"Shipping must not be subjected to more burdens than other means of transport"
Interview with Ralf Nagel, Chief Executive Officer of the German Shipowners’ Association (VDR)
Of what relevance are the SECA zones in the North and Baltic Seas for European short sea shipping and RoPax lines?
Here's the good news: Sulphur emissions have been dramatically reduced and shipping is becoming even cleaner. Official measurements confirm that shipowners are complying with the new emissions limitations. The strict threshold may also, in the mid-term, contribute to more ships using clean fuel, such as liquefied natural gas (LNG). Now here's the bad news: Shipowners must pay significantly more for fuel. The low-sulphur marine diesel costs roughly twice as much as traditional heavy fuel oil. Few ships have been outfitted with a scrubber since after-the-fact investments in scrubbers are expensive and technically demanding. Currently, the low oil price is helping shipowners to defray the additional costs for the low-sulphur fuel. For this reason, above all, the feared shifting of traffic from ships to trucks has not yet been felt. But shipping, especially short sea shipping, continues to be in direct competition with other means of transit, in particular with trucking. And after all, fuel for trucks has also gotten cheaper. Many contracts with shipping customers stipulate furthermore that the bunker costs can be adjusted to the current price developments. So we are not really feeling true relief in terms of energy prices. Shipping must therefore not be subjected to even more burdens in comparison with other means of transport.
At a recent joint parliamentary dinner hosted by the maritime business associations, you discussed the innovative and environmentally friendly fuel: LNG. From your perspective, is there a shift from cautious attitudes toward a more open embrace? Has the low oil price negatively impacted the use of alternative means of propulsion?
The German shipowners see great potential in LNG as a clean fuel. Many already have ready-to-deploy plans to use LNG in their ships. The current price difference between oil and gas does not play a significant role. Ships have an operational lifespan of 20 years and more – the oil price will not stay low for that long. The real hurdle for LNG operated ships are the high costs of investments in motors and fuel tanks – roughly one-third more than conventional propulsion systems. The ongoing revenue problems and the caution of banks exacerbate the financing issues. In order for ships using low impact liquefied gas to start sailing, we need effective public financing as a start-up aid. If we start getting more ships with LNG underway, it will become more interesting for gas suppliers to invest in infrastructure for the provision of these vessels. Going beyond this, many ports have yet to develop the legal frameworks for operating and bunkering LNG ships – but, of course, they have the best accident record since they have these stringent security requirements.
What influence do the new SOLAS rules regarding the weighing of containers have when it comes to the daily work and business of German shipowners?
The new regulations regarding container weighing make sea shipping even safer. The more the owners and seafarers know precisely the weight of the individual containers that are loaded, the more stability they can achieve when stowing cargo. In advance, the IT systems on board and in the terminals need to be adjusted. Specifically in the initial phase, there will be significant administrative effort required until all ports have adapted. The final result is that the situation will be safer – and that is the only thing that matters.
How do you regard the trend of reflagging ships under the German flag? What significance do the new crewing regulations and the rules regarding retention of wage taxes from the German federal government have? What international status does the German flag and do German sailors have nowadays?
The relief with respect to the non-wage labor costs and the more flexible requirements regarding manning provide much needed wind in the sails of the German flag and will thus open up new opportunities for German seafarers. The economic disadvantage of the German flag has thus largely been addressed. Germany now is at the European level which our neighbors in Denmark and the Netherlands have already sustained for quite some time. Without these actions, the German flag would have soon disappeared from international shipping. A large number of other flags like Liberia and Antigua & Barbuda have been increasing their standards for some time and are now among the world's 43 high-quality flags. In flag state controls which aim to secure conformity with the numerous regulations, e.g. in safety and work conditions on board, these flags regularly achieve the best results. They also offer quick and professional service to shipowners. Thanks to uniform training standards, shipowners can find good personnel outside of Europe. Many shipowners cooperate with maritime academies abroad, e.g. in the Philippines, and are training highly qualified personnel there. The industry in Germany needs its own know-how in order to sustain a competitive flag. In order to secure the training of young seafarers, shipowners – in the midst of the crisis – established the German Shipping Foundation for Training and Education of Seafarers (Stiftung Schifffahrtsstandort Deutschland). Each year, they provide 30 million euros for training new seafarers. Roughly 1,300 young seafarers have already benefited from the foundation’s support. The most recent measures help these seafarers achieve long-term careers. Multiple VDR member companies have reacted and flagged ships back to Germany, which is a very positive development that will profit the entire German maritime industry. Indeed, the shipping and engineering knowledge of the seafarers is needed not only on ships but also in many economic sectors – research institutes and shore administrations – including the harbormasters and pilots who are essential for the functioning of the ports.