The UK Chamber of Shipping recently hosted the inaugural UK Shipping Summit in London, in partnership with Fathom Maritime Intelligence, gathering a range of industry experts and enthusiasts to discuss the factors influencing the UK shipping industry.
Topics covered by expert speakers and panel discussions alike included ballast water management ship finance, climate and environmental change, the UK Ship Registry, and UK seafarer training.
Sian Jones, presenter, facilitator and communications coach, opened the summit, alluding to the importance of the shipping industry in the wider context of international trade and drawing upon its vital role in the global economy, as a ‘facilitator of trade’.
Dr Grahaeme Henderson, Vice President, Shipping & Maritime, Shell, and UK Chamber of Shipping President, provided a further introduction, highlighting the need for the shipping industry to change with the times, stating that ‘new opportunities and new horizons’ exist. Challenges matter more than ever before, he reiterated. The quality of the flag, innovation, technology, and training are all vital to the wellbeing of the industry.
Following the brief introductions to the summit, Independent Television News (ITN) the British-based news and content provider, presented a short film clip that showed how the UK maritime industry is revitalising and drew upon the importance of starting at the grassroots level, training and moving upwards to create a sector that is independent, efficient and considerate towards its employees.
It was then the turn of Lord Ahmad of Wimbledon to give the keynote speech to summit delegates, reaffirming Dr Henderson’s warning of the challenges that lie ahead, particularly in relation to Brexit. Lord Ahmed said that “complex decisions lie ahead as we share our trading relationships outside the EU”, and emphasised the difficulties wrapped up in UK fleet and crew training. “These we cannot ignore for the purpose of employment and livelihood”, he stated, and we “must be confident that we can compete for business on the world state”. He also briefly touched upon the importance of growing the flag and ship register, stressing its inability to grow alone on reputation or history and the need for the UK to push ahead with the ambitious transformation of the maritime industry to grow the flag further. Collaboration is vital and speaking with a united voice, reinforcing and renewing relationships with neighbours and on a global scale, working together to build a stronger sector and nation and showing proactively that the UK remains open for business. He stated that we need to “seize the opportunities we now face.” “Today’s summit is an opportunity to relate a plan for the future of shipping”, he concluded.
Up next was an opportunity for industry specialists to discuss the on-going challenges that the industry faces in relation to climate change. Chaired by David Balston, UK Chamber of Shipping, the first panel, entitled “Climate: The Most Important Issue of Our Generation”, examined the issues of environmental and climatic change and how the industry can and should respond to the challenges ahead. Dr Jeremy Wilkinson, Sea Ice Physicist, British Antarctic Survey, was the first speaker up who confirmed the truth about the rise in temperature, but said that there is much uncertainty on the costs and the role of the shipping industry within this. “If there is one thing ships need to do, it is to be sustainable,” he stated.
Dr Tristan Smith, Reader in Energy and the Environment, University College London (UCL) spoke of carbon budgets and the need to reduce carbon intensity between 60-90% between 2010-2060. The design of ships is vital, he stated, particularly as ships may reach 25-30 years of age. However, the issue with this often lie in financing and the structural challenges based on timescales of change. Operational offsets are of course one method but whichever method is chosen, decarbonisation is essential. The International Maritime Organization’s (IMO) role within the Paris Agreement and implementation of emissions reductions is still abundant with uncertainty, and shipping companies are often suddenly subjected to rates of change they are not prepared for. Risks and financial losses through stranded assets are real problems and it is the role of the IMO to catch up with the Paris Agreement in order to reduce such risks and address the problems associated with decarbonisation. The key take-home message was to identify a strategy. “What are the future scenarios, what do they mean for future assets and lifestyles, and what future technologies are necessary?” he asked the delegates to consider.
Katy Ware, Director of Maritime Safety and Standards & Permanent Representative of the UK to IMO at the Maritime and Coastguard Agency (MCA) brought about the topic of the recent ratification of the Ballast Water Management Convention. There is a lot of work to be done around finalising the G8 guidelines and there are still concerns around sampling and analysis, she said. In relation to early mover penalisation for those who have already adopted ballast water treatment systems (BWTS), she stated that there is likely to be some phasing out and replacement of equipment, but the IMO’s final decision is still uncertain.
Katharine Palmer, Environmental Manager, Lloyds Register, spoke on the topic of energy efficiency and greenhouse gas (GHG) emissions. A 23% reduction in 2030 from the 2007 baseline is possible, but using EEDI and SEEMP alone are not enough to achieve this, she stated. Palmer voiced that what the industry needs is data collections schemes from the IMO and EU and it must be ensured that designed are able to give the industry the right feedback. “We need to have confidence in the schemes we have designed,” she said, “but at the moment we do not really know what exactly we want these schemes to show us.” A tighter framework and future measures are vital, while policies to drive change, create incentives and gradual changes towards decarbonisation are needed to ensure minimal disruption to the industry, she stated. Palmer also briefly spoke of the potential lying in alternative fuels, battery power, liquefied natural gas (LNG), and in particular wind power. The problem with wind power, she said, are the lack of demonstrators in the water at the current time. The safety, risk and commercial barriers only add to this, she explained to the floor.
The next speaker changed the direction by looking forwards to what has been done to offset emissions. The SVP Maritime Affairs at Carnival Corporation PLC, Tom Strang, agreed that the industry needs to be proactive. “Transparency and proactivity are key to energy efficiency improvements”, he urged. Despite Carnival’s 10% growth in capacity since 2011, it has reduced its carbon footprint by 6% by investing heavily, around £150 million in 2015, in not just technologies but energy efficiency training. Designing ships with greater efficiency and taking on more efficient ways of operating, the cruise line has been able to achieve such results. Having an open view of the various ways of operation that are possible and looking into alternative methods and fuels is also part of the transparency that is required to enhance operational efficiency and save fuel and reduce emissions.
Following on from this, Saurabh Sachdeva, Maritime Policy & Regulatory Affairs Manager at BP, urged for consistent and simple regulations: “what works is regulations”, he stated. The industry needs simple in-house design schemes and not multi-schemes, conflicting regimes are not useful to ship owners and operators and it needs to get ships to align with these schemes, Sachdeva commented. “We are under no illusion that change will be an easy one; it will be a big change for the sector with market challenges, but clear regulations will allow things to mature and markets respond”.
Alan McCarthy, Consultant, Marine Finance and Investment Professional, introduced the Ship Finance panel, which aimed to explore the new and innovative methods of ship finance with perspectives on banking, pension funds and crowd-funding platforms.
McCarthy drew upon the challenges the shipping industry faces today in terms of financing its ships, highlighting a concern of many ship owners today: “there were previously around 50-60 banks in the world, but today these banks, in short, do simply not have a lot of money left for the shipping industry.” In 2007, 80-90% of banks were lending to shipping assets but today the industry is seen as too risky and this kind of investment is just not happening. Restrictions on bank loan capitals to small and medium sized companies is a real problem, he highlighted.
Following this, Mr McCarthy asked delegates: how can you build a shipping company without finance? “Well, it takes modification and adaptation in order to attract limited bank financing. Corporatisation is one method. Producing independent accounts and taking small companies and merging them with other smaller ones to make a medium size company is one way of attracting finance”, stated McCarthy.
However, a critical issue still for shipping investment is cash flow, continued McCarthy. There needs to be some certainty in cash flow to acquire the right investment but the volatile nature of the shipping industry means that this is a near impossibility. Private equity is an option but it should not be relied upon for long-term funding. It also has the potential to generate management issues with control over the company. For instance, if an organisation gives 80% of the funding, this also means they will have this sum of ownership share and can therefore make decisions that may not be in line with the original company’s own framework.
Richard Greiner, Partner at Moore Stephens addressed these challenges by stating that the industry needs to be realistic about financial expectations. Historically, the shipping industry has not been good at aligning its business to the financial industry, but this needs to change in order to move its position into one that is better placed for financing. Whatever is in your control you need to be looking to manage, Greiner reiterated.
Dimitrios V. Lyridis, Associate Professor, School of Naval Architecture & Marine Engineering, NTUA, the third speaker from the ship finance panel to take the floor agreed with Greiner’s statement and suggested that “one way of doing this is to first make yourselves and your operations transparent. Transparency is fundamental.” More funding needs to go into green shipping and the environment but this can only be done with transparency.
The second to final session of the day, entitled “Full Steam Ahead: Delivering Reform”, the UK Ship Register and MCA looked at the reform of the UK Ship Register and the Maritime and Coastguard Agency (MCA), with Richard Pellow, MCA, who discussed the work that has been done on the Maritime Growth Study. A Director role has been created and work has been maintained with stakeholders, a working group has been added, with all improvements tested by subjecting them to criteria analysis. MCA also stated that historically they have not always been up on the technology front by now online applications are beginning and there is more of a commercial focus with modern working to retain existing surveyors and attract new ones.
The Maritime Growth Study, which Pellow alluded to has given a collective voice to the industry, reinforcing direction of travel to be more customer focused and orientated. “Light has been shed in dark corners where previously it had not been explored further” – the study has helped show the MCA to do what they thought they needed to do.
Dick Welsh, Director, Isle of Man Ship Registry, supported the benefits of the Maritime Growth Study and stated that working together for common standards is key. This has been enhanced over the last five years with more consistent communication and common standards now being put into place.
For the final panel of the day, entitled “Seafaring Generation: Is the UK Really the Best Place to Train?”, the discussions turned to the status of seafarer training in the UK.
Nigel Lehmann-Taylor, the Head of UK Shipping at Maersk, described the importance of UK training for seafarers and highlighted the rigorous process potential cadets have to go through to obtain a career at sea.
Training seafarers is critical to making sure the most highly skilled are those seafarers which are out at sea. However, not only is there a large ratio of applicants to places, but the cost of training in the UK is at an all-time high. According to Lehmann-Taylor, the UK is the 2nd most expensive place to train cadets, behind Australia. Not only does this mean that funding is vital but also that there is a need to ensure the UK’s place as a successful maritime training academy remains and therefore placing it as a priority within the wider industry is crucial.
Furthermore, Lehmann-Taylor illustrated the overwhelming competition potential seafarers face, stating that Maersk has 34 cadets starting training at UK colleges, selected from 936 applications this year. And to demonstrate this further, the company has already received 512 applications for September 2017.
Despite this tough competition, Lehmann-Taylor stated that Maersk feels it is important to nurture careers. Those who they recruit now need to have a very good chance of completing the course to take up a life at sea, meaning that the selection progress is even more rigorous than ever before.
“Training costs need to be reduced, but they are likely to increase, meaning that government funding and a true determination and passion for the seafaring sector is therefore vital for those seafarers wanting to gain the best training for a future career at sea” Lehmann-Taylor concluded.
The topics of climate change, ship finance, ship registries, and seafarer training proved to provide a day of full of interesting discussion and debate, with the key take home messages being that sustainability and transparency in operations are key, while retaining the UK as a top training centre for seafarers is essential to the future of the maritime and shipping industries.
Following on from this successful event, Fathom Maritime Intelligence and the UK Chamber of Shipping are set to host a series of further events in 2017. For more information about the summit and future events, please click here.
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