Operational, commercial and technical factors see European tug owners facing added investment in an already squeezed market, says Martyn Wingrove
These are challenging times for European tug operators.
On a trip last week, I engaged with members of the European Tugowners Association (ETA) and operational management at the ETA annual meeting in Limassol, Cyprus. The event was hosted by Vasiliko Terminal Services (VTS), and while I was there I also took the chance to climb on board a couple VTS tugs to speak with the crew and get their views.
Broadly, what I learned was that tug owners face operational, commercial and technical issues in a market that is already under pricing pressures.
Here are some of my key takeaways from the ETA’s annual meeting and my discussions with VTS on board tugs in the sunny Mediterranean.
Block exemption threat
There is an underlying threat to European harbour towage that owners will need to push back against: namely, that container ship owners have formed alliances to ’optimise’ (ie cut costs on) ship operations, voyages and cargo carriage.
Alliances are allowed under the EU’s Consortia Block Exemption Regulation. This policy is under review this year, just when a whole crowd of new MEPs (Members of the European Parliament) are starting their first session.
The ETA is lobbying the European Commission to ensure that this block exemption – if it is extended after next year –will clearly exclude towage from joint purchasing of port services. If the ETA is unsuccessful, joint purchasing powers could potentially give container ship owners leverage to control the market and pricing.
This decision should come before the end of this year, but with a new parliament, it may be delayed into 2020.
The biggest regulatory unknown for tug owners is what emissions controls measures the EU and flag states will impose on port service vessels.
Because they operate in ports, tugs are often the most immediately visible representatives of the shipping industry and, as such, are on the front line in the war to curb emissions being waged at IMO.
As the new ETA chairman, Kimmo Lehto*, told me, there is no certainty around what policies the EU and flag states will introduce, only the near certainty that emission regulations will eventually by enforced.
Some of the ETA’s members already have experience in operating environmentally friendly LNG-fuelled and hybrid propulsion tugs. As Mr Lehto said, ETA members own the greenest and most technologically advanced tugs in the sector.
But there still remain huge questions around who will pay if owners are forced to invest in environmental equipment on existing tugs and in purchasing new greener tugs.
Crew shortage and skills gap
In Europe, skilled local labour forces are scarce, made more so by the fact that shipping is failing to build a local workforce trained for modern tug operations. In response, owners such as VTS have recruited worldwide to secure the most highly trained crew available.
Demands on existing crew skillsets are changing more quickly, too. The new generation of tugs have technically advanced and complex engineroom systems, higher levels of automation and additional wheelhouse systems.
Seafarers increasingly need advanced IT experience and skills to manage and maintain new communications, automation and remote monitoring technology platforms. For shipowners, building the additional skills means changes in training requirements and further investment in human resources.
The shipping industry’s shift in digitalisation is a trend that tug owners understand they cannot ignore.
As Mr Lehto explained to me, tug owners want to be part of this trend and even position themselves to influence industry developments.
More tugs are being built with sensor packages readied for digitalisation and all of its operational benefits, particularly for preventing technical failure before it happens.
This begs the question – what will operational systems on board European harbour tugs look like in the next decade?
I am certain those vessels will have more digitalisation packages and greener technology. But the tugs may even have fewer crew members on board during harbour towage operations as remote control and automated operations become more common.
The added costs these technologies represent makes the potential block exemption legislation threat even more significant for European tug owners.
Megaships and port expansion
Even during these challenging times for ETA members, opportunities are arising as new ports are built.
In Europe, there is a new port under construction in Norvik, Sweden, and there are new LNG import terminals and expansion projects in the region, as well.
Megaships, ultra-large container ships, VLCCs and Q-Max LNG carriers are increasingly berthing at existing terminals, which require larger bollard pull tugs. This is driving investment in tug newbuildings throughout Europe.
However, there is little evidence that container ship owners are willing to pay any more for these larger tugs. Luckily for both container ship and tug owners, for now, shipyards are competing fiercely for newbuilding orders and driving prices down.
Shipyards are also building tugs for their own stock to enable rapid delivery when owners gain new port service contracts. So, on the whole, there are solutions ready for deployment to meet any fleet shortages that occur.
*Kimmo Lehto is manager of health, safety, environment and quality at tug owner Alfons Håkans