Bankable Insights – Shipping Finance Edition I_December 2021
Bankable Insights - Shipping Finance Edition: A collection of the latest insights and perspectives in the maritime industry.
*Bankable Insights* Shipping Finance
December 2021
2021 has been one of the most exceptional years that shipping has seen in recent times. Though global uncertainty has not yet abated, freight levels are at the highest they have ever been since 2008, driven by a combination of a reduction in vessel supply, and changes in supply chain and transport networks, along with a recovery in seaborne demand. With the orderbook at historical lows, favourable supply and demand fundamentals should ensure healthy earnings for vessel owners in the next two years as the global economic outlook improves.
Digital transformation is another significant trend impacting the industry. Advancements in digital technologies have given us unprecedented abilities to collect, store and process large amounts of data. New digital technologies are constantly evolving to make the maritime industry safer, cleaner, more secure, and efficient.
The final transformation is the shift towards decarbonisation. In the world’s transition to a net zero future, the maritime industry has to innovate and shift towards cleaner and greener ships. Shipowners cannot do it alone and the entire supply chain must transform. Stakeholders including governments, regulators, charterers, owners and operators must collaborate to establish a cohesive strategy that drives the research and development of zero carbon fuels and technologies. Major funding is required to speed up the development of alternative fuels and emerging technologies which also need to be implemented and adopted on a wider scale. This is where finance and investment can play an active role.
In this inaugural edition of Bankable Insights for shipping finance we are celebrating the maritime industry’s journey to transformation. We have collated a series of articles and videos that embody the positive momentum in the maritime industry, and the role Standard Chartered is playing in it.
A big thank you to all who have partnered with us to make a difference to maritime’s future.
Abhishek Pandey
Global Head, Shipping Finance
The future growth of Maritime Singapore
The future growth of Maritime Singapore
What must Singapore do to retain its status as the world’s busiest transshipment hub1 in the face of challenges posed by COVID-19, and a changing global landscape?
At the Marine Money Week Asia 2021 conference in Singapore, Quah Ley Hoon, Chief Executive of the Maritime and Port Authority of Singapore (MPA), shared insights with Abhishek Pandey, Global Head of Shipping at Standard Chartered, on Maritime Singapore’s vision for achieving this through a high-tech port ecosystem, and by accelerating decarbonisation.
The future of the port of Singapore
More than 80% of goods are transported by ship2; and Singapore is an important global node in that process. Singapore is the world’s busiest container transhipment port, and has been ranked as the world’s leading port and top maritime centre by the Xinhua-Baltic index for the past eight years3. It receives many vessel calls annually4 and hosts some 5,000 maritime businesses5, ranging from ship owners and operators to broking and chartering services, to port operations agencies, to marine insurers and reinsurers6,7.
At the same time, Singapore’s maritime industry faces several challenges, and the pandemic has exacerbated them. These include the need to improve intermodal connectivity8 - which affords a range of transport alternatives that unconnected systems do not – to retain and enhance the city’s share of global container traffic9; expedite the process of digitalisation across the sector; and attract, retain and upskill talent in a rapidly changing industry10.
The MPA has had to deal with these issues as part of its overarching mandate to develop the country’s status as the gateway to Asia. In turn, the agency sees its role as building a strategic partnership with the maritime ecosystem rather than simply setting rules for businesses within it.
The MPA is one of the few agencies in the world that acts as both a regulator and a promoter. It is not always easy to strike a balance between the interests of different parties.
Quah Ley Hoon
Chief Executive of the Maritime and Port Authority of Singapore (MPA)
The ongoing pandemic, for example, has required the MPA to straddle the conflicting priorities of maintaining Singapore’s status as a global shipping hub and shielding its citizens from external sources of infection at the same time. To this end, the government has introduced the Sea Crew Vaccination Initiative, whose aim is to work with shipping companies and unions to vaccinate as many seafarers as possible, including non-resident ones11, while also putting in place safe crew change procedures. Nevertheless, the disruption to supply chains caused by the pandemic has demonstrated why it is now so important to remove friction points that slow down the world’s trade.
Digital processes can minimise friction
Digital innovation is seen as central to the effort to remove supply chain bottlenecks.
First, we need interoperability. We actually see shipping in Singapore not just as ‘shipping’ or ‘transporter’, but as a key component of the global supply chain, meaning therefore that there must be integration and interoperability with logistics players.
Quah Ley Hoon
Chief Executive of the Maritime and Port Authority of Singapore (MPA)
This interoperability requires different digital platforms to be able to talk to one another, for instance, between the platforms used by shipping companies, shipping agents and logistics operators. “I was once told that there are 18 touchpoints across the entire global supply chain,” she said. “[We] can only advance as fast as the weakest link, meaning that everyone needs to level-up.”
The MPA’s strategy for driving this interoperability revolves around digitalOCEANS™, an initiative that facilitates cross-border data exchange and automated services between supply chain participants, clearance authorities and other national windows12. The idea is that digitalOCEANS™ will forge system-to-system interoperability that forgoes the need for form-based submissions so that when a ship or cargo needs clearance, the system is as seamless and paperless as it possibly can be.
“We are looking at how to enhance connectivity all the time, and that includes layering physical connectivity with digital connectivity,” Ms Quah said.
Green finance to the rescue
However, this hyper-connectivity places greater demand on the investments required across the supply chain.
Most of the well-known European shipping banks have either exited shipping or curtailed their operations and returned to their core markets, leaving a gap.
Abhishek Pandey
Global Head of Shipping,
Standard Chartered
One way of filling this gap is the rapidly expanding world of green finance. Decarbonisation is now a significant priority for the shipping industry, and many companies have dedicated teams to determine the best path forward. In August, the MPA established the Global Centre of Maritime Decarbonisation (GCMD) with SGD120 million fund from MPA and six founding partners. GCMD is dedicated to collaborating with the industry to explore ways to reduce emissions in the sector13.
Singapore is also leading efforts to promote the use of greener fuels such as LNG and funding research to develop zero-carbon fuels14. In addition, the MPA is looking at building waterfront facilities in Singapore to support the Global Centre for Maritime Decarbonisation’s research and testing of green marine technologies.
The second strand of support is the MPA’s Maritime GreenFuture Fund, an SGD40 million (USD30 million) pot of money that will support this kind of R&D activity15. The GreenFuture fund can be particularly helpful to small and medium-cap firms who may find it difficult to source affordable lending from a bank. One example is electrified harbour craft, with three consortia awarded funding to research these low-carbon vessels16.
There is also potential for Singapore to develop its capabilities in maritime green financing, by leveraging the existing green finance strengths of the nation. Parallels can be drawn from how MPA grew Singapore’s MarineTech ecosystem, where angel investors and venture capitalists were brought in to be matched with start-up companies based on the unique suite of needs from each of the organisations. The future Green Ship Finance Hub in Singapore can potentially explore the growth of these connectors and intermediaries such that companies of all sizes with project proposals can be linked with financiers, thereby increasing financing flows to our ecosystem of companies.
Standard Chartered, a signatory to the Poseidon Principles, a global framework aligned with the International Maritime Organization's goal to reduce the shipping industry's total annual GHG emissions by at least 50% by 205017, is likewise working to extend sustainable loans to shipping companies that are investing in technologies that reduce their carbon footprints18.
The need for multi-faceted solutions – technological, financial, regulatory, cultural – explains the importance of umbrella concepts such as Maritime Singapore, which can unify these different strands under a common agenda, solving complex problems in the process. This disciplined, coherent approach has driven Singapore to its current status as a world-class shipping hub, and is likely to form the basis of its future success.
This article is based on themes discussed during a panel at the 2021 Marine Money Week Asia conference.
Why decarbonisation remains shipping’s foremost challenge – and opportunity in a changing world
Why decarbonisation remains shipping’s foremost challenge – and opportunity in a changing world
From disruptions to supply chains caused by the pandemic, environmental regulations and increasing pressures to decarbonise, what does the future of shipping look like?
Impact of global trade and supply chains
The cyclical nature of the shipping industry is well known, but whether it is about to enjoy a new “super cycle”, as major markets reopen and demand recovers in the wake of the Covid-19 pandemic, is less certain. What is clear is that broad forecasts for a hugely diverse industry are likely to obscure the differing fortunes of various subsectors.
For instance, at the start of the pandemic, as global energy demand fell, tanker operators saw asset values suffer and then found a silver lining in rising demand for offshore storage. This year, tanker values and charter rates have fared poorly compared to those for container ships, operators of which have reaped incredible gains as soaring demand has combined with supply-chain bottlenecks to send container rates into the stratosphere1.
A combination of unleashed pent-up demand for consumer goods and a series of supply constraints, including the closure of major ports in China2 and backlogs in land transport3, has seen unprecedented gains for container operators. By the second week of September, for instance, spot rates for containers as measured by the Shanghai Containerized Freight Index (SCFI) had risen 60% since the start of 20214 and had set records for seventeen weeks in a row5.
Even so, uncertainty remains about the success of the global vaccine rollout and whether economies will continue to recover. And longer-term macroeconomic trends are also likely to play a role in moderating demand. These include a pushback against globalisation that is increasing calls for reshoring, diversifying and de-risking supply chains.
Against such broader currents, the recent bubble in container shipping is likely to be unsustainable – even though analysts agree that its profitability curve has likely shifted upwards permanently. Similar megatrends, notably rising demand for renewable energy and a reshaping of the refining landscape, are likely to affect long-term demand for tankers – even if aviation recovers to pre-Covid levels – while the prospects for dry bulk cargo remain tied to longer-term movements in commodities demand.
Against this complex backdrop, decarbonisation remains perhaps both the biggest long-term challenge and opportunity facing shipowners and operators.
Increasing efforts to go green
While the need for shipping to decarbonise is well understood – given the sector accounts for around 3% of global greenhouse gas emissions and runs predominantly on fossil fuels – the industry hasn’t yet grappled with the costs and means to do so. Further inaction clearly isn’t an option: according to the IMO, global shipping emissions could increase by as much as 50 per cent in 2050 compared with 2018 levels if nothing is done6.
As a result, regulators have started to take more steps to drive change.
The landscape for ship owners has changed drastically over the past 20 years. Shipping regulations used to be implemented at a much slower pace and at a much smaller scale. However, in recent years: we have witnessed large scale regulatory changes which have been implemented at breakneck speed. This includes IMO 2020, Ballast Water Management Convention, IHM [Inventories of Hazardous Materials], and looking ahead, EEXI [Energy Efficiency Existing Ship Index] regulations, as well as IMO 2030 and 2050 emissions targets.
Chih Chwen Heng
Director of Shipping Finance,
Standard Chartered
Shipping operators face an array of choices when making decisions about which technology will be most cost-effective in helping them meet decarbonisation goals. This includes retrofitting existing vessels for lower-carbon fuels, optimising superstructure, and propeller design in new ships, as well as investing in data-gathering technology to ensure accurate ship energy modelling. Monitoring sustainability metrics will also be increasingly crucial to accessing a range of green financing innovations aimed at helping the industry decarbonise.
Shipping companies must also act as calls from end-users for greener transport grow louder. Major shipping users like ecommerce giants are increasingly going to demand sustainable factory-to-customer supply chains. Unless shipping companies adapt to their clients’ demands, they will lose out.
Fuel change could favour first-movers
This means, too, that first-movers will be able to command a premium for delivering energy-efficient, clean, and sustainable service. While recent economic conditions have made some steps towards decarbonisation (such as scrapping older vessels and slow steaming) unlikely, some shipowners are taking immediate action on fuels. This comes despite high adoption costs and uncertainty about which fuel source – from lower-carbon LNG, to carbon-neutral biofuels, to zero-emissions hydrogen, ammonia, or electricity – will ultimately become the industry standard.
Maersk, the world’s largest container shipping company by fleet capacity7, is one such prime mover. In August 2021 it announced an order of eight dual-fuel containerships that would run on carbon-neutral methanol, allowing it to be the first to offer customers carbon-neutral shipping on mainline ocean trading routes when the ships are delivered in 20248. It had previously also suggested that a tax of US$150 per tonne of CO2 emissions should be phased in to encourage the adoption of greener fuels9, while the company’s CEO later suggested that fossil-fuelled ships should be phased out altogether10.
Green finance and the need for collective action
The problem of this approach is that inevitably, smaller and medium-sized operators, which play an important role in all shipping subsectors, may struggle to make similar investments in fuel-efficient new ships, or to retrofit old ones, which in turn will make them riskier for investors. This could lead to sectoral consolidation, although given no major player has yet successfully adopted cutting-edge sustainability technology, the opportunity remains for some SMEs to thrive through taking such an approach.
Ultimately, it will require all stakeholders, from government and multilateral agencies to major and minor shipping companies, to align to promote decarbonisation. The financial sector has a crucial role to play here, for instance through loan agreements that tie shipowners to progress on sustainability goals (recent examples of which have been pioneered by Standard Chartered11.)
By aligning the cost of borrowing to sustainability performance, banks can incentivise the shipping industry to make progress on their long-term decarbonisation agenda. Alternative and innovative financing that embeds sustainability targets into funding deals can help companies escape a vicious circle whereby they lack the funding to invest in the technology to decarbonise, but their lack of progress on doing so means they are overlooked by investors.
Some imaginative funding tools have already been proposed, including carbon taxes, carbon trading schemes and offsets. Initiatives like the Poseidon Principles12 and the Sea Cargo Charter13 are helping define the future of financing. But much remains to be done, particularly on closer collaboration, to help shipping companies adapt to the biggest challenge – and seize the biggest opportunity – they currently face.
This article is based on themes discussed during a panel at the 2021 Marine Money Week Asia conference.
Can carbon trading help the shipping industry reach net zero?
Can carbon trading help the shipping industry reach net zero?
Shipping is seen as one of the most difficult industries to decarbonise, and industry players blame the lack of commercially viable technologies. Can carbon trading help?
With the world becoming more reliant on maritime transport to send and receive the materials that are crucial to companies’ operations, global CO2 emissions from the shipping industry are projected to rise from the current 2-3 per cent of the global total to up to 17 per cent in 20501 if the increase goes unchecked.
Switching from fossil fuels to cleaner alternatives is easier said than done for long-haul, ocean-going vessels. Although one of the world’s biggest shipping companies has announced plans to launch “carbon-neutral vessels2”, sustainable fuels for maritime transport are currently either unavailable at scale or not commercially viable for industry-wide adoption.
While 1,800 organisations have made public sustainability commitments, the technology is unfortunately just not there for some industries like steel manufacturing and shipping.
John Chen
Head of Commodity Sales for ASEAN and Head of Corporate Sales for Singapore,
Standard Chartered
Even though decarbonisation in the near-term remains a distant goal for most shipping firms, taking a watch-and-wait approach is not the answer to the climate crisis. Instead, encouraging widespread participation in the carbon market is the best alternative, according to panellists at the event.
Putting a price on carbon to plug the gap
Broadly, two main types of carbon markets exist today: mandatory, also known as compliance, and voluntary.
In the compliance market, carbon emission allowances are governed by a regulatory framework. Examples include the EU Emissions Trading System3 (ETS)– the world’s largest and most liquid mandatory scheme – and the California Cap-and-Trade Program, which ranks as the fourth largest4. Voluntary markets, which are primarily based in Asia, entail the use of carbon credits generated from projects that reduce, avoid or remove carbon dioxide to retire or offset emissions generated by polluting sources.
Together, by putting a reasonable yet meaningful price on carbon, these two schemes work to incentivise companies to compensate and increasingly neutralise emissions as they try to meet their net zero targets.
However, experts at the session acknowledged that a lot more work needs to be done to bring shipping on board. For one, the wild disparity in voluntary carbon credits today – prices can range from US$2 to US$90 per tonne – needs to be addressed to level the playing field for all parties in the shipping industry. While high carbon prices in the compliance market are a deliberate decision, the huge price differential in the voluntary market is driven by demand dynamics and the quality of carbon credits.
Secondly, given the global and fragmented nature of the shipping industry, trying to put in place a uniform emissions trading scheme could prove complex. Currently there is a lack of consensus on how to address the industry’s carbon emissions problem, especially when for most companies shipping is considered a cost centre, and cost reductions have often taken priority over sustainability.
Solutions debated at the panel session include implementing a hybrid carbon offset-and-tax approach to overcome the lack of an industry-wide, global system. Also discussed was the setting up of a global exchange to enable the trading of high-quality voluntary carbon credits– such as Climate Impact X (CIX), a public-private entity based in Singapore5 that aims to address the issues of price discovery and the quality of voluntary carbon credits.
Implications for the maritime industry
While carbon trading has yet to be widely adopted in the shipping industry, panellists agreed that for it to switch from emissions-intensive fuel to cleaner energy, fuel costs must increase, either relative to other fuels or just in themselves.
Discussions at the session suggest that among the various approaches to pricing carbon, market-based mechanisms, such as CIX, are far more efficient for the shipping trade than simply adding to firms’ fuel costs. If the goal is to increase fleet efficiency or fuel savings with technology, the best approach is to incentivise corporations through financing. And companies that are unable or unwilling to retrofit their fleet can do their part by compensating those that proactively adopt more sustainable options.
Setting the right price for carbon credits is key. Priced too low, it can incentivise the wrong behaviour, such as shipping firms opting to purchase carbon credits to pay their way through the problem, rather than thinking about long-term mitigation measures.
Despite critics’ concerns that carbon credit schemes inhibit innovation and extend the runway to net zero, they have already demonstrated their effectiveness in some industries, such as real estate, oil and gas, and aviation.
There's a place for carbon credits, it just needs to be priced correctly and the quality needs to be assured. And that means using technology for monitoring and ensuring transparency in the process.
John Chen
Head of Commodity Sales for ASEAN and Head of
Corporate Sales for Singapore,
Standard Chartered
With quality carbon credits, shipping companies will be able to accelerate the industry’s decarbonisation journey.
This article is based on themes discussed during a panel at the 2021 Marine Money Week Asia conference.
How the shipping industry is preparing for the future
How the shipping industry is preparing for the future
Here’s how technological breakthroughs, greener fuel systems and more environmentally friendly vessels are defining a new future for shipping.
Change has been a long time coming for the shipping industry, but the past 18 months have shown the need to be futureproof. Seafarers have borne the brunt of pandemic disruption, and this has highlighted the need to address their unique challenges and enhance resilience. Technological breakthroughs are enabling new, greener fuel systems that will power the next generation of vessels towards a more environmentally friendly future.
For many, COVID-19 saw their homes become their workplaces, but for seafarers aboard merchant vessels, it was rather the opposite. In October 2020, UN agencies described the circumstances of some seafarers as a “humanitarian crisis”, amid cases of crew being stranded aboard for far longer than the 11-month maximum permitted by IMO rules due to COVID-19 restrictions1,2. This has raised awareness of how greater digitalisation is required in order to allow the industry to manage such crises better, to become more resilient and to minimise crew hardship.
An outflux of skilled crew is something that the industry needs to avoid if it is to future-proof itself. Merchant fleets are in the process of introducing new fuel technologies designed to cut emissions, and operating such vessels requires upskilling seafarers in the new technologies. Complicating the situation, it is not yet clear which fuel technology will prevail, a fact which has deterred some shipping companies from placing orders for new ships, wishing to mitigate the risk that they could become obsolete very quickly3. Nevertheless, alternative fuels are gaining traction, with data from Clarksons Research indicating that such vessels now represent 27% of the order book by tonnage4.
Transitioning to greener shipping
The IMO wants to reduce shipping’s emissions by 40% by 2030, on a voluntary basis5.
In addition to low carbon fuels, several other technologies are being explored to reduce the industry’s carbon footprint, such as more streamlined hulls, more efficient propeller design, improved voyage planning to make savings on fuels, better hull coatings and even air cushions to reduce friction.
The shipping industry is also being steered towards the carbon trading markets.
The European Union, for example, is considering proposals to add shipping to its carbon-trading mechanism, and it is not clear that any of the funds raised by that system would be returned to the industry to finance the transition to greener vessels6.
Carbon-trading is also coming to Asia, with China launching its trading system in July7 and companies such as Braemar and Clarksons setting up carbon-trading desks in Singapore. The emergence of different carbon-trading regimes in different regions brings with it the potential for market distortions. In an ideal world, a global system would be preferable.
Future-proofing the industry requires sources of finance to build the new ships. Fortunately, environmental, social and governance (ESG)-related investing is a rapidly growing trend, and it can help with construction.
Standard Chartered, for example, has been arranging loan facilities for shipbuilding with the credit-margin linked to the client’s progress against their sustainability targets.8
Kheng Sin Chu
Regional head of shipping finance
for ASEAN and South Asia,
Standard Chartered
The need for financing for new technologies and fuels is likely to accelerate as industry leaders take action. Maersk, for example, the world’s largest shipping and logistics company, has decided to focus on methanol as its preferred low-carbon fuel, rather than ammonia, LNG, LPG, hydrogen or even nuclear. It is planning to reduce its CO2 footprint by 60% before 2030, and to net zero by 2050, targets more ambitious than those set by the IMO9.
Maersk already has engines that can run on methanol, which is a relatively safe and straightforward fuel to use, being non-toxic and liquid at normal temperatures and pressure. Shipping analysts agree that the main problem is sourcing: Maersk will require far more methanol than is currently being produced for the market. Where giants like Maersk lead, however, smaller firms and fuel suppliers are likely to follow, and this perhaps offers some indication of how the energy transition in shipping will shape up.
Finally, finding and retaining the seafarers to crew the vessels of the future will require better rewards for them, and greater support for their mental health and wellbeing. Already the industry has partnered with regulators in major ports to establish corridors of safe transport for crews amid the pandemic, while also endeavouring to vaccinate seafarers where possible, but greater efforts are needed if the industry is to attract the talent needed for future success.
The fragility of supply chains exposed by the pandemic has shown quite how important their work is to many countries, and this greater awareness should support greater investment in them as people.
This article is based on themes discussed during a panel at the 2021 Marine Money Week Asia conference.
Sustaining the rally for dry bulk carriers
Sustaining the rally for dry bulk carriers
What’s next for the dry bulk shipping industry rally?
The dry bulk shipping industry is experiencing a banner year. Profits are at multi-year highs1 and expected to remain strong for the foreseeable future. But at the same time, carriers are coping with various challenges: balancing their desire to reward shareholders with long-awaited dividends with the need to invest in sustainable technologies to conform to increasingly stringent regulations aimed at reducing emissions, while ensuring the wellbeing of overworked crews in the midst of a pandemic.
Dry bulk carriers, like their counterparts in the container shipping business where freight rates have nearly quadrupled in recent months2, have enjoyed a bountiful year. Driven by a post-pandemic economic recovery, which has fueled demand around the world for goods like iron ore and coal and pushed global supply chains to breaking point, the rates to charter dry bulk carriers of all sizes have risen by nearly 2.5 times since the start of 20213.
The Baltic Dry Index, an industry benchmark, hit a 12-year high in September4. Going forward, a shortage of dry bulk vessels5 is expected to coincide with growing demand for goods like coal6, iron ore7 and steel8 from both emerging and developed markets. Flush with government stimulus funds, they are launching ambitious infrastructure development plans9 that are likely to push prices higher10.
It’s been an amazing ride for the industry so far. And given the demand and supply side pressures at play – port congestion and its spill-over effects, a limited supply of vessels, coupled together with a firm rebound in demand for iron ore, grains and coal – the outlook remains firm.
Amy Chow
Executive Director,
Standard Chartered
Overcoming strategic challenges
Industry observers are keen to understand how shipping companies plan to capitalise on the newfound liquidity and deploy the funds. Will they spend their record profits on new vessels? Will they resume paying dividends to shareholders? Or will they use the cash to pay off debt and deleverage their businesses? Or invest in new technologies to make their fleets greener?
There appears to be some consensus among the key industry players on all these points. For one, owners are exceedingly wary of adding capacity by commissioning new vessels11 - a caution stemming from the severe downturn experienced by the industry in the wake of the global financial crisis as a result of adding excess capacity in the preceding years12. At the same time, dry bulk operators are being crowded out of shipyards handling a surge in fresh orders from companies operating container vessels and tankers13.
For these reasons, carriers are choosing to focus on enhancing the utilisation rates of their current fleets and acquiring used ships, especially in the capesize category, which are seen as the most undervalued of all dry bulk vessels.
There is also a growing emphasis on reducing debt and rewarding shareholders for their patience with dividend payouts, which had dried out as the industry hit rough weather following the financial crisis14.
Planning for a sustainable future
Another critical factor driving the decision to hold back on investing in new ships is the risk of vessels becoming obsolete as the industry moves rapidly towards adopting cleaner propulsion technologies, in line with shipping's goal to reduce carbon emissions.
Most bulk carriers are investing in retrofitting their existing fleets with energy-saving technologies to bring their fleets in line with new regulations that require ships hauling dry bulk to switch to low-sulphur fuels15. This includes installing so-called scrubber devices that clean the exhaust fumes emitted by ocean-going vessels16.
Operators around the world are also turning to acquiring vessels that use cleaner fuels such as LNG, while pouring funds into researching the potential of zero emission fuels17. These efforts are aided by the growing availability of sustainable finance solutions, such as those arranged by Standard Chartered, which has funded dry bulk carriers around the world with loans tied to sustainability targets in line with the UN’s sustainable development goals (SDGs)18.
With dry bulk carriers being responsible for large portions of global trade, innovations in technology, alternative fuels and financing will be critical to accommodate the industry’s transition.
Last but not the least is concern for the safety of ocean-going crews and the challenge of getting them vaccinated. Since the early days of the pandemic, workers on oceangoing vessels have been prevented from coming ashore at ports of call by various local governments, in effect forcing them to spend months at sea19. The carrier companies argue that this is a violation of the Maritime Labor Convention20 and urge signatory governments to honour the agreement by allowing crew members to come ashore and enable them to travel to visit their families and get vaccinated. Failing which, industry officials caution, experienced workers fearing for their mental and physical wellbeing will continue to exit the profession, worsening the ongoing supply chain crunch21.
Undoubtedly, dry bulk carriers are looking to the future from a position of strength. Yet there is also a recognition of the issues that need to be addressed before the industry can make the most of the opportunities presented to it by the confluence of ongoing macro trends.
Despite these near-term challenges, the overall outlook remains positive – with industry insiders describing it as the perfect storm. However, unlike most storms, seafarers weather on the high seas, bulk carriers will not want this one to blow over any time soon.
This article is based on themes discussed during a panel at the 2021 Marine Money Week Asia conference.
