Markets - US in the driving seat for change

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With just two months to go until the start of a new year, for shipping this will bring a fresh wave of legislation some confirmed and some almost ratified. The beginning of next year also heralds the final demise of the few single-hull tanker left from being able to trade in conventional trades, EA Gibson said in a recent report. 

 

Perhaps of more significance is the possibility that we will finally see some movement on the Ballast Water Management Convention (BWM), which will enter into force 12 months after ratification by 30 flag states, representing 35% of world merchant shipping tonnage.

According to the latest IMO figures, 44 states have ratified the convention, representing 32.86% of the merchant fleet. As a result, it would only take one moderate size flag state to sign up, which would compel owners of every ship type and size to consider their options - scrap or commit to the additional expenditure, which in some cases could be costly.

One owner estimated that the cost for a VLCC would be around $2.5 mill, which could be in addition to other possible renewals discovered during drydocking.

Once the convention is ratified, all vessels would be required to install an appropriate BWM system at their first scheduled drydocking survey, following the 12 month grace period.

Some owners have advanced their drydocking schedules in order to get around this piece of pending legislation, which could provide older vessels with an extended grace period, Gibson said.

However, the US has a slightly different approach to BWM from the rest of the world. Vessels trading to the US are already required to have BWM systems in place ahead of the global IMO ratification.

Further emission regulations are also taking effect in the US from January. The control of NOx emissions will be further reduced from marine engines, which will be applicable to ships built on or after 1st January, 2016 operating in the North American ECA and the US Caribbean Sea ECA.

Tier III is a further tightening of US NOx regulations previously implemented in 2000 (Tier I) and 2011 (Tier II), which already apply to existing ships operating in the North American ECA. The new emission permissible limits are considerably lower than the previously tier limits. Again this regulation appears to have stimulated more ordering activity to avoid the additional costs in complying with the new regulations, Gibson said.

Another US initiative is to look at LNG as an alternative bunker fuel resulting in the Government subsidising several projects to build Jones Act tonnage with dual fuel Capability. The first vessel, a containership, was completed last month by NASSCO.

Also in October, NASSCO christened the first of five ECO tankers for American Petroleum Tankers. Scheduled for delivery in December, the ‘Lone Star State’ a 50,000

DWT, LNG-conversion ready MR, offers improved fuel efficiency and the latest environmental protection features, including a ballast water treatment system.

Thus, the US is very much leading the way on environmental issues, which are heavily supported by its shale oil/gas revolution.

However, the recent lower fuel oil prices seen, have eroded much of the cost differential over the Henry Hub gas price. This appears to have applied the brakes on further dual fuel ordering activity other than for LNGCs, Gibson concluded.