Conventional wisdom in shipping has always been to let others take the innovation and regulatory risk and then follow after learning from the mistakes of others
While this approach remains relevant, it may no longer be as effective as a risk mitigation strategy given the pace of the change in the expectations, requirements and tastes we are witnessing from stakeholders now.
In a recent example from the container feeder market the vessel selection criteria, based on CO2 emissions, changed from one week to the next. To the shipowner, this came out of the blue and was a surprise given the very buoyant freight market in this sector. What is interesting about this case is that this decision was triggered by the third-party receiver of project cargo and not the charterer of the vessel with whom the owner had a commercial agreement.
The signs of this trend have been there for some time, however what has changed is they are being acted upon with a direct impact on business or freight rates for the shipowner. This trend is fuelled by the increasing ease of access to a wide range of benchmarking data and metrics on ships, fleets and trade routes. These new tools make it much easier to integrate the benchmarking data into the freight decision-making processes and workflows to find more efficient vessels.
There are companies already offering CII benchmarking data across the entire world cargo ship fleet. One might argue that these can’t be completely accurate, given the regulations and rating bands are not yet finalised. While this may be true, this misses the point, which is that they will increasingly be used in vessel selection decisions anyway as a relative measure, with or without data flaws or inadequacies.
It is important to note that CII is a global requirement for all cargo and passenger vessels larger than 5,000 gt and it will therefore have a very wide impact across many sectors and trades. Those who see CII as a compliance matter alone, subject to enforcement in the normal way, may be in for a rude shock at any time.
The CII is not a ‘one and done’ regulation like others before it. The regulation requires continuous improvement over time with reference to a median vessel. This will require a well thought out operational plan considering the remaining expected economic lifetime of the ship.
The late ordering of scrubber installations impacted a number of owners negatively through yard labour and material delays, quality issues, equipment and component failures. Beyond poor returns on the scrubber investment itself, this also resulted in reputation damage to the owner stuck with unreliable equipment on their ships.
The demand for upgrades to meet this regulation will be significantly higher than for scrubbers given a very high proportion of the fleet will require some form of modification to avoid significantly lower operating speeds. The capacity of engine manufacturers to install EPL’s should be considered in the planning phase as well as the likelihood that docking to fit the additional equipment will be required, particularly for older container ships and bulk carriers to maintain a favourable rating. In addition the number of recognised suppliers able to design and build the customised energy-saving devices is also limited, as is the access to reliable repair yards for the installation.
There are many moving parts, which is why practical experience of the entire process from equipment selection to installation through experts on the ground is needed to ensure these upgrades go smoothly. Lookout Maritime has partnered with Anglo-Eastern to provide expert support to owners looking for near-term ways to reduce their emissions and provide evidence of their sustainability credentials to market their ships to lenders, investors or cargo interests.
At the Steamlining CII compliance webinar hosted by Riviera Maritime Media, delegates who were asked “What is the most important consideration for you in the procurement of CII improvement services?”, clearly project risk was fresh in their minds when the results were in. The order of most to least important was as follows – 1: Practical experience, including the installation and the safe operation of the recommended equipment, 2: Provider who is able to take care of the whole project from review right through to installation and commissioning on board, 3: Provider who is both technology and solution agnostic - not selling a particular product or solution, 4: Finding the cheapest service on a per ship basis and 5: Dedicated service-oriented contact person”.
This survey result confirms the need to appoint a ‘safe pair of hands’ with demonstrated capability in the review, selection and installation phase of the vessel optimisation process. This turnkey approach brings comfort to the owner or investors that project risk will be effectively mitigated and that the installed equipment will be reliable and can be operated safety.
CII and EEXI regulations will need to be complied with on a global scale, however there are several reasons to get started early beyond managing supplier and installation risks. Increasingly, questions are being asked by cargo interests around emissions performance and the ability to contribute and provide evidence of that is fast becoming business critical.
What is different this time is that on top of the need to demonstrate compliance, benchmarking tools and rating systems will increasingly affect vessel selection and therefore the tradability of vessels on a voyage by voyage basis.
Martin Crawford-Brunt is founder and chief executive of Lookout Maritime, a company he founded to accelerate the implementation of more sustainable business practices in the maritime industry. Lookout Maritime entered into a strategic partnership with Anglo-Eastern to provide a complete service to shipowners wanting to better understand future tradability of the vessels including practical vessel optimisation services.
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