Dr Anna-Mari Antoniou casts an eye over the next 12 months to see how the shipping market will develop in 2019
The end of 2018 is fast approaching and it is thus a good time to reflect on the popular issues the industry is currently dealing with and also look forward to 2019/2020. Here, we take a look across the industry, including developments in trade, the environment and finance.
“2019 looks to be another interesting year for shipping. It is time for some certainty, so we hope 2019 will bring clarity, if not resolution, to the UK-EU position”
In mid-October 2018, the EU signed a free trade agreement with Singapore, the first bilateral contract between the EU and an ASEAN member (Association of Southeast Asian Nations). It is certain that European shipowners are looking forward to the agreement being ratified quickly, so that it can come into force in 2019. Martin Dorsman, the ECSA’S Secretary General, said: “Southeast Asia is a key partner for European shipping companies with Singapore being the EU’s largest ASEAN partner, accounting for almost one third of EU-ASEAN trade in goods and services… European shipowners welcome the fact that the EU and Singapore show their commitment to free, fair and rule-based trade”. There is likely to be even closer co-operation between the EU and the ASEAN region as an EU-Vietnam trade and investment deal was also presented to the European Council in mid-October. An EU-Vietnam agreement is therefore imminent, it seems.
The IMO’S Marine Environment Protection Committee (MEPC 73) has been holding discussions in London during October 2018 with a full agenda of issues. The first two items are the establishment of an experience-building phase (EBP) for the 2020 sulphur cap and a ban on heavy fuel oil in the Artic.
The Bahamas, Liberia, Marshall Islands, Panama and BIMCO, INTERTANKO and INTERCARGO submitted a paper to the IMO calling for ways to gather and analyse data to see if the 2020 regulation needed changes. It proposed the EBP which is also supported by the US, though it did not seek delay of the sulphur cap. The IMO, in any case, has made it clear several times, including the latest in September 2018, that the date is fixed, as Edmund Hughes, Head of Air Pollution and Energy Efficiency at the IMO, stated at the Asia Pacific Petroleum Conference in Singapore. Of more concern seem to be the safety risks of new fuel types rather than the date of implementation. However, there has also been a sharp rise in the installation of scrubbers. DNV GL reported that there have been more than 1000 scrubber systems ordered over the last six months across the global merchant fleet with a total of 1850 units fitted or booked.
The second issue the IMO is examining is the possibility of a ban on the use and carriage of heavy fuel oil in the Arctic, for an agreement to be reached in 2020 and implemented in 2021. Many countries are on board, including the US, Norway, New Zealand and the EU, although Canada has not taken a position on the ban itself. Of particular concern are any oil spills in the region, as the area lacks the infrastructure to deal effectively with the potential damage.
The fact that the sulphur cap is approaching also means that credit lines will need to be increased in light of pricier fuels. With the increase in operating costs, it is likely we will see the consolidation of smaller players and in the future, the thinning of operators will be a positive for those remaining.
November will also see the ICC’s Trade and Supply Chain Conference in London which will for the first time bring together the Trade Finance Conference with Supply Chain Finance aiming to “bridge the trade finance gap”. We look forward to the results from this. 2019 looks to be another interesting year for shipping. A topic not approached in this article is Brexit and that is bound to have an effect in Europe, but the never-ending drama is in many ways not worth discussing again until we have some concrete information about what trading relationship the UK will end up having with the EU. It is time for some certainty, so we hope 2019 will bring clarity, if not resolution, to the UK-EU position.