Shippers Freak ahead of New IMO Rules

'Storm approaching': firms fear for deliveries in shipping shakeup

"Ship owners must cut sulphur emissions to 0.5% from 3.5%. They can do this by using low-sulphur fuel, installing exhaust gas cleaning systems or opting for other, more expensive, clean fuels such as liquefied natural gas or traveling more slowly."

What a brilliantly simple solution. So why the worry? Oh, wait... costs? Prices? Hmmm.

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56 minutes ago, Marina Schwarz said:

What a brilliantly simple solution. So why the worry? Oh, wait... costs? Prices? Hmmm.

The solutions are simple and available. It will shipping a little more expensive, but not that much. It is just that many shipping companies and the supply haven't spent the money to prepare so now there is going to be a big bottleneck and some temporary disruptions. 

Ultimately this may be good for shipping which is still dealing with excess capacity due to too much credit being available. 

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I suspect your "a little bit" is the same as their "a little bit" but I agree there must be solutions that don't require billions. Although on an industry-wide scale it could and probably would cost billions. IMO says 90% of the world's trade is maritime, so...

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1 hour ago, Marina Schwarz said:

I suspect your "a little bit" is the same as their "a little bit" but I agree there must be solutions that don't require billions. Although on an industry-wide scale it could and probably would cost billions. IMO says 90% of the world's trade is maritime, so...

Actually my point was that the IMO 2020 will help thin the herd. Shipping in general has too much capacity - a lot of container ships are not full when they travel around the world. The new regulation will help force a thinning of the herd. Capacity needs to leave the market in pretty all sectors of shipping. 

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On 6/25/2019 at 1:45 AM, Marina Schwarz said:

'Storm approaching': firms fear for deliveries in shipping shakeup

"Ship owners must cut sulphur emissions to 0.5% from 3.5%. They can do this by using low-sulphur fuel, installing exhaust gas cleaning systems or opting for other, more expensive, clean fuels such as liquefied natural gas or traveling more slowly."

What a brilliantly simple solution. So why the worry? Oh, wait... costs? Prices? Hmmm.

They will REALLY freak out if the USA changes its USPTO developing world which subsidizes the world shipping into the USA by ~75%.  This will hopefully be changed(from USA citizen perspective).  This will help to further crash the long distance shipping sulfur fuel problem. 

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Read up on dual fuel locomotives. Doing this on ships might be a bit more difficult (and probably take more time), but it would fix the issue with a big hammer.

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6 hours ago, Wastral said:

They will REALLY freak out if the USA changes its USPTO developing world which subsidizes the world shipping into the USA by ~75%.  This will hopefully be changed(from USA citizen perspective).  This will help to further crash the long distance shipping sulfur fuel problem. 

I'm not familiar with this.  Can you elaborate?

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(edited)

There was a lot of IMO2020 discussion and debate in this thread

 

Edited by ceo_energemsier

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On 6/25/2019 at 8:22 AM, Rasmus Jorgensen said:

The new regulation will help force a thinning of the herd. Capacity needs to leave the market in pretty all sectors of shipping. 

The way "capacity" leaves the market is by bankruptcy.  In a full-blown bankruptcy, where the shipping company actually runs out of operating cash, you end up with ships being seized by creditors in various ports (with the cargoes still on them), with harbor terminal operators refusing to unload those ships  (especially container ships, as nobody will haul the containers as there is no place to store them once they are unloaded, and the owner cannot pay to take them back and place into storage), and crews stranded on those ships and no way to get off and go home, basically hostages and prisoners to the competing Courts.  The bankruptcy of South Korea's Hanjin Lines was a complete disaster and should have been a wake-up call for the industry.  Was it?  No chance.   https://unitedshipping.com/hanjin-shipping-bankruptcy-causes-turmoil-in-global-sea-freight/

So then the bankruptcy court proceeds to auction off the assets - the ships.  Are those ships scrapped?  No chance.  What happens is that competitors now buy those assets on the cheap, and because the assets have a lower capital cost, they can be run for revenues lower than assets bought from shipyards.  The result: the same over-capacity, and a new Darwinian race to the bottom for freight rates.  The herd does not get thinned.  The herd simply has to operate for less, or in the red.  And if in the red, then another set of creditors and investors are getting set up for yet another bruising. 

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11 hours ago, BenFranklin'sSpectacles said:

I'm not familiar with this.  Can you elaborate?

If you are a developing country, then it is cheaper to ship from their country to anywhere in the USA by ~3X-->4X than shipping from city to city in the USA due to an ancient(100 years old) STUPID law.  Why shipping in the USA for say... a dress is ~$10, but from China it is only ~$1.50 on a dress that costs ~$100 to make(This is a massive advantage to foreign manufacturers).  It will finally be debated this October and I as a USA citizen hopes and prays it finally gets repealed.  In short, USA has been subsidizing foreign shippers and production because the USA was trying to build up the western Hemisphere at the beginning of the 20th century to withstand foreign adventures by the Brits, French, Spanish, Portuguese etc. 

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8 hours ago, Wastral said:

If you are a developing country, then it is cheaper to ship from their country to anywhere in the USA by ~3X-->4X than shipping from city to city in the USA due to an ancient(100 years old) STUPID law.  Why shipping in the USA for say... a dress is ~$10, but from China it is only ~$1.50 on a dress that costs ~$100 to make(This is a massive advantage to foreign manufacturers).  It will finally be debated this October and I as a USA citizen hopes and prays it finally gets repealed.  In short, USA has been subsidizing foreign shippers and production because the USA was trying to build up the western Hemisphere at the beginning of the 20th century to withstand foreign adventures by the Brits, French, Spanish, Portuguese etc. 

Would repealing this law give a major advantage to coastal US cities, or would the river towns throughout the Midwest be able to compete? 

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17 hours ago, Jan van Eck said:

The way "capacity" leaves the market is by bankruptcy.  In a full-blown bankruptcy, where the shipping company actually runs out of operating cash, you end up with ships being seized by creditors in various ports (with the cargoes still on them), with harbor terminal operators refusing to unload those ships  (especially container ships, as nobody will haul the containers as there is no place to store them once they are unloaded, and the owner cannot pay to take them back and place into storage), and crews stranded on those ships and no way to get off and go home, basically hostages and prisoners to the competing Courts.  The bankruptcy of South Korea's Hanjin Lines was a complete disaster and should have been a wake-up call for the industry.  Was it?  No chance.   https://unitedshipping.com/hanjin-shipping-bankruptcy-causes-turmoil-in-global-sea-freight/

So then the bankruptcy court proceeds to auction off the assets - the ships.  Are those ships scrapped?  No chance.  What happens is that competitors now buy those assets on the cheap, and because the assets have a lower capital cost, they can be run for revenues lower than assets bought from shipyards.  The result: the same over-capacity, and a new Darwinian race to the bottom for freight rates.  The herd does not get thinned.  The herd simply has to operate for less, or in the red.  And if in the red, then another set of creditors and investors are getting set up for yet another bruising.  

That sounds like a great way to transfer wealth away from productive companies and hand it to banks.  It also sounds like a great way to consolidate power in an industry. 

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2 minutes ago, BenFranklin'sSpectacles said:

Would repealing this law give a major advantage to coastal US cities, or would the river towns throughout the Midwest be able to compete? 

It doesn't really work that way.  Back before containerization, when freight was manually removed one pallet at a time by stevedores swinging the cargo out of the holds using derricks and cargo nets, the larger part of a ship's career was spent in port.  It might take two weeks to unload one ship.  So the Jones Act was to build up a fleet of U.S. hulls with skilled U.S. sailors the be instantly available to the USA in the case of war between belligerents in Europe - specifically, France and Germany, who had been tussling with each other for a century, and where war would spill out onto the oceans.  In those days a shipowner would paint the nation's neutral flag on the ship side in very large size, and it would be left alone. SO a US ship could sail right trough a battle scene with these other guys shooting at each other and still nobody would shoot at that US ship.  Now admittedly all that went out the window with the sinking of the Lusitania which despite being British-flagged was still a passenger ship and that was considered against the Rules to go sink.  When the German sub commander did that anyway, with huge loss of life, the gloves really came off, and you ended up with gassing in the trenches  and all kinds of horrors. 

It became apparent that the Rules respecting neutrality would not be respected by European belligerents so the idea that the US could protect its own merchant fleet went out the window.  Logically, there is no longer any advantage to the Jones Act, but at this point there were vested interests, specifically the Seafarer's Union and the shipyard owners, and also Matson Lines and United States Lines, that had developed large vested interests in keeping it the same.  But the advent of containerization meant that ships could spend most of their time at sea and not in some port and the advantage of a cheap ship and lo-cost ship labor became overwhelming.  The net result is that all shipping is done by foreign hulls and crews except for US Mainland to Puerto Rico  (and US Virgin Islands, and of course Guam). 

This became a problem for larger ferryboat operators, specifically the Alaska Steamship Company. operating the ferry services up to Alaska from Seattle, so a policy of issuing "waivers" came into play, where a ship operator could buy a foreign hull and get a waiver from the Maritime Administration to operate it in US coastal waters.  And plenty of those waivers have quietly been issued.  The US shipyards have gone over to building military ships mostly, very lucrative, and some tugs, oil drilling platforms, ad platform supply vessels. Aside from barges and some tankers, basically for the rest the US yards have abandoned the trade.

Now that leaves US coastal traffic largely abandoned.  But the US shipper and consumer has not taken it in the shorts much as the US rail network has goeen much better and both rail and trucking have taken over virtually all intra-US shipping.  You do get barges hauling commodities being pulled by US tugs, but that is pretty much the extent of it.  The Jones Act is more of an irritant than anything else.  It does not make much sense: you can ship your passengers and freight in a French Airbus, or haul it in a Volvo truck  (albeit with a 25% duty), or send your passengers along in a train with a Swedish locomotive, or a bus built in Canada or Belgium, but you cannot buy your ferryboat from a yard in Poland or Germany or Denmark?  What is the logic in that?  And since there is no logic, at some point the Jones Act will be repealed.  That is, assuming that the vested interests, specifically yards building for the Puerto Rico trade, do not have enough lobbyists!

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3 minutes ago, Jan van Eck said:

It doesn't really work that way.  Back before containerization, when freight was manually removed one pallet at a time by stevedores swinging the cargo out of the holds using derricks and cargo nets, the larger part of a ship's career was spent in port.  It might take two weeks to unload one ship.  So the Jones Act was to build up a fleet of U.S. hulls with skilled U.S. sailors the be instantly available to the USA in the case of war between belligerents in Europe - specifically, France and Germany, who had been tussling with each other for a century, and where war would spill out onto the oceans.  In those days a shipowner would paint the nation's neutral flag on the ship side in very large size, and it would be left alone. SO a US ship could sail right trough a battle scene with these other guys shooting at each other and still nobody would shoot at that US ship.  Now admittedly all that went out the window with the sinking of the Lusitania which despite being British-flagged was still a passenger ship and that was considered against the Rules to go sink.  When the German sub commander did that anyway, with huge loss of life, the gloves really came off, and you ended up with gassing in the trenches  and all kinds of horrors. 

It became apparent that the Rules respecting neutrality would not be respected by European belligerents so the idea that the US could protect its own merchant fleet went out the window.  Logically, there is no longer any advantage to the Jones Act, but at this point there were vested interests, specifically the Seafarer's Union and the shipyard owners, and also Matson Lines and United States Lines, that had developed large vested interests in keeping it the same.  But the advent of containerization meant that ships could spend most of their time at sea and not in some port and the advantage of a cheap ship and lo-cost ship labor became overwhelming.  The net result is that all shipping is done by foreign hulls and crews except for US Mainland to Puerto Rico  (and US Virgin Islands, and of course Guam).  

This became a problem for larger ferryboat operators, specifically the Alaska Steamship Company. operating the ferry services up to Alaska from Seattle, so a policy of issuing "waivers" came into play, where a ship operator could buy a foreign hull and get a waiver from the Maritime Administration to operate it in US coastal waters.  And plenty of those waivers have quietly been issued.  The US shipyards have gone over to building military ships mostly, very lucrative, and some tugs, oil drilling platforms, ad platform supply vessels. Aside from barges and some tankers, basically for the rest the US yards have abandoned the trade.

Now that leaves US coastal traffic largely abandoned.  But the US shipper and consumer has not taken it in the shorts much as the US rail network has goeen much better and both rail and trucking have taken over virtually all intra-US shipping.  You do get barges hauling commodities being pulled by US tugs, but that is pretty much the extent of it.  The Jones Act is more of an irritant than anything else.  It does not make much sense: you can ship your passengers and freight in a French Airbus, or haul it in a Volvo truck  (albeit with a 25% duty), or send your passengers along in a train with a Swedish locomotive, or a bus built in Canada or Belgium, but you cannot buy your ferryboat from a yard in Poland or Germany or Denmark?  What is the logic in that?  And since there is no logic, at some point the Jones Act will be repealed.  That is, assuming that the vested interests, specifically yards building for the Puerto Rico trade, do not have enough lobbyists! 

It sounds like acts of Congress die when the industry supporting them shrinks to irrelevance.  <s> Sounds effective.  <\s>

The story I read was that the Lusitania carried munitions in addition to passengers, and the Germans purchased newspaper ads across the entire US Eastern Coast to warn people it would be sunk.  If true, does that change the situation? 

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3 minutes ago, BenFranklin'sSpectacles said:

It sounds like acts of Congress die when the industry supporting them shrinks to irrelevance.  <s> Sounds effective.  <\s>

The story I read was that the Lusitania carried munitions in addition to passengers, and the Germans purchased newspaper ads across the entire US Eastern Coast to warn people it would be sunk.  If true, does that change the situation? 

The "munitions" story was put out there in order to try to salvage an impossible public-relations disaster.  Yes, there was some form of secondary explosion after one of the two torpedos struck the ship.  My guess is that the secondary explosion was the ignition of coal dust. Those massive boilers were fired by coal, and the constant shoveling of the coal by the stokers, all done by hand, created lots of dust.  Bring in a nice spark and flame front into the coal bunker and handling area and the result is predictable. 

And yes, the German Foreign Ministry did make noise via advertisements that it was open season in the zone around England, but remember, that was to try to deter ships from bringing in trade from South America mostly, goods such as grain, wool and beef, part of an "embargo" policy.  The Rules of War specifically excluded non-combatants, and by definition a passenger ship is filled with non-combatants.  The Germans were grotesquely outside the rules of war for shooting at the Lusitania.  The sub commander did it anyway.  Secretly, internally the German high command was horrified, and actually took the step of conveying their dismay to the British and the Americans by back channels. No one was mollified.  The US loss of life pushed the US into the War, in part, as I recall.  Big tactical mistake.

On another note, Acts of Congress never die, like an old soldier, they just fade away........MacArthur told you that.....

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12 hours ago, BenFranklin'sSpectacles said:

Would repealing this law give a major advantage to coastal US cities, or would the river towns throughout the Midwest be able to compete? 

Would give the interior an advantage.  Coastal cities can still get dumped on by foreign products and why Tariffs are required as shipping via the sea is still vastly cheaper by several times than shipping via land or rail. 

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On 6/30/2019 at 5:36 AM, BenFranklin'sSpectacles said:

It sounds like acts of Congress die when the industry supporting them shrinks to irrelevance.  <s> Sounds effective.  <\s>

The story I read was that the Lusitania carried munitions in addition to passengers, and the Germans purchased newspaper ads across the entire US Eastern Coast to warn people it would be sunk.  If true, does that change the situation? 

Lusitania was told Uboats in vacinity.  Was told to zig zag at flank speed. Why?  Uboats were slow and cannot fire at fast ships.  Lusitania went slow and in a straight line and got nailed by an over zealous uboat captain(how it generally happens during war and "neutrals" whose captain age is what?  25?  30?)  The cover story later was the munitions baloney.  No one is going to ship a tiny amount of munitions on a passenger liner when the NEED was vast which would require multitude of LARGE cargo vessels. 

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