The last few years have seen an increase in the number of regulations from the International Maritime Organisation (IMO), addressing safety, security and the environment. Shipowners, already struggling because of overcapacity and falling rates, now have to invest in technology, training of seafarers and retrofitting of vessels, which will pinch their bottom line further.
“Generally, most legislative changes in shipping result in some extra costs for shipowners, one way or another, and in many cases these extra costs are difficult to pass on to shippers and customers,” admitted Sabrina Chao, Chairman of Wah Kwong Shipping and the Hong Kong Shipowners Association. “But shipowners are well aware that to face these challenges, it is most important for the industry to be well prepared and well equipped,” she said. “As part of the global community, it is also their social responsibility to comply with the laws on safety, security and pollution.”
Regarding the higher costs for shipowners, Chao noted, while the recently introduced changes to the Maritime Labour Convention (MLC) and Standards of Training, Certification and Watchkeeping for Seafarers (STCW) will result in extra costs for some, many quality shipowners will not incur more costs as they are already compliant with the new standards. “Regrettably, there are some bad apples among the good, and it is the former that the new regulations are targeted at,” said Chao.
The main increase in operating costs in recent years for shipowners has been changes to MARPOL, the international marine environmental conventions for the prevention of pollution from ships, according to Chao. Shipowners are required to comply with the new sulphur oxide emissions of 0.5% in IMO mandated Emission Control Areas (ECAs) and in Domestic Emission Control Areas (DECAs) in Hong Kong and China, so they must switch from Heavy Fuel Oil, which has a high sulphur content, to Gas Oil. “There is a 50-60% difference in the cost of the two oils so it could add US$10,000-$20,000 to ship fuel costs,’’ Chao said.
The new Ballast Water Management System (BWMS) rule, which comes into force on 8 September 2017, will be another cost burden for shipowners. “While many newly-delivered ships have been built with BWMS, most existing ships still have to install them,” said Chao. One consolation for shipowners is that they are allowed up to five years to retrofit the BWMS after renewing their first IOPP (International Oil Pollution Prevention) certificate.
The costs of retrofitting BWMS in ships varies significantly, depending upon ship size. “For a small feeder vessel, the cost could be as low as US$500,000, but for a 18,000 TEU ship, Capesize bulker or VLCC tanker the cost could be between $2 million and $3 million,” said the HKSOA boss.
“The time from contracting to retrofitting is typically 9-12 months. The retrofitting itself doesn’t take that long, and most of the work is carried out at sea rather than dockside, so schedule delays and port disruption by container ships will be minimal,’’ said Chao. “However, it may be longer for bulkers and tankers,” she added.
“During these hard times, there are at least three things that the shipowners can and should do,” said Chao.
“First, shipowners must ensure that they remain at the forefront of debates on all rules that may impact shipping. Through the HKSOA and other regional and international shipowners’ associations, they must make sure that their voice is heard when new regulations are being formulated, and make sure that their concerns are addressed when existing regulations are ill-conceived or badly implemented.
“Second, shipowners should continue urging the Hong Kong Government to support the industry and proactively create a business environment that is conducive to industry growth. For instance, more double-taxation agreements should be negotiated with trading partners; more resources should be devoted to strengthening the service function of the ship registry; and more effective measures should be taken to tackle the long-standing manpower problems.
“Lastly, individual shipowners need to think creatively and plan innovatively to enhance their business operations, such as taking advantage of the latest technologies. By using modern technology, shipowners can achieve cost reduction and increase productivity,” concluded Chao.