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International Maritime Organization May Mandate Slow Streaming, Ultimately Raising Costs for Shippers and Creating Supply Chain Issues

 

Just One of Many Issues on Table at IMO Meeting in London in Early April, with Major Consequences

March 20, 2018
SCDigest Editorial Staff

With the 72nd session of the International Maritime Organization's (IMO) Marine Environment Protection Committee set to take place in London April 9-13, delegates from countries around the world are considering a number of issues to go into a draft text towards a global agreement to reduce maritime greenhouse gas emissions.

Supply Chain Digest Says...

With even a 20% decrease in allowable speeds, "you have to build a lot of new inventory [ships] to the equation."


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Global bulk and container shipping is responsible for about 2.5% of worldwide greenhouse gas emissions - and rising. Carbon emissions from shipping are projected to be two to five times higher in 2050 than they were in 1990, according to EU estimates.

Shipping emissions, like international aviation, were not addressed under the UN's Paris Agreement on Climate Change in 2015, and present a problem due to the cross country nature of the activity, most of it in open international waters.

The issues will be contentious. For example, The Marshall Islands, which it turns out has the second largest shipping registry globally, has been joined by a group of other Pacific Island states and New Zealand in pushing for a fully decarbonized shipping sector as soon as 2050 – a tall order indeed.

"There is simply no excuse for countries to stand in the way of an ambitious outcome from the IMO in April. Those of us that are truly committed to climate won't accept anything less," said David Paul, Minister of Environment for the Marshall Islands, leading up to the April meeting.

Meanwhile, other countries pushing for a less ambitious plan have cited concerns about insufficient data to create such a mandate, and have fears about transport cost increases from such an aggressive plan. For example, a joint submission from Brazil, India, Argentina, and Saudi Arabia proposes a looser timeline for the vision to cut shipping-driven GHG emissions, replacing an earlier target to reach a zero carbon shipping sector by 2075 with a less specific commitment for phasing out emissions "as soon as possible, but no later than in the second half of this century."

So as that debate plays out, there are also so moves afoot to mandate so-called "slow steaming" by ocean carriers to reduce carbon emissions from ships in what would be a rather extraordinary move. The Journal of Commerce, for example, reported that World Shipping Council vice president Bryan Wood-Thomas told audience members at the 18th Annual TPM Conference in Long Beach on March 6 that requiring slow steaming is "something we're going to be spending a lot of time looking at from a carrier perspective, and encourage shippers to look carefully as well," adding that "This is the time to look at it, because if you begin to look at it after most governments in the world have made a decision as to which direction to go, it will be too late."

A requirement that ships limit their speeds is "one of the few measures that will deliver emission reductions in the short-term" a group called the Clean Shipping Coalition says.

Slow steaming was a strategy invented by Maersk Line during the Great Recession as a way to reduce operating costs after global trade volumes collapsed with technique significantly reducing bunker fuel costs such that total cost are lower even though the journey takes longer.

The practice has remained around, but is seeing much less adoption in recent times as container and bulk volumes have strengthened substantially.


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Part of the goal of slow steaming was also to reduce effective capacity in the industry – and that result would of course also be the result of mandated speed reductions for ocean freight.

With even a 20% decrease in allowable speeds, "you have to build a lot of new inventory [ships] to the equation. And a 30% reduction would require a tremendous capital investment to move the same amount of material around the world," said Wood-Thomas at the conference, according to the JOC.

At the same conference, Franck Kayser, an independent shipping consultant, added that "if this speed scheme goes forward, shippers will see a significant increase in costs," as demand increases given an effective reduction in capacity.

Also, currently slow streaming is generally not used say for perishable food products. But would an IMO mandate apply across the board to moving sll freight, dramatically impacting supply chains and maybe causing some ocean shippers to move to more expensive air freight?

So there is a lot at stake in the somewhat obscure IMO meeting in London. We'll let you know what transpires.


Can you see the IMO mandating slow steaming? What would be the impact? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

Nathan

Walters, COSCO
Posted on: Mar, 21 2018
Slow steaming only became widespread as a practice to save money during the recession. It didn't create any supply chain issues then, so not sure why your article is scaremongering that it will now? If slow steaming becomes mandatory, fuel consumption is lower, meaning a lower fuel bill is passed on to shippers, if as expected most sectors of the fleet stay oversupplied for a while longer.

Muthukamaraj Ramasamy

Business Consultant, TCS
Posted on: Mar, 23 2018
Not denying the fact that water transport contributes a lot for greenhouse emissions but not sure how slowing down the speed in ocean will help in reducing greenhouse emissions. There could be some impact for sure, but will it solve the problem?

If IMO mandates slow steaming, it will impact the entire globe directly and indirectly.

1) It will increase Transport Lead times, leading to increases in the safety stock of raw materials
2) It means more Inventory Cost, and Capital expenses for every manufacturing organization who relies on one waterway for their supply chain
3) This will increase the product cost 
4) The end consumer will need to pay for this
5) It might lead to global economic slow down
6) and,  it will need vigorous monitoring of speed in ocean, as well as, huge investments and resources.

Need more R&D, and source ideas from various groups to effectively handle this problem, but slowing down the speed alone won't be a solution to this problem.


 

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