At Future Proof Shipping (FPS), we agree there is a case for clarifying what is meant by the term ‘zero-emissions’. Over the past 12 months, so much information has been shared with regard to zero-emissions shipping. This is encouraging for an organisation like ours, but we understand the confusion too much information and too many interpretations, definitions and theoretical viewpoints can bring.

How we view zero-emissions

We look at zero-emissions through an operational and practical lens, and not so much from a theoretical viewpoint, because ultimately, we are in the process of building a zero-emissions fleet. It’s a very practical affair for us.

To set our sustainable boundaries, we have subscribed to the Global Maritime Forum list of zero carbon energy sources and align our energy sourcing with the hydrogen and synthetic non-carbon fuels category, which means zero GHG emissions.

To enable the transition to a decarbonised shipping sector, the phrase “zero carbon energy sources” should be understood to cover energy sources and fuels that collectively have the potential to be scalable for supply of all of shipping’s energy demand in 2050.

With regards to the sailing and fuelling of our ships, zero-emissions means zero GHG emissions. All our vessels will be equipped with zero-emissions propulsion systems.

In regard to shore-based emissions, we are transparent in the impact data of the propulsion systems and technology we have on board our vessels. To ensure the lowest possible emission output, the emissions footprint and environmental impact related to the manufacturing of this equipment is requested from our partners at the RFQ stage. We want to know the emissions footprint of all of the technology used on board our vessels.

We are in touch with some of the best universities in the Netherlands to find research students who can compare the footprint of hydrogen,  battery and other upcoming technologies for newbuild and retrofit vessels to existing ones that operate on fossil fuels. While more macro-level discussions on emissions calculations are important to follow, complex calculation debates can sometimes be an attempt to slow or even stop progress completely. We cannot let these discussions hold us back, but we will also never give up on our constant quest for a greener more efficient way to ‘future proof shipping’.

Powering the future of shipping

Our aim at FPS is to have ten zero-emissions ship projects kickstarted within the next five years.

Hydrogen, if generated with green energy, can play an important role in making the maritime sector emissions free and sustainable. Electrification of the drive train can allow for flexibility by enabling the use of different energy providers (batteries, fuel cells in combination with hydrogen, etc..) and can be the first step towards zero-emissions for the harder-to-decarbonise subsectors and vessel types.  We believe in eliminating NOx emissions, hence we are not exploring hydrogen combustion (which produces NOx emissions due to the temperature of combustion) or the use of (green) ammonia in combustion engines. We are always interested in hydrogen ‘carriers’ like LOHCs, developments in battery technology and any other potential new solutions that can enable sailing without emissions.

Connecting for zero

We believe a move to zero-emissions shipping is a smart, calculated investment for the future and we are here to convince the early adapters of that. We interact with all parties in the entire maritime value chain from shippers to shipowners, operators and terminals, as we consider tackling only one part of the chain will not be sufficient. We want to support our customers and enable them to make conscious energy transition choices. Now is the time to fast forward the transition to zero-emissions.

The shipping world is in the midst of an information revolution, with massive of amounts of data – some useful, some not – being made available. Anecdotally, as borne out by owners and bankers on the conference circuit, bigger companies, with greater market capitalizations and larger fleets, have access to capital markets that their smaller brethren do not. But the impacts of company size on the cost side of the business have seen less mention, and has escaped rigorous analytical scrutiny.

A recent webinar produced by Capital Link highlighted a new effort by the accounting firm Moore Greece, a leading accountant and consultancy serving shipping clients, to create fresh benchmarks using anonymized company financial data. While, elsewhere, there is considerable attention placed on algorithmic approaches to forecasting shipping markets, this effort is not about predicting the markets’ ups and downs – rather it is about looking at actual operating revenue and cost accounting metrics across a broad swathe of companies, allowing for observation of trends. Importantly, “benchmarking” implicitly asks the question of “How does my fleet’s performance compare against the larger universe of comparable vessels?”

As explained in the late Spring, 2020  Moore Maritime Index report, ‘Shipping trends based on the fleet size’,  the firm’s initial focus was to search for  “correlations between operating expenses, net income, vessel age, capacity and fleet size” in the tanker and bulk carrier segments. The report’s authors explain that “Collected data comes from more than 150 management companies which manage more than 1,500 vessels globally and data is grouped under four categories based on fleet size under management: 1-5 vessels, 6-10 vessels, 11-20 vessels, more than 20 vessels.”

The Moore Maritime Index (MMI) project (seeking additional data contributors, who would in return gain access to an advance suite of analytical capabilities) has already uncovered information that does not comport with the “conventional wisdom”  expressed in  gossip and hearsay of “bigger is better.”

On the webinar, Moore Greece’s managing partner and global shipping leader, Costas Constantinou, explained that: “As accountants, we love numbers…numbers have a story to tell…by trying to [put these numbers in order] you may be able to hear the stories that the numbers are telling…and see if there are any patterns in the numbers.”

A few patterns emerged in the dataset, using 2018 data from 150 management companies controlling more than 1500 vessels; for both the tanker and drybulk sectors, “the larger fleets are comprised of younger ships Also, across the board, “there is strong evidence that management companies with big fleets tend to manage younger and larger vessels.” Also, from the dataset, Constantinou suggested that     “…bigger fleets seem to be able to earn a higher time charter equivalent.”

That data presented to webinar viewers indicated that, in both wet and dry sectors that crewing costs, and “administration” costs, expressed in $ per day, per vessel, increase as size of the fleet increases,  though other costs, such as insurance, did benefit from economies of scale.

MMI is looking to source additional data beyond what is admittedly a snapshot. “The more data that we have, the more we will be able to analyze it …MMI will get better as our database expands.” In asking for industry support, Constantinou said, “It’s a big puzzle that I hope we can solve together.”

Japan’s shipbuilding sector is betting its future on carbon-free solutions, but the sector must survive the current crisis before a renaissance can arrive. Eco-designed, fuel-saving ships once gave a boost to the country’s yards. The “chance” for them to prosper again lies in zero-emission vessels, says Jun Kohno, head of the Shipbuilding and Ship Machinery Division of Maritime Bureau at the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).

The industry planner recently rolled out the Roadmap to Zero Emission from International Shipping, hoping the project will help the country’s players gain a pole position in this arena. Apart from agendas for technological and regulatory developments, the project essentially sets out two pathways for future marine fuels, which eventually lead to four types of zero-emission ships: those fuelled by hydrogen, super-efficient liquefied natural gas, ammonia, or ships that can capture CO2 on board.

It is hoped that this vision of the future can provide insight into the International Maritime Organization’s mandate to achieve its 2050 decarbonisation target, whose prospects remain uncertain on many fronts. “We believe that this roadmap will help understand the specific direction of the maritime industry in the future,” Mr Kohno told Lloyd’s List.

The MLIT spent a year hammering out the zero-emission roadmap, after numerous discussions with the relevant parties, including shipowners, yards and research institutions, he adds. Together under that planning, they aim to make delivery of the first commercial ship within a decade. While the forward-looking vision is to be welcomed, the short- and medium-term outlooks appear challenging.

The double whammy of an already extended industry downturn and the extra-sharp knock from the coronavirus pandemic is pushing virtually all shipbuilders into a battle for survival. Yards in Japan are among the hardest hit. Data from the Japan Ship Exporters’ Association shows their combined backlog had reduced to 23-year low as of end-May. Some large builders, such as Mitsubishi Heavy Industries and Mitsui E&S, were even forced by the recession to scale back businesses. Mr Kohno describes the situation as “severe”, with fears that the market could “take more than a few years to recover”.

Meanwhile, competition from neighboring countries has stiffened. Compared to China and South Korea, Japan’s shipbuilding sector is slimmer in capacity and less consolidated in scale. This is because the richer history and legacy of Japanese builders have made them more scattered across the country and more into the habit of working on their own, Mr Kohno explains. As a result, many of them are also niche players specialising in only one or two vessel segments as opposed to the large all-rounders.

The core competence of Japanese yards, however, still rests on their savvy in technology and efficiency in operation. The MILT intends to further enhance those strengths by offering incentives that can encourage innovation and improve productivity. The primary focus has been put on digitalising the entire process of developing a ship — from design to construction and to operation — as showcased in the i-Shipping project launched by the government in 2018. Still, the government is promoting the integration of yard operations under different ownerships to seek shelter in economies of scale. The recent tie-up between Imabari Shipbuilding and Japan Marine United sets “a good example”, says Mr Kohno. But he dismisses speculation over the “All Japan Shipbuilding” plan, which was reported by Japanese newspaper Nikkei earlier this year, about an initiative to merge 15 main domestic shipbuilding companies. “That’s just a misunderstanding from the reporter.”

What becomes more pressing is perhaps a level playing field globally as state bailout funds have mounted up in South Korea and China over the past a few years. Japan’s attempt to establish a new competition regime at a recent meeting under the Organisation for Economic Co-operation and Development was rejected by South Korea, which insisted that China should be included in the discussion. “Although China is not an OECD member, its engagement is indispensable in order to make those activities effective and meaningful,” Mr Kohno says, adding that his government will “spare no efforts” to pursue that agenda.

Meanwhile, the renewed consultation since March between Japan and South Korea on the latter’s shipbuilding subsidies at the World Trade Organisation is ongoing.  He declines to reveal plans for the next step, but says Tokyo “will continue to work to the utmost for a prompt resolution”. However, will Japan attempt to accelerate the negotiation process by leveraging its antitrust approval on the merger of Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering, two of South Korea’s largest shipbuilders?  “No,” Mr Kohno says. “The two events are handled by separate government departments that won’t intervene in each other’s decision.”

It was Japan’s policy goal to compete for a 30% market share in the world’s cargo ship construction market. This requires an amendment with trimmed capacities at local yards and a shift of their priorities towards a green future, he further points out. “The most important issue for Japanese shipbuilders now is to survive in their respective segments,” he says.

There has been a sharp increase in the number of vessels laden with coal lying idle off China’s coastline following the introduction of import restrictions in April on thermal coal at the country’s major ports, market sources said this week.

Ships were queuing off a number of ports in the southern provinces of Guangxi, Guangdong and Fujian, along the eastern coast and up to Shandong province, sources said.

“Imported coal not meant for local enterprises’ usage is not allowed to clear customs,” a China-based trader said, adding that the import restrictions were putting a lot of pressure on the market.

S&P Global Platts cFlow vessel tracking software showed Friday that 243 ships loaded with coal were stationary off the coast of China, up from a count of 102 ships when the previous round of port restrictions were imposed at the end of October last year.

The stationary coal ships include 25 that are lying idle in the Hong Kong Regional Vessel Queue, 13 in the Ningbo/Zhoushan Anchorage Area, and six in the Rizhao queue, according to cFlow.

Market sources have reported extensive delays and longer queues for ships arriving to discharge seaborne thermal coal at several ports.

“The restrictions have been tightened since April,” another Chinese trader said. “But the impact became more obvious now as utilities are using up their import quotas.”

The Platts cFlow software can detect and track the location of individual cargo ships, their current status in terms of whether they are stationary or moving, the type of cargo, intended destination and estimated arrival time, and other key operational information.

HONG KONG VESSELS IN QUEUE
The African Loon, a 61,255 mt coal ship that arrived from Indonesia’s Adang Bay port, has been waiting in the Hong Kong Regional Queue since June 30. The estimated arrival date for the ship at Xinsha port was June 30.

Also in the queue Thursday was the Tuo Full 11, a 77,500 mt ship laden with coal that left East Kalimantan on June 27 and entered the queue on July 2, and the Janna S, a Panamax that missed its original estimated arrival time in Guangzhou of July 3.

Two Panamaxes from Indonesia, the Rosco Sandalwood and the Long Dar, have been waiting in queue for customs clearance since July 8, according to Platts cFlow.

NINGBO/ZHOUSHAN ANCHORAGE
On Wednesday, 12 ships were waiting in China’s Ningbo Anchorage, four of them having departed from Newcastle in June.

The Capesize Anangel Vision, which had been scheduled to reach Zhoushan on July 9, was waiting for clearance off the eastern province of Zhejiang.

Two other Capesize ships, Lowlands Longevity and True Navigator, have been lying idle at Ningbo Anchorage with an overdue arrival date for Zhangjiagang of July 7 and July 1 respectively, according to cFlow.

SHIPS IN QUEUE AT RIZHAO
Six ships carrying coal have been waiting at Rizhao port in northern China, including two Capesize ships from Australia that have been in queue for over a week.

They include the CHS World, a 174,200 mt ship that entered the queue on July 9 with an overdue arrival date at Rizhao of July 10, and the Yue Shan, a 177,800 mt coal ship from Newcastle, also with an original arrival date of July 10.

— Yuchen Huo, huo.yuchen@spglobal.com
— Edited by E Shailaja Nair, shailaja.nair@spglobal.com