Heading for a log jam

At present, owners and yards are putting all their efforts into survival. Owners because over-supply means low rates, which hardly cover costs. Builders because the same situation means no new orders, and once the current batch of orders leaves the yards, there will be no work. Yet, creeping up almost unnoticed we have an unprecedented boom in conversion jobs. Maybe it’s because the industry hasn’t experienced this before that the majority seem woefully unprepared. Or maybe it’s a lack of firm direction from the rule makers. I refer, of course, to the imminent ballast water and exhaust emission regulations.

Previously, rules involving such a great engineering input have only been applied to new ships. Existing vessels have been allowed to keep sailing. We saw the genesis of a more universal approach a few years ago, with the GMDSS and VDR rules. Even those, which involved quite minor alterations to the ships, had a far from smooth passage into force, mostly down to supply of equipment rather than fitting it. But fitting ballast water treatment systems involves major engineering input, at manufacture and installation.

The emissions rules look less frightening, in that of the possible approaches, one, i.e. switching to distillate fuel, doesn’t need major work onboard. But it will involve considerable additional operational cost, which unless charter rates soar in the next few years (or maybe even months), will be hard to accommodate. Once the global sulphur limit (rather than just the cap in ECAs) comes in, many owners may find themselves wishing they had invested in scrubbers.

Scrubbers, like BWTS, involve a major investment and in most cases major work to fit them. And like BWTS the technology is insufficiently mature to offer confidence for many owners. But scrubbers will allow owners to completely escape the worst of the fuel price rises.

With dilemmas like these on the horizon, it is surprising that there are not more yards seeking to diversify at least temporarily from newbuilding into conversion work. And that more owners are not pressing the order-poor shipyards for good deals to prepare their ships in good time for the new rules, avoiding the inevitable log jam caused by leaving things to the last minute.