Tuesday 17th Jul, 2018

INDUSTRY OPINION: Australian shippers reject mandatory slow steaming measures

IMO efforts to promote slow steaming may come with risks for isolated nations.
IMO efforts to promote slow steaming may come with risks for isolated nations.

NEXT week the Australian Government will be participating in an intersessional working group established to address the reduction of Greenhouse Gas (GHG) emissions from ships.

This meeting will precede the International Maritime Organisation’s (IMO) Marine Environment Protection Committee (MEPC) meeting that will take place the following week in London.

As many readers know, the IMO is looking to implement the most ambitious emissions reduction program it has ever undertaken. While the initiative is an honourable one, the devil is very much in the detail.

One of the proposals for short-term measures is for the mandatory reduction of ship speeds, commonly known as “slow steaming”, a practice historically employed to save fuel.

Is mandatory slow steaming a good outcome for Australia?

As a remote geographical area, Australia should be very cautious about endorsing such measures. Shippers around the world have expressed concerns slow steaming will translate to higher supply chain costs and extended lead times undermining JIT deliveries.

These effects would be amplified by distance travelled. One industry observer has suggested that speed limit reductions of 10-30% would see potential freight rate increases of 25-30%.

Some observers have also suggested that reducing ship speeds would cause the network to add more ships to maintain frequencies and timetables, potentially negating any environmental benefits.

While shipping lines may save on fuel costs, those savings are not likely to be passed onto shippers.

From a shipper perspective, the efficiency and effectiveness of transport will be impacted by enforced ship speed reduction. Last year was the fastest year of continuous growth for airfreight since 2010 (ref: IATA).

Shippers, large retailers included, are already budgeting for strategic airfreight shipments for goods that are traditionally shipped via sea freight, given recent blank sailing programs and other disruptions.

Longer transit times will further encourage shippers to explore airfreight as a modal option. Shippers involved in perishable products are at particular risk.

Longer transit times can increase the chance of product damage. Even if the products can withstand longer refrigeration time, what are the extra energy and fuel inputs necessary to keep goods refrigerated for longer?

There is no surprise that geographically remote countries are the ones who are most passionately speaking up against the proposed measures, in fear that it will lead to distortions in global competitiveness.

“Slow steaming” is not the only short-term measure available to the IMO. Some members countries have recommended to the IMO that they should focus on the improvement of energy efficiency and the uptake of alternative fuels, rather than a quick fix that may do more harm than good.

Alternative fuels and carbon trading are game changers and long-term solutions that need to be considered as priorities.

Shippers are also looking at their own supply chains and emissions reduction strategies, with consulting companies like Scope 3 leading the way in Australia, instead of waiting for a directive from the IMO. Scope 3 will be presenting on this and other topics at the upcoming Global Shippers Forum event in Melbourne on 10 May 2018.

In a highly competitive international transport market, speed is king. There must be a better way.

* Travis Brooks-Garrett is secretariat at Australian Peak Shippers Association

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