From the CSA president, Juan Carlos Croston

Maintaining stability in times of uncertainty

As the world focuses its attention on the climate emergency emanating from the threat of global warming, efforts to reduce greenhouse gas emissions continue to have a significant impact on the shipping industry. Although shipping is currently the most efficient and emission-friendly mode of moving cargo, compared with other modes such as aviation, road trucks and railways, it still accounts for roughly 3 per cent of the world’s carbon dioxide emissions. Estimates by the International Maritime Organization (IMO) suggest that if this situation goes unchecked, carbon dioxide emissions from international shipping could increase by as much as 250 per cent over the next three decades.

With this pressing issue in mind, the start of the new year has greeted us with the global implementation of IMO 2020 – a regulation that prohibits ships from using fuels containing more than 0.5 per cent sulfur unless they are equipped with approved exhaust-cleaning “scrubbers”. The previous maximum fuel oil sulfur limit was 3.5 per cent, which makes this 80 per cent reduction the largest undertaken at any one time. While this rule has been in the making for many years, its implementation on 1 January still represents a seismic shift that comes with some degree of uncertainty as to how the change will play out in the short and long term.

Burning Concerns

Among the burning concerns facing the industry at this juncture are bunker availability and supply, fuel quality, compatibility and pricing, the readiness of vessels and enforcement and compliance. As a region, we have gone to great lengths to prepare ourselves for the repercussions of IMO 2020. Reports coming out of the International Bunker Industry Association (IBIA) Caribbean Bunker Conference held in Jamaica last September indicate that several territories are well-positioned to meet the new demands for compliant fuel.

Jamaica was highlighted in the north Caribbean, while Curaçao was featured in the outlook for the south Caribbean. Panama’s state of readiness for IMO 2020 was also discussed, and it was revealed that the country is close to establishing a new offshore bunkering location.

Significant Hurdles

We realize, however, that there is still much more work to be done if we are to fully capitalize on the opportunities and overcome the challenges in this area. Enforcing this regulation under the provisions of Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL) presents significant hurdles. Countries yet to incorporate the IMO 2020 rule into local legislation are rendered powerless, while those that already have the laws in place must contend with issues ranging from insufficient manpower for inspection to the lack of necessary testing tools to properly enforce port state control.

Navigating the early days of IMO 2020 requires commitment and collaboration from all the parties involved, which goes a long way towards assuaging the teething pains. At this time, it is also instructive to bear in mind that as shipping continues to chart a course towards carbon neutrality, we must continuously prepare for the future regulations and strategies that will fundamentally affect the industry. Ambitious targets set by the IMO include reducing carbon emissions by at least 40 per cent by 2030 and cutting down total annual greenhouse gas emissions by 50 per cent by 2050, compared to level in 2008. The IMO will also require all new ships added to fleets after 2025 to be 30 per cent more efficient than those built under current designs. The journey ahead is complex and challenging, and the onus is on us to keep these climate change imperatives firmly in our sights and plan accordingly for their impact on our business.

Downgraded Outlook

The uncertainty stemming from the implementation of IMO 2020, among other factors, has resulted in maritime research firm Drewry Shipping Consultants downgrading its outlook for world container port throughput for 2019 as well as its five-year projections. Drewry suggested that the additional fuel bill related to the switchover to low-sulfur fuel warranted consideration based on potential disruption in supply. The research firm also added that drone attacks (in September 2019) on Saudi oil facilities muddied the waters when it caused oil prices to spike.

Global trade tensions and civil unrest in some territories have added more layers of uncertainty, which weakens the business climate and deters investment. The fallout from this is evident in the decline in cargo trade between the United States and the Caribbean and Central America during the first nine months of 2019. According to data from PIERS, the 0.4 per cent slip in container volume to 2.37 million TEU was the first decline since 2014.

In order to stay afloat in this volatile environment, it is important that we find ways to quickly and effectively adapt to the events in the marketplace while still creating value for our customers and meeting their needs. When facing uncertainty and risks, it is useful to employ strategies and tools that promote greater levels of flexibility, dependability and resilience. By taking this approach, our businesses will have the opportunity to remain relevant and viable during difficult periods.

Going Digital

A key component of business survival and success is adopting the right technological solutions. When long-standing, traditional methods fail to keep pace with the complexities of the modern business environment, shipping executives have no recourse but to turn to technological solutions that deliver improved value along the supply chain.

The benefits of digitalization in the shipping industry are already clear, and many companies are enjoying increased efficiency and a distinct competitive advantage. Paperless bills of lading, blockchain-based bills of lading, real-time freight rates, automated container terminals and harnessing data to gain relevant business insights are just a few of the available solutions. However, before embarking on this digital transformation, it is important to have a concrete understanding of the concepts and establish a clear link with the vision and purpose of the organization. There are instances where companies rush to digitalize their operations based on trends without fully evaluating the specific benefits to their business. It is important to recognize that digitalization is not the main objective - it is a means to an end and an enabler for the business.

The adoption of new technology and automation tools is often linked with the elimination of jobs, and while this happens in some cases, the transformation also creates new employment opportunities. Increasingly, the perception is shifting away from job loss to job change, as people begin to acquire new skills and work closely with the technology. Organizations in the shipping industry must realize that it is in our best interest to retrain employees for skilled roles as we adopt intelligent technologies.

Commitment to Training

On the topic of training, the CSA remains committed to creating training programs that are relevant to national shipping associations and regional companies that comprise our membership. We will continue to work with key partners to provide the best trainers available and ensure that the participants in our programs are exposed to the most up-to-date equipment and technology. We look forward to significantly increasing our interaction with our members and getting a better sense of their priority issues and concerns. There is so much that we can accomplish together, and as we strive to push the regional industry forward, let us not be defined by the many challenges that we face, but by the inventiveness, resoluteness and solidarity of our responses.

Juan Carlos Croston
President
Caribbean Shipping Association