient ships that will hang around for 20-25 years. Once I’ve ordered those ships, they aren’t going to go away,” Jensen said.