With over 50,000 merchant ships in
circulation transporting around 90% of the worlds
internationally-traded cargo, regulating the global shipping
industry is a vital but complicated business.
In 2013, the industry is still in
the throes of what is arguably its worst ever peace time crisis
with many shipping firms struggling to remain afloat. The
global recession in 2008, combined with the collapse of the
commodity supercycle in 2011, have left shippers feeling
bruised and rueful of decisions made when the going was
It is therefore not surprising that
the prospect of more stringent regulation of the way the
industry operates is receiving a frosty welcome from
The International Maritime
Organisation (IMO) regulations on sulphur emissions from fuel
oil have faced particular hostility, with many ship owners
claiming that the rules are confusing and frustrating.
During the Red Sea and Gulf
Bunkering Conference (RESCON) in Dubai this September, a number
of industry figures complained of the uncertainty surrounding
the International Convention for the Prevention of Pollution
from Ships (Marpol) regulations.
Marpol Annex VI - the prevention of
air pollution from ships - sets limits on sulphur oxide (SOx)
and nitrogen oxide emissions from ship exhausts and has seen
the introduction of a number of designated emission control
Marpol slammed at RESCON
The SOx Marpol regulation 14 states
that outside an ECA, a limit of 0.5% m/m (percentage of total
mass) SOx and particulate matter emissions will be introduced
on or after 1 January 2020. However, depending on the outcome
of a review to be concluded in 2018 into the availability of
the required fuel oil, this date could be deferred to 1 January
Uncertainty about the outcome of
the 2018 review, together with the costs and short timeframe
required for infrastructure upgrades to refineries, storage,
ports and vessels if the 2020 date is confirmed, caused RESCON
participants to voice concerns.
How are we going to meet and
comply with these regulations and how is it going to pan out?
The simple answer is I dont know. Its going to be
an interesting and game changing set of circumstances that we
face in the very near future, said Chris Hunt, director
general at the UK Petroleum Industry Association.
Morten Dehn, general manager for
the bunker department at MUR Shipping, agreed: I have to
say from a ship owners perspective, it is extremely
There is so much uncertainty
and we cannot get any clear answers. It is a gigantic game
changer. Why are we having regulations that are clearly not
going to be enforced?, he said.
Whenever the new regulation comes
into force, what is certain is that most ships that operate
both in and outside the ECAs will need to operate on different
fuel oils in order to comply with the new limits.
Captain Farhad Patel, general
manager at Sharaf Shipping Agency, questioned whether, in the
event of a recovery in shipping, there will be enough
ECA-compliant fuel to go around.
I personally believe in the
next two years, once the shipping market bounces back, there
will be a heavy demand for fuel. Where are we going to get that
additional fuel oil from?, he said.
Greater transparency in
In what is arguably a less
contentious change for the shipping industrys regulatory
climate, increasing pressure on the banking sector to de-risk
its investment holdings is leading to a number of
permanent adjustments in shipping finance,
according to one influential banker.
Speaking at the 7th City
of London Biennial Meeting at the IMO headquaters in London in
November, Michael Parker, industry head for global shipping and
logistics at Citi said that banks had been kicking the can down
the road when it came to dealing with ship owners who breach
Such breaches include falsifying
the seaworthiness of vessels, mis-describing cargoes and
We have now reached the end
of that proverbial road, Parker said, adding that
shipping finance was having to become more transparent in order
to satisfy new levels of regulatory scrutiny.
Shipping debt has long been
mispriced for the risks being taken, he observed, noting
that many European lenders are abandoning or scaling back this
part of their business as regulators seek to make banks safer
after the 2008 global financial crisis.
These [banks] are unlikely to
return soon, if ever, he said. We will continue to
see more focus by regulators and we will continue to see the
shrinkage of those banks that have announced their scale
I think the capacity of those
banks to do more will be a function of the comfort of their
regulators, the quality of their portfolios and their own
broader addressing of capital issues as banks, Parker
told Reuters earlier this year.
Banks including Frances BNP
Paribas, the UKs Lloyds Banking Group and Germanys
HSH Nordbank are lending less to shipping as they shrink their
balance sheets to reduce risk and tougher regulation requires
them to hold more capital, making loans less profitable.
Parker, long-time head of
Citis transport and logistics practice, oversaw the
purchase of $2bn-worth of French bank Societe Generales
$6bn portfolio in June 2012.
EU Labour laws
In mid-November, a proposal to
include seafarers within the scope of five European Union (EU)
labour law directives was presented by the European Commission
(EC) as part of the ECs better regulation policy.
If passed, the proposal would give
boat crews the same information and consultation rights in all
28 EU member states as on-shore workers in cases of collective
redundancies and transfers of undertakings.
Offshore and onshore workers
should have equal rights, in particular when it comes to such a
fundamental right as information and consultation, said
Laszlo Andor, European Commissioner for employment, social
affairs and inclusion, on presenting the proposal.
This proposal would improve
the living and working conditions of seafarers and so help to
attract more young people to work in the maritime sector,
Although EU labour law generally
applies to all workers in all sectors, until now certain labour
directives allowed member states to exclude seafarers from
their right to information and consultation. This has led to
seafarers being treated differently in several member
The new proposal would amend five
labour directives in order to give seafarers the same rights as
their colleagues onshore.
As there are differences between
the 28 member states in terms of the nature of their maritime
sector and the extent they made use of the possibility to
exclude seafarers, the proposal includes a transition period of
five years for the member states.
The goal is to offer sufficient time to implement the
proposal into the national legislation and practice.