Uncomfortable and discouraging. That is how maritime economist Martin Stopford characterises how maritime businesses must be feeling now that they are facing the energy transition, digitalisation and the current geopolitical situation. His advice in terms of switching to greener fuels: make sure you get in early.
Stopford discussed the current situation the maritime industry finds itself in at a press conference looking ahead to the upcoming international trade fair SMM in Hamburg, Germany, from 6 – 9 September. He was joined at this conference by René Berkvens, Chair of SEA Europe, Nikolaus H. Schües, President of BIMCO, Knut Ørbeck-Nilssen, CEO of DNV Maritime, Bernd Aufderheide, CEO of Hamburg Messe und Congress, and Christina Alexander, COO of Bound for Blue.
The economy bounced back quite well after Covid, according to Stopford, but we are now faced with new disruptions and inflation. Still, shipping is currently earning quite well, and as he puts it: ‘A dollar in the bank is a dollar in the bank.’
The elephant in the room
Despite logistical disruptions, the war in Ukraine and ongoing digtialisation, Schües says that decarbonisation is ‘the elephant in the room’, which will also be one of the biggest topics at SMM this year. ‘It’s all about finding the right path to do the right thing. BIMCO seeks alignment between understanding the requirements of regulators and the possibilities of the industry. Key to this is a level playing field. Regulations need to be practical, measurable and implementable.’
Yet, he sees coming up with global regulations as difficult. ‘As such, IMO should at least try to come up with a framework for regional regulations,’ he stresses.
Ørbeck-Nilssen adds that it will be important to look beyond the maritime industry and that it is time for collaboration. Organisations such as IMO and BIMCO will have to play a significant role in this. Ørbeck-Nilssen: ‘We are facing a challenge too big to solve alone. The communication between organisations is becoming more important. And we are dealing with many viewpoints and agendas, so it will not be easy, but the willingness is there. That is a good path to be on, but the work is ahead of us and action is needed.’
All panel members see digitalisation as a ‘no-brainer’. Digitalisation will help with reducing emissions, make the industry more transparent, and can improve the logistics chain. The only question is at what speed it will take place.
When asked whether European shipbuilding has a future, Berkvens states that there is still an uneven playing field in maritime construction, with a lot of Asian yards receiving government support. A fact, he says, that has finally been admitted by the EU. ‘But on the other hand, the EU has not proposed a solution to this.’ Still, on the whole, he feels positive about the industry.
He sees a healthy shipbuilding and maritime equipment industry in Europe that is ‘still leading in innovation. So, we should continue to ask for a level playing field. And we should combine that innovative strength with decarbonisation. Decarbonisation will see a lot of business opportunities with the EU spending a lot on Green Deals. This could be a business case for European maritime companies. We should spend or RD&I [research, development and innovation, Ed.] to at least protect the market that is strategic to Europe, to serve the European market, think of fishing and defence and security.’
A bonus to this focus on RD&I according to Ørbeck-Nilssen, is the way it could attract new engineers to the industry. ‘During the pandemic, we challenged ourselves. It forced us to digitalise, look at problems with new eyes. This could attract new talent. We will need to tackle challenges and this provides young engineers with the possibility to really make a difference.’
Massive investment decisions ahead
When discussing shipbuilding, Stopford says that the major shipbuilders China, Korea and Japan, have gotten through ‘a nasty period’ quite well. Looking ahead, he thinks prices will go up. ‘The order book is now smaller than it used to be. There is not a lot of work.’
The big question, according to Stopford is: ‘What do you order?’ He sees a lot of shipowners ‘sitting on their hands’ at the moment until it becomes clearer what will be a sensible thing to do in terms of propulsion systems, fuels and digitalisation.
Stopford: ‘In the past, a ship did not change all that much in fifty years. But now, everything is on the table. On the one hand, there will be new propulsion systems, but getting the fuel will be an even bigger problem. And then there is digitalisation. You have got to get it working on the ship, integrate all systems. Putting the three together is very difficult.’
In addition, he says there is ‘a lot of money tied up in it’.
Energy density of new fuels
The big downside of new fuels is their energy density. Stopford: ‘We have been using diesel/heavy fuel oil (HFO) since the 1940s with excellent energy density. We will now see internal combustion engines with multi-fuel bases such as methanol, hydrogen en ammonia. But these do not offer the same energy density as HFO and this poses a problem for deepsea shipping.’
He adds: ‘Fuel cells and batteries can use the same alternative fuels, but this technology is still very embryonic in shipping and difficult to develop in such a way as to be an option for deepsea shipping.’
‘The molten salt reactors have been resurrected,’ Stoford continues. ‘The big plus is that these do not explode, but shut down. Making them quite safe. Still, the nuclear option is not quite on the table, but it is worth thinking about.’
He expects wind energy may also enter the mix, but in an assisting fuel source, not as a main power source.
Not at the front of the queue
The big problem with sustainable fuels is their price, stresses Stopford. ‘To create new fuels like methanol, ammonia and hydrogen, it all goes back to hydrogen. You can use wind and sun to produce these fuels, but it is very expensive.’
Ørbeck-Nilssen agrees: ‘The challenge is producing enough, distribute them and have them available in the ports. This will be a massive undertaking.’ That is why he sees a major role for oil majors. ‘They need to be in the conversation.’
Stopford in fact calculated that powering a 23,000-TEU container ship with sustainably produced alternative fuels, could cost USD 100,000 a day.
He adds that so far, thirteen per cent of world electricity production now comes from renewables. ‘This does not even cover the growth in electricity consumption over the past years. So their will be massive competition for this energy from a lot of different sectors. And shipping will not be at the front of the queue.’
Stopford concludes: ‘So, what worries me most is: what if you buy a ship and then find you can’t afford the fuel? The volumes needed for new fuel will be huge. And large projects will be chased by so many people. So, get in early to get a contract.’
Picture: Panel discussion at the SMM Advance Press Conference, from left to right: Bernd Aufderheide, Martin Stopford, Cristina Aleixendri, the panel’s moderator David Patrician, René Berkvens, Knut Ørbeck-Nilssen and Nikolaus H. Schües (©Hamburg Messe und Congress/Rolf Otzipka).