British economist Martin Stopford doesn’t mince his words. He is perceptive about the future of shipping and clear about the steps the industry needs to take to meet the looming targets and deadlines set by the IMO. Here’s his take.
Our series In Conversation poses tough questions to thinkers, decision-makers and influencers on issues that matter.
As the non-executive President of Clarkson Research Services Limited, British economist Martin Stopford’s interest in the future of shipping is obvious. Twentyfour7. caught up with him to get some insights on the innovations and technological advancements that are helping this century-old industry transition into a sustainable digital world. Read on as he talks about cutting carbon emissions by slowing down growth and ship speeds and introducing a new generation of ship optimisation that makes marine smart.
1. Why is the maritime industry so slow to adopt new technologies?
The problem we have today is that our business model is a commoditised model. The average bulk shipping company has only two people for every ship at sea. And the ships could be worth USD 100 million each. Thus, when it comes to doing things that involve technology companies find it very difficult to implement it.
The industry is also very fragmented because, in a sense, every ship is a business unit and its operating in the high seas, and you cannot just go and visit it. You have to make an appointment to be at the dock at the right time.
Another factor is that a lot of ships are custom-built. Unlike planes, which are built to particular models, ships are generally built to the customer’s order. They are similar but the equipment is not the same. That means you are dealing with a highly-varied physical structure of the business.
All of these things make it very challenging to bring technological change.
2. In the long-run, where do you see the industry heading?
There is an awful lot of technology available. But it’s not something that has suddenly appeared. It’s been growing gradually. However, suddenly, there are many things to do.
You need to look at the ship and redesign the on-board systems in the same way that car manufacturers have done. This will make things more streamlined and offer integrated units that work better and are more reliable. In short, you get a higher degree of automation. Cargo-handling is an example.
Then you need to look at how fleets of ships operate. Running a fleet of ships is like running a transport factory. It is a very new concept because you are trying to maximise the return on a whole fleet of assets. And you will be using digital technology to make them flexible, interchangeable and give you good information about the performance of every ship in the fleet in many areas.
Another point, which has been discussed here at Slush, is door-to-door transport. We don’t do this at all. If we are going to use maritime transport for B2B, then you really need to be able to bring in local distribution.
3. Do you think we can achieve decarbonisation in shipping before 2100?
I think the IMO (International Maritime Organization) will commit hara-kiri if we don’t achieve it by 2100.
We don’t have any naval architecture on the scale to make a significant impact, but we can reduce the carbon footprint substantially by being more careful about what we carry by sea. We should probably not carry as much cargo by sea as we plan to do in the future.
Second, we should trade ships slower. Slow steaming can save a lot. And then we should look at a new power source. Hydrogen is probably the best bet in the next 20 years.
4. What will be the biggest challenges that the marine equipment manufacturing sector will face in preparing for the 2020 compliance?
Only 1.5% of the fleet is fitted with scrubbers. That means most ships are not burning compliant fuel, which is either very low sulphur, blended fuels or gas oil.
But there seems to be an issue around the variable composition of blended fuels. That is because, if you are blending by sulphur content, different blenders may use very different mixes and input fuels. Companies will have to set up organisations to deal with that.
You would also need to do budget and forecast and make sure that every aspect of the business was looking at implementing this.
Also, everyone needs to realistically take account of both the financial and the supply issues on: how to manage the situation if you can’t get complaint fuels; how to manage the situation if you are tramping around small ports – some of which are not signatories; how to deal with situations where people try to use inappropriate measures; and how to deal with your charterers and the charter parties to make sure that liability is clear in the event that the ship won’t perform because it has fuel that is not appropriate.
It is a planning exercise which will have to involve everyone in the company and on the ships. There are plenty of banana skins and it’s not something you want to be dealing with on the 31st of December next year. You need to spread the load around the company.
I am very interested in the idea of a platform to record fuel blends and to get bunker suppliers to put their blends on the platform and to get users to report what they actually got.
Realign to reduce emissions
“A lot of the cargo we move isn’t actually adding a lot of value,” said Stopford while talking about realignment, which he believes the industry needs to implement. His suggestion was that the industry should transport less cargo and reduce growth from 3.2% to 2.2% because given the current growth trajectory, the industry is going to end up producing three billion tonnes of carbon in 2050, which is not only unsustainable but also needs to be reduced to half to meet IMO’s emission guidelines.
Regional realignments are needed as future growth is going to come from the non-OECD world. “Europe’s share of business is slipping away. And the industry needs to address this point if we are going to keep our slice of the maritime industry,” Stopford noted.
Introduce a carbon pricing system
Stopford also mentioned how introducing a carbon pricing system could be a simple solution to cut emissions, but at the same time acknowledged that engineering carbon pricing would be a big challenge. Cutting emissions by slowing down to 10 knots is another simple solution. “We should redesign ships so that they can operate safely and effectively at slow speed. Vessels should come with zero-carbon propulsion systems,” Stopford suggested.
“In the UK, we have 213 active ports. Yet, we bring in 11000 containers a day into three ports, which are extremely congested in the south-east of the country. Clusters such as the Asia B2B maritime cluster and Europe B2B maritime is the new trend and they say, ‘forget the big global growth trends, let’s focus on short-sea shipping that allows us to get really good seaborne transport between all the ports’,” Stopford pointed out.
“Cars are now computers on wheels. You can’t yet say that the average merchant ship is a computer on the sea,” said Stopford. “We need to adopt standard protocols, introduce standard plugins, have an automated mooring, condition-based maintenance and autonomous cargo handling,” he added.
Stopford also pointed out that shipping needs to segregate the IT systems on ships so that systematic upgrades can be run on them. He also stressed the need to have trained personnel in the shipping office who can communicate with the terminals so that you can have seamless voyage management in place.
“How to put all of this together is the challenge,” Stopford concluded.