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Daily Briefing November 10 2017

Shipping will be included in the EU emissions trading regime 

Topics

Shipping will be included in the EU emissions trading regime 

 

THE SHIPPING industry will be in the European Union's revised Emissions Trading System, but only in a compromised form that spares it from regional legal obligations and allows global decarbonisation efforts to proceed intact, Lloyd's List understands. 

Negotiators from the EU's three institutions, the European Parliament, the European Commission and the European Council, struck only a provisional agreement on Thursday. It will have to be ratified by representatives of the EU member states and the assembly of the European Parliament, but sources told Lloyd's List that such provisional agreements were rarely rejected. 

Under this agreement, shipping will be included in the bloc's overhauled decarbonisation scheme, but it will only be part of the larger political statement and scope of the ETS and not included in its operational aspect, which dictates how and when the emission allowance auctions will apply to the various sectors. 

"The Commission should keep this under regular review, and should report at least once a year to the European Parliament and Council on the progress achieved in the IMO towards an ambitious emission reduction objective and accompanying measures to ensure that the sector duly contributes to the efforts needed to achieve the objectives agreed under the Paris Agreement. Action from the IMO or the EU should start from 2023 including the preparatory work on adoption and implementation and due consideration by all stakeholders," the text seen by Lloyd's List says. 

In effect, this means that the IMO's current timeline is protected. However, the text is a clear warning for the IMO to deliver tangible results in 2023 or else face European regional measures. Inclusion of the binary "IMO or the EU" in the text recognises the explicit possibility that if the EU is not satisfied with the IMO's option it will include shipping within the ETS. 

Relief for the industry 

International Chamber of Shipping director for policy and external relations Simon Bennett said that shipping not being part of the actual emissions trading scheme should be seen as a positive development and show that the EU as a whole has confidence in the IMO.

"We do not think that this decision will materially have any impact on the immediate development of the initial IMO strategy and we remain confident that the IMO will be successful in adopting an appropriately ambitious plan with a vision, a set of candidate measures and hopefully some clear dates and numbers in terms of milestones for ambition," he said.

Danish Shipping director for EU affairs Casper Andersen also expressed his satisfaction with the outcome, given the circumstances, and particularly the fact that it respects the IMO timeline. Mr Andersen pointed out that Danish Shipping is in favour of an ambitious agreement at IMO level and calls on IMO countries to deliver on it.

A flexible agreement

Sources described this to Lloyd's List as a compromise between those who wanted shipping to have clearly defined legal obligations under the ETS and those who fought for its complete exclusion from the text.

In effect, the sector appears to have escaped the threat of any practical obligations; the European Parliament had initially proposed that shipping be included in an ETS scheme by 2023 if the International Maritime Organization did not agree to a long-term decarbonisation measure in 2023 — two years ahead of what the IMO's roadmap prescribes. This will not be part of the revised ETS.

However, there could be direct implications for the industry from the sector?s part in the ETS, even in its compromised form. The inclusion in the political scope means that the parliament and the commission will have a mandate to keep tabs on the IMO?s progress. As a result, EU countries could be adopting an even harder line in the upcoming IMO decarbonisation negotiations than they would have should shipping not have been mentioned in the ETS at all.

Mr Bennett said that a positive effect of the EU's decision is that it decreases the possibility of an emissions trading system when the IMO discusses candidate market-based measures. Although he reiterated that the ICS is deeply sceptical about a market-based measure, he said it would now be more likely that a fuel levy would be preferable.

 


 

Top stories:

Shipping's financial backers are being urged to prepare internal carbon pricing

A NEW briefing by the World Bank's Carbon Pricing Leadership Coalition, in collaboration with the NGO Carbon War Room, calls on shipping financiers to consider applying an internal carbon price mechanism to prepare for changes.

That would mean introducing a theoretical carbon price system to gauge the risk of investments relative to incoming regulation. 

"Shadow carbon pricing can be used as an effective tool to identify and manage risks associated with the implementation of GHG [greenhouse gas] mitigation policies on the maritime industry. Minor amendments to sensitivity analysis on freight rates can be used to identify and manage risks associated with the implementation of the Paris Agreement," the briefing said. 

According to Carbon War Room finance lead James Mitchell, who wrote the briefing, financing is among the segments that will help the maritime industry move towards decarbonisation, by providing funds for shipbuilding, for example. 

Full story

Safe Bulkers is spending over $10m to install ballast water systems

SAFE Bulkers, the Polys Hajioannou-led dry bulk carrier owner, has signed an agreement with Erma First to install ballast water treatment systems throughout its fleet.

Safe Bulkers executives declined to put a price on the deal, but it is estimated to be worth well in excess of $10m, not including installation costs. The total number of vessels covered by the deal comes to 45, with the addition of 11 bulkers privately owned by the Hajioannou family.

Installation of the Erma First system on board the Safe Bulkers fleet is expected to start in the first quarter of 2018 and will be spread over the next five years, according to the company's drydocking schedule.

Full story

 


  

Markets:

Liner strategy puts profits at risk

CONTAINER lines must carefully manage capacity across their networks if they are to prevent freight rates declining further and limit financial losses over the winter season, BIMCO has said.

Peter Sand, the association's chief shipping analyst, questioned why average freight rates had fallen while volumes had grown at healthy levels throughout the third quarter peak season, buoyed by strong US and European import demand.

European import volumes grew by 4% to reach 21.2m teu over the first eight months of the year, according to Container Trade Statistics. Volumes on the Asia-Europe trades expanded 5.4% over the period and accounted for a little more than half of all European teu imports.

Full story

 


 

Results in brief

D'Amico International Shipping has strong faith in market recovery 

D'AMICO International Shipping's third-quarter results showed little improvement from the year-ago level, but the Milan-listed product tanker owner said it would maintain spot exposure for the forecast market upturn. DIS reported a net loss of $7.4m in July-September compared with the year-ago loss of $7.5m, even as revenues rose to $101.1m from $81.1m amid fleet expansion. The company's fleet achieved average time charter equivalent earnings of $12,977 per day in the third quarter, versus $12,904 in the same period last year.

"The product tanker market rebound most industry analysts have been predicting has not yet materialised as at the end of the third quarter of 2017," chief executive Marco Fiori said in the quarterly report.

Full story

Dry bulk brings Norden back to black

DANISH shipping company Norden returned to profitability in the third quarter thanks to gains in its dry bulk unit as well as a one-off tax reversal.

Adjusted results for the group amounted to $3.7m from a loss of $12m a year earlier, it said in a statement. It announced a tax reversal of $4m and increased its guidance for the full year to within a range of a loss of $10m to a profit of $30m. That is $10m higher than its previous estimate.

Chief executive Jan Rindbo said in the statement that the company was well-positioned to benefit from the "significant improvements" in the dry cargo market, having launched a new operator unit focused on short-term chartering activities.

Full story

Odfjell losses widen on soft tanker market

ODFJELL Group posted an $11m net loss for the third quarter of the year compared with a $17m net profit in the same period a year ago as dismal market conditions and lower forward prices of oil products hit chemical tanker and terminal businesses.

Revenue for the quarter decreased slightly to $236.7m from $239.7m.

A breakdown by segment showed the chemical tanker business was affected by falling spot rates in the third quarter, although higher contracts of affreightment and spot volumes helped alleviate some of the weakness in freight rates.

In the aftermath of Hurricane Harvey, the company's fleet utilisation was affected, with the situation compounded by new tonnage delivered.

Full story

Teekay firms talk of future recovery after third-quarter losses

WEAK spot earnings and impairment costs weighed on the Teekay group of firms' third-quarter results, but company executives expressed optimism over future performances, with early signs of market recovery.

Teekay Corp, the holding company, reported a net loss of $12.6m on revenues of $500.8m in July-September against the year-ago profit of $6.1m on revenues of $547.6m.

The bottom line was mainly hit by $243.7m impairment charges across several fleets owned by its subsidiaries on a consolidated basis. It was also affected by an accounting loss of $103.2m on deconsolidation of Teekay Offshore Partners and deferred gains of $349.6m after the Brookfield transaction.

Full story

Yang Ming returns to profit in third quarter

YANG Ming Marine Transport has finally returned to the black, with a net profit of $T1.3bn ($42m) in the third quarter, amid a recovery in the liner shipping markets.

The result came following a net loss of $T4.6bn and $T4.2bn during the corresponding period in 2016 and 2015 respectively.

Lifting volume also increased 11.1% year on year to 1.2m teu between July and September this year, while revenue jumped 23.4% to $T35.8bn.

The Taipei-listed carrier attributed the improvement to "the higher freight rates and a healthier supply and demand during the traditional peak season", and to "strategic actions and initiatives designed to control operating costs" and "concerted efforts of its team members worldwide".

Full story

International Seaways shrugs off weak tanker market

INTERNATIONAL Seaways was busy with a long overdue fleet modernisation programme during the third quarter, despite posting a net loss.

The company posted a net loss of $21.8m for the third quarter, compared with a net loss of $50.9m in the third quarter of 2016. The quarterly results included a loss on disposal of vessels of $5.4m, compared to a loss on disposal of vessels of $49.6m a year ago.

Full story

Gener8 trims fleet amid mounting losses

GENER8 Maritime kept its eye on trimming its fleet and bank debt amid mounting losses during the third quarter. 

After selling a total of nine tankers since June 30, the Peter Georgiopoulos-led company has been left with a fleet of 30 vessels. Some 19 of these vessels are modern very large crude oil carriers. Based on an eco design, they were all built between 2015-2017. All the company's newbuilding vessels have now been delivered.

Just a year ago, the company owned a fleet of 43 vessels that included four VLCCs under construction.

Full story

Wilh Wilhelmsen posts loss on accounting charge related to Norsea Group

NORWAY's Wilhelmsen Group incurred a $23m loss for the third quarter of 2017 versus a $50m profit in the year-ago quarter mainly due to a charge attributed to the NorSea Group. 

The group saw a $40m accounting loss stemming from the reclassification of the NorSea Group from associate to subsidiary after its stake was increased to 72% from 40% previously. 

There was also some impact on its maritime services businesses from the situation in Qatar, in addition to currency exchange fluctuations on the earnings before interest and taxes margin, said group chief executive Thomas Wilhelmsen in an earnings webcast. 

Total income fell 54% to $104m.

Full story

Navigator swings to third-quarter loss

GAS carrier Navigator Holdings incurred a $1.1m net loss for the three months ended September 30 this year compared with a $6.5m net profit in the year-ago quarter, amid higher operating expenses and seasonal weakness in the liquefied petroleum gas transportation market.

Total operating expenses, which include brokerage commissions, voyage expenses, vessel operating expenses, depreciation and amortisation, general and administrative costs, other corporate expenses and write-off of insurance claim receivables increased to $61.9m for the third quarter versus $55.2m in the 2016 period.

The New York-listed company also saw interest expenses rise to $9.4m from $8m in the year-ago quarter.

Full story

FSL Trust results hit by impairment losses and soft tanker market

SINGAPORE-listed First Ship Lease Trust posted a net loss for the three months ended September 30, 2017 of $21.7m compared with a $3.5m net profit in the year-ago period, as it incurred a substantial impairment charge on vessels and as the tanker market remained soft.

During the quarter, the trust recognised a $22.2m impairment loss on the FSL New York, FSL London, FSL Tokyo, FSL Hamburg, FSL Singapore and FSL Osaka in line with the fall in current market values for the three chemical tankers and three product tankers.

Revenue for the period decreased 18.5% to $18.7m.

Full story

Pioneer Marine slashes loss as China boosts dry bulk market

PIONEER Marine has drastically reduced its net loss as the dry bulk market made gains prompted by higher demand from China for coal, iron ore and grains.

The Singapore-based company posted a net loss of $769,000 in the third quarter from $2.8m a year earlier, it said in a statement. The figure included a one-time cost of $284m for restructuring that was completed during the quarter, and a small loss related to a vessel sale.

Full story

Avance Gas remained mired in the red for the third quarter, weighed down by weak spot earnings of very large gas carriers amid severe oversupply. (Company report)

Epic Gas, which operates small-sized pressurised LPG tankers, reported a narrower after-tax loss in July-September amid early signs of market recovery. (Company report)

 


  

Opinion:

Michael Grey's Viewpoint: Chartered status

IT IS funny how perceptions of our language change over time. What do we think of when we hear the word "master"? My old Imperial Reference Dictionary, probably published about a century ago, leaves us in no doubt. "One who commands or controls: a lord or owner: leader or ruler: commander of a merchant-ship: one who has complete knowledge: one eminently skilled in anything: head of a body or corporation, as Balliol College; a degree conferred by universities". The list goes on forever and I don't want to be a bore, so I have been a bit selective.

Is there a need to further qualify this important rank or qualification, in the light of such definitions? I'm afraid there is, with professional bodies constantly striving to make themselves more exclusive. Accountants, it might be recalled, were once book keepers, who sat on high stools in counting houses, but somehow rose in the world to become "chartered" and now rule much of the universe of business./p>

Curiously, they never wished to become "master book-keepers" but opted for something they obviously believed sounded more professional and which they assumed would resonate with the public.

Engineers, who have been around for only a couple of hundred years, opted for the same route, the CE suffix drawing a distinction between a tip-top professional and the chap who comes to fix your boiler. Master mariners, who have probably been recognised (if not formally qualified) for a couple of millennia, have, by contrast, relied on the recognition of the public to spell out their professionalism in the handling of a ship at sea.

But in an era in which ships are something seen distantly, on a far horizon, and their commanders rarely encountered in public, it has been judged that something rather more recognisable, to distinguish the real experts among them, was called for. A Chartered Master Mariner qualification, then, would be the badge of professional excellence that was needed in the 21st century. Accordingly, the Honourable Company of Master Mariners, along with the Nautical Institute, have, with the assistance of the Privy Council, now done the business.

I assumed these changes would take ages, if not entire generations, to put in place, so it is astonishing to reveal that less than a year after the announcement of the scheme to grant chartered status to Master Mariners, the first certificates have been awarded. They are the successful candidates in a pilot exercise which, it is hoped, will provide a mechanism that will give due encouragement to other professional master mariners.

They were awarded on a sunny day in October, on the quarter deck of the Headquarters Ship Wellington, which seemed a very apposite River Thames location, bearing in mind the history of this old warship and that of the Honourable Company. Presenting the awards in place of the shipping minister, who was detained in Parliament, the Maritime London chairman Lord Mountevans suggested that this award, in terms of our industry, would henceforth be seen as "the hallmark of excellence".

Rigorous process

The recipients, a group of "industry leaders, visionaries and trendsetters" were invited to take part in the pilot, but still had to go through the same rigorous process that examined every facet of their professional development. For instance, the peer review examines their individual contribution to the industry and how they have directly contributed to the development of others. I dare say the future volunteers to this exacting examination will perhaps be a bit younger, and at an earlier stage in their careers, but the principles of the process have been proved by the examples provided by the successful pioneers, 10 of whom were present in London.

They were an interesting group of master mariners. Peter McArthur, Matthew Easton and Don Cockrill are all practising pilots, but have been recognised for their many extra-curricular activities that enhance other people's work and contribute to their expertise. Kevin Slade is the chairman of the Merchant Navy Training Board, while Mark Fortnum and David Taylor hold senior positions in their oil company marine transport departments. Duncan Lamb runs the Royal Fleet Auxiliary and is the senior civilian mariner advising navy command.

Stephen Monk and Leslie Chapman are former Royal Navy officers, the former involved with navigational training, the latter working with commercial organisations, governments and the Ministry of Defence. Richard Barnes is a seagoing shipmaster, a chemical tanker specialist and trainer with a raft of other useful competencies.

Not all those involved with the pilot were successful, but those presented with their certificates last month have successful satisfied peer reviewers, personal evaluations, assessments, recommendations and a rigorous validation process. The main thing is that it has worked, it has proved practical and hopefully other master mariners who aspire to this chartered status will now come forward. Their suitability will be measured against a range of professional, technical, educational, philanthropic and personal development standards.

Overlooking my desk as this is being written is a faded photograph of my ancestor Captain Edward Grey, who was the first of a long line of Grey master mariners to be "officially" qualified by the old Board of Trade, which oversaw standards in Victorian times. The competence of his predecessors was assessed solely by the fact that they brought their ships safely home.

I suspect that this photograph, as he sits stiffly in a most uncomfortable looking chair, holding a scroll in his right fist, was the occasion of the presentation of his BoT Master's Certificate. He went on to command Australian wool clippers.

He lived at a time when everyone knew what a master mariner did, but I suspect he would have approved of the new chartered status earned by his successors and would encourage others to come forward.

rjmgrey@dircon.co.uk

Viewpoint

 

 

 

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