An uncertain year ahead for shipping

TWELVE months ago this column started the year by asking the question: "Is a confident start to 2020 justified?" My answer was, broadly speaking, "Yes". Little did I know. Little did we all know about the pandemic that was about to unleash havoc on the world. So it is with more than a little trepidation that I look into my very imperfect crystal ball once more.

Actually the task this year is in some ways much easier. It is just stating the obvious to say that coping with Covid-19 is going to be the main challenge facing the shipping industry.

However, how well shipping is going to be able, be allowed even, to cope is a different matter. Shipping's fortunes depend partly on how quickly the global economy recovers.

There seems to be a general consensus that lockdowns and other restrictions are going to be in place for several months yet. Over the past few weeks, the short term outlook has become bleak. New variants of the virus appear to be much more infectious and are causing big problems in the UK and South Africa. North America and Europe are also struggling to keep control.

While global trade has been more robust than perhaps could have been expected, the short term outlook cannot be good for an industry that depends on moving cargoes around the world.

Zero carbon goal

Nevertheless, as "K" Line's president and CEO Yukikazu Myochin puts it in his New Year address, "the movement of goods has not stopped, and countries are finding ways to balance prevention of the spread of the disease with the economy".

He clearly feels confident enough to say that "the dry bulk and car carrier businesses that were significantly affected by Covid-19 have left their most difficult period and are on the way to recovery".

Coronavirus will definitely continue to be a huge challenge for the proper manning and operation of the global fleet. The plight of seafarers and the need for them to be regarded as key workers have been covered on numerous occasions in this column.

Shipping industry decision makers may be forgiven for thinking that keeping their ships running and their companies solvent might be sufficiently daunting tasks for the coming year.

Unfortunately, as noted this time last year, the big questions on how shipping moves towards zero carbon are becoming ever more urgent. The pressure for change has not eased up due to Covid-19.

In fact the opposite may be true. Certainly that seems to be Mr Myochin's view. He comments: "People have been forced to make significant changes due to the spread of Covid-19, providing a renewed awareness of the importance of sustaining society, the environment and the economy, which is sustainability in a word. Although demand for international transportation temporarily decreased through this, it has retained underlying stability, and we have been repeatedly reminded of the importance of the sustainability of shipping as a lifeline and infrastructure supporting people's life and the economy."

He adds: "In terms of the environment, we revised the "K" Line Environmental Vision 2050 last year, establishing greenhouse gas reduction targets exceeding those of the IMO. In order to achieve these, we are currently examining implementation plans for each business division in a project spanning the entire company. One specific move is expansion of utilising LNG fuel. Last year, we commenced the LNG fuel supply business in the Chubu Region, and following ship management of an LNG fuel supply vessel in Singapore, we are also scheduled to complete construction of the company's first LNG-fuelled vessel this year. Testing aimed at the practical implementation of Seawing using wind power is also underway.

"Furthermore, research on next-generation fuels is also being conducted through a company-wide project with the aim of halving the total amount of greenhouse gas emissions as targeted for 2050."

Delaying newbuildings

Mr Myochin heads up a massive company that has the resources to back several horses when it comes to alternative fuels and propulsion. Most ship operators will be in the position of having to choose just one when it comes to fleet replacement. Ordering newbuildings is a gamble that an expensive asset that should last 25 years will not be obsolete within 10.

So it would really be surprising if shipbuilders had much to smile about in 2021. As much as possible, many shipowners are likely to hold off ordering new tonnage until it becomes clear which of the various alternative fuels are going to be winners. With luck, we are entering a year of gradual recovery, but it is still likely to be very tough going for the whole industry.