Words from the Steering Committee by John Sypnowich, Chair, MACN
“In October 2019, MACN members signed off on our 2025 strategy. The strategy defines MACN’s 2025 journey, with an emphasis on our Members’ commitment to combatting corruption globally. This will see MACN focusing on supply chains and highlighting safer courses of action for our captains and crews. This strategy also establishes MACN’s collaborative approach model as a measure for success.”
Corona pandemic makes crew change a challenge
Bengt Ellingsund (42) has been at sea since January 12th. The corona pandemic has made crew change a challenge, and it is uncertain when he will got home.
Due to strict infection control measures and travel restrictions, many seafarers have not returned home since the virus broke out. Around 200,000 seafarers are waiting to be replaced, and just as many are waiting to get to work.
The tanker Bow Fortune, where Ellingsund is chief mate, is in the Indian Ocean when we get hold of him on a telephone line. He would much rather have been at home in Norway.
– We left Panama in January when the pandemic broke out, after five days in China there was a total shutdown, he says.
Quarantine and test center in full operation in Manila
The Norwegian Shipowners' Association, in collaboration with several member shipping companies, have established a quarantine and test center in Manila. The center has been in operation since 1 October, and the experiences so far have been positive.
The world depends on shipping to supply the necessary supplies through the corona pandemic. To ensure that the seafarers sent out to serve on ships all over the world are infection-free, the Norwegian Shipowners’ Association, in collaboration with several member shipping companies, have established a quarantine and test center in Manila. The center has been in operation since 1 October, and the experiences so far have been positive.
The center is established in a hotel near the airport in Manila where we rented 120 rooms. It was opened on October 1 and ten member shipping companies use the center. NTC Manila is responsible for the operation of the center, Marriott Hotell provides accommodation and infrastructure, and St. Luke’s Hospital conducts and analyzes covid tests.
Shipping accounts for 2.2% of global greenhouse gas emissions. Norwegian shipowners are now taking a leading role in the fight against climate change. The goal is for the entire Norwegian fleet to be climate neutral by 2050.
The aim of the Paris Agreement is to limit global warming to 1.5 degrees. The UN Intergovernmental Panel on Climate Change has given us ten years to halve greenhouse gas emissions, and maintains that they must drop to zero by 2050. Climate change must be taken seriously. If we are to succeed in curbing its effects, we must act quickly.
Four proactive climate goals Under the umbrella of the Norwegian Shipowners’ Association, Norwegian shipping companies have taken action by adopting four ambitious goals laid out in a climate strategy. The goals state that members will cut their greenhouse gas emissions by 50% per transported unit by 2030, compared to 2008. From 2030, Norwegian Shipowners’ Association members will only order vessels with zero emission technology. From 2050, the Norwegian fleet will be climate neutral. The strategy also entails an international ban from 2050 on fuel types that are not climate neutral.
“Norwegian shipping is taking a leading role by setting ambitious goals for the development of new and profitable green technology,” says Harald Solberg, CEO of the Norwegian Shipowners’ Association. “We have high ambitions, even in areas that today do not have commercially available technological solutions. We believe ambitious goals will help accelerate the necessary development. This means that the entire industry, in collaboration with the authorities, both nationally and internationally, must engage in developing new solutions,” Solberg says.
Good for climate, good for business Norwegian shipping sees great business opportunities in taking leadership in the development of innovative technology that the maritime industry and the world need. At the same time as contributing to the mitigation of global warming, and providing cleaner air and healthier oceans, new and green jobs will be created.
“We need new technology and new sustainable solutions, and development must happen quickly,” says Solberg. “We can meet global climate targets while generating business opportunities . We have already accomplished a great deal, and now we want to do even more,” he concludes.
According to a recent member survey, Norwegian shipping companies have so far lost nearly 25 percent in turnover due to Covid-19 and its global effects. This is expected to grow to 35 percent by year-end, with all segments impacted. Members now project a tripling of vessels in lay-up, a doubling of vessels for recycling and report a deterioration in capital supply.
Decline in turnover
As of 17 April, the passenger ship segment has been hardest hit with a fall in turnover of close to 80 percent. Deep sea shipping companies have seen a fall in turnover of around 25 percent. This is a sharp increase from the previous survey (31 march), and clearly shows the situation deteriorating rapidly for shipping companies as the weeks go by. Offshore service shipping companies had a turnover decline of 13 percent.
Members expect turnover to fall further in 2020, reaching an average decline of 35 percent by year-end.
“This will have major, long-lasting effects on the engine of the maritime cluster,” says Harald Solberg, CEO of the Norwegian Shipowners’ Association.
– The consequences for the maritime industry are likely to be greater than the financial crisis and the oil price crisis combined. At this time, it is crucial for society that the wheels that can be kept in motion are indeed kept in motion. The flow of goods, crew changes and measures to stimulate activity are crucial for companies that are basically healthy to be able to get through the biggest economic crisis in recent history, he says.
Virus outbreak could cause approx. NOK 83 billion drop in revenue in 2020
The 35 percent decline in turnover amounts to more than NOK 83 billion and reduces the forecast for total turnover in 2020 from NOK 244 billion to NOK 161 billion. Members had initially projected a near six percent increase in turnover for 2020. This decline will be by far the biggest in the last 15 years – financial crisis and oil crisis included.
Three times as many ships to be placed in lay-up
Members report significant growth in lay-up figures, up from 95 to 138 since February. Based on new estimates, the number of vessels in lay-up at year-end will be double that of February, which means a tripling over the year-end projection for 2020.
Offshore service, deep sea and rig companies are anticipating the biggest negative changes. Passengers and short sea respectively report significantly fewer or about the same number of vessels in circulation at year-end.
Twice as many ships to be recycled
Due to weak markets, several shipping companies are now considering recycling excess tonnage. Almost all segments estimate that they will recycle more ships than they assumed in January. This is particularly true of offshore segments and passenger ships, where there is a huge growth in projections for ships that may be considered for recycling.
Access to capital – significantly harder. Members fear it may get worse
Shipping companies are experiencing very tight capital access. Almost no one replies that they have good or very good access to capital. This is especially true for offshore service and rig companies, which have experienced a significant deterioration in capital inflows in recent months. At the opposite end, we find short sea, which has experienced little change in capital access.
The shipping companies also expect further deterioration of the capital inflow, across all segments. Here too, offshore service in particular is expecting a significantly lower supply of capital in the coming months. This is probably because the offshore shipping companies are in a double crisis, both as a result of Covid-19 and the sharp fall in oil prices.
Shipping companies fear greater operational challenges
Virtually all shipping companies have experienced operational challenges as a result of the coronavirus outbreak. Crew changes have been a key obstacle and are expected to continue to be very demanding. A large share of member companies has chosen to extend contracts with existing crews. These extensions are running out, and soon the need for crew changes will become critical. Shipowners fear that the operational challenges will increase substantially in the time to come.
– We are working closely with the international and European shipping industry to establish good structures to carry out the necessary crew changes, says Harald Solberg.
For the passenger vessel companies, the operational challenges are mainly related to the authorities’ travel restrictions, stopping virtually all passenger transport in and out of Norway. These companies have seen their revenue base fall away overnight, while customers are entitled to having ticket expenses reimbursed. With other fixed costs running as normal, the government-imposed travel restrictions have put these companies in a challenging liquidity squeeze.
* A note on graphs – provided here in Norwegian while English slides are being developed.