Would have Significant Impact on Shippers, but Many Countries not On Board; Macron Acting because of Paris Accord Disappointment?

In May, the International Maritime Organization (IMO) – which makes rules relative to global shipping – declined to mandate so-called "slow steaming" that was being pushed in some quarters as a means to reduce CO2 emissions.

The idea of putting speed restrictions on ships had been proposed by a group of nine environmental NGOs and 120 shipping companies (none of which being container lines) in an open letter to the IMO earlier this year. (See Threat of IMO to Mandate Slow Steaming Gets No Traction – for Now.)

Supply Chain Digest Says... Macron may be attacking shipping because of the increasingly tarnished image of the UN Paris Agreement. What do you say? Click here to send us your comments Click here to see reader feedback

Slow streaming is a technique invented by Maersk Line, the sector's largest container shipping line, around the time of the Great Recession in 2008 as a mean to use less expensive bunker fuel in the face at the time of plummeting shipping rates.

The practice has remained in use across container carriers for many sailings, with container shipping rates still generally at levels that leave carriers struggling with profitability. Slow steaming also has helped to moderate the vessel surplus that has persisted in the industry, as demand flattened and carriers kept ordering new ships anyway.

Increasing the time it takes a ship to make a voyage with slow steaming also reduces effective industry capacity, good for carriersr in a market generally challenged by over-capacity.

But environmentalists have latched on to the potential for slow steaming to reduce carbon emissions as well through lower use of fuel for ships move at slower speeds. Also a factor: the IMO'S own goal, announced in 2018, of reducing CO2 emissions from the shipping sector by 50% by 2050 versus 2008 levels.

Now, after the IMO failed to act in May, French President Emmanuel Macron has stirred up the pot. At the recent G7 meeting of the leaders of the world's largest economies, Macron said "We will engage with shipping companies to reduce the speed of merchant ships. It is one of the most effective ways to reduce greenhouse gas emissions globally, and this measure would be a real change."

Many if not most IMO members see a slow steaming mandate as difficult to enforce. Many also believe it will delay necessary investment in new ships that would use carbon-neutral engines.

But slow steaming remains popular with ocean shipping lines. Maritime broker Clarkson produced a report earlier this year finding average ship speeds have declined by 21% across all ship cargo types over the past 10 years, leading to decreases in fuel consumption and CO2 emissions in the sector by an average 18%.

A broad slow-steaming mandate would certainly impact supply chains, with products taking more time to arrive and companies likely paying more for transport costs because of the longer sailings.

“Cargo will be delayed, there will be higher stock volumes and more waiting days at port terminals and more port congestion,” Jordi Espin, maritime policy manager at the European Shippers Council, which represents Europe's biggest exporters and importers, told the Wall Street Journal.

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Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, also noted that "If more ships are added to compensate for slow steaming, it will cost significantly more to move cargo and I don't know how this will help the environment."

While Macron is pushing the forced reduction in speeds, the idea is not gaining traction within the IMO, with South American and Asian countries being strongly against the idea, the Wall Street Journal reports. The US and China are also said to be against the proposal.

Nevertheless, reports are that Macron has asked Rodolphe Saade, chairman of French container carrier CMA CGM, to head a Green shipping lobby group.

Interestingly, the ShippingInsight.com web site suggested another angle to Macron's push for slow streaming: He may be attacking shipping because of the increasingly tarnished image of the UN Paris Agreement. Hailed early on as the breakthrough moment, the Paris Agreement came into being before Macron was elected as French President. However the accord has suffered numerous setbacks since it was formulated in 2015.

Since then, the US has pulled out and most other countries have not only failed to meet their voluntary targets but have taken actions that make meeting them any time soon even less likely.

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