Speech: Shipping at the centre of world trade

Maritime UK Vice Chair, The Lord Mountevans, delivered the following remarks at The Maritime Symposium in Chile on 29 November during UK-Chile Maritime Focus:

Ladies and gentleman, I’m delighted to here at this impressive conference, a highlight of an exciting period of maritime activity in Chile.

Let me first thank Maritime UK’s Patron, HRH The Princess Royal, for hosting us at the British Ambassador’s residence last night. It was a pleasure to meet so many of you there.

Shipping really is at the centre of world trade. We all know the statistic – but it’s worth repeating. Our industry is responsible for facilitating over 90% of global trade.

And that role in driving global trade means we have a responsibility to speak out about its value, and the powerful role free trade can play in delivering prosperity and improving lives across our planet.

Late last year, the World Bank published research that found the world’s 60 top economies have adopted more than 7,000 protectionist trade measures since the financial crisis.

This is a worrying trend. Even though the world has never traded more, it seems like once again we have to defend trade, free markets and capitalism itself from those who would seek to tear them down.

Capitalism, globalisation and international collaboration spread prosperity and growth - and shipping has a vital role to play in this process. It follows that the shipping industry should also play a vocal role in defending them and challenging the protectionist trend.

Protectionism — whether in the UK, in the EU, the USA or anywhere else — will see trade fall and that extraordinary progress reversed.  We must not allow this to happen.

So when we are arguing for change from governments and regulators, when we are recruiting young seafarers or taking care of old ones and their families, let us remember – the success of the shipping industry is about more than our bottom line alone.

When we say shipping is important to the global economy, it cannot just be about patting ourselves on the back. It means we accept the responsibility that comes it. To connect people. To treat our seafarers well. To invest in our future. Because, by extension, we are investing in the future prosperity of the millions of consumers who receive goods that have been transported by sea every day.

There has been no liberator of the world’s poor quite like free trade. In the past 30 years, we have witnessed the single greatest decrease in human deprivation in history. In 1993, 45 per cent of India’s population sat below the poverty line; in 2011 it was 22 per cent – it is no coincidence that in the intervening period India embraced globalisation and liberalised its economy.

The world has never been more interconnected, never more reliant on each other and, by implication, never more reliant on shipping.

The future of trade is too important to be dismantled by protectionists who are interested only in their own short-term gains.   Trade facilitates human progress. It is the rock upon which a strong global economy, international diplomacy and mutual respect is built. Let’s play our role in broadcasting and bolstering that fact.

I have long held great interest in Spain and Portugal, but it was only when I started to visit Peru fairly regularly on shipping business in 2005 that I began to fall under the spell also of Latin America. I will never forget being in Pisco on August 15th, 2007, when the country’s largest earthquake of recent years was centred just offshore there – but that’s for another time.  When I was Sheriff of the City of London in 2013, I had the great good fortune to accompany the then Lord Mayor, Sir Roger Gifford, on a visit to Peru, Colombia and Panama, where as a shipping man I was fascinated to witness some of the Canal enlargement work. Then in 2016 when I was myself Lord Mayor, I was so fortunate as to make two visits: firstly to Chile, Brazil, and Cuba, where they welcomed me very warmly, though I am not sure I evoked quite the same delight and excitement  as the Rolling Stones, who had been there just days before for that very famous Havana concert! On a subsequent Mayoral trip, I visited Panama again, this time for the official opening of the enlarged Canal, as well as Costa Rica, before heading further north into the United States. And now, I am incredibly excited to be back in Chile.

Ladies and gentlemen, it is not unusual to read or hear the view that the 21st Century is the century of Africa. Well without in any way wishing to play down the prospects for Africa, personally I beg to differ.  I believe that the potential in Latin America is even greater. And if anyone mentions political challenges, I might just point out that this is a feature in many countries today, including Britain, the United States, Germany, Italy - and we can all name others!

We’re delighted to be visiting Chile to celebrate the 200th anniversary of the Navy. But more than that, we’re celebrating the strength of relations between our two maritime nations. The UK and Chile are steadfast maritime partners, as demonstrated by the breadth and depth of activity across our visit. From naval to technology, to services and marine science, our two maritime sectors are already working closely together, but there’s more to do. And that’s what our visit is all about.

British companies work exceptionally closely with their Chilean counterparts across many areas, but particularly in marine science and in support of the navy. We are looking forward to promoting the UK’s maritime expertise in high-quality and bespoke ship design, marine equipment and integrated systems.

The UK is the world’s leading centre for the provision of legal services to the international maritime community. English law is applied to shipping disputes far more widely than the law of any other country. We believe there is huge scope to deepen relations and in turn support the development of the Chilean maritime sector.

Our visit comes at a pivotal time in the negotiations on the UK's departure from the EU. It was recently reported that a new Free Trade Agreement between the UK and Chile would be agreed promptly, with the Chilean Foreign Minister saying that a deal would be agreed the ‘moment Brexit takes place’.

I am also pleased to be here as President of the Institute of Chartered Shipbrokers. The Institute – the global professional body for maritime professionals - is committed to Latin America, and is keen to expand its work in this dynamic region.

Ladies and gentlemen, let me turn to one of the big issues challenging our industry.

The upcoming Global Sulphur Cap in 2020 is undoubtedly the biggest challenge affecting international shipping and will also impact the worlds of commodities trading, refining and bunkering.

For those who aren’t familiar, a global limit of 0.5% will be imposed on the sulphur content of marine fuel for vessels trading international from 1st January 2020.

This is a significant reduction on the current global limit of 3.5%, which has been in effect since 2012.

That means shipping has just 404 days*to prepare in order to be compliant when the Sulphur Cap comes into effect.

This is a call to action for not only shipping but its customers and fuel suppliers – as well as for governments, refiners and ports in IMO member states.

But, for shipowners, the journey towards compliance will not be straightforward and it certainly won’t come cheap.

Two main options have emerged that will help lower sulphur emissions from shipping. Both will be costly; both have pros and cons.

Shipowners can either purchase compliant, low-sulphur marine fuel for their vessels, or they can invest in exhaust gas cleaning systems — or “scrubbers” — that allow ships to continue using fuels with a higher sulphur content, without releasing the harmful emissions. 

Neither option is perfect.

It remains to be seen if refiners will be able to produce enough compliant marine fuel to meet demand by the 2020 deadline and, even if they can, it is likely to come at a cost premium over conventional heavy fuel oil. We also don’t yet know which regions could be worst affected by these potential shortages of compliant fuel.

Scrubbers are expensive too, of course – with a price tag of at least $5 million per vessel. It’s a CAPEX investment that really only makes sense for bigger or newer vessels; it’s probably not worth the outlay for smaller or older vessels. Scrubbers are, however, a technology that has not yet been proven in the long term. It also remains uncertain whether vendors will be able to supply scrubbers to all the vessels that demand them before the 2020 deadline.

There is always the alternative fuel option, of course, such as using LNG. But LNG is only really suitable for newbuild vessels or those that operate on short routes or fixed schedules where bunkering infrastructure is already in place. Use of other alternative fuels such as methanol is still in its infancy.

Because of this, it looks like it will be a case of choosing between scrubbers and compliant fuel for most shipowners — but time is running out to make their choice.

What is important to remember is there will be no ‘transition’ period after 1st January 2020 to allow for the burning of any non-compliant fuel remaining onboard ships. That means shipping companies, charterers and their crews need to fully prepare now in order to be compliant by midnight on 31st December 2019.

And still, so many unanswered questions remain. We still need to gain a clearer picture of how regulatory enforcement will work and how non-compliance will be addressed by the authorities.  

Meanwhile, the shipping industry has no experience of the new ultra-low-sulphur fuels that will be used, so we have little idea of their risk profile. It has yet to be seen how these fuels will interact with one another within the engine, and how they will affect the overall safety of the vessel.

Because of all these unanswered questions, it’s no wonder that the Global Sulphur Cap presents such an enormous challenge to international shipping. And solving that challenge and exchanging expertise is what today’s conference is all about. I look forward to the discussion and debate!

So, to close, ladies and gentlemen, on behalf of Maritime UK, let me reiterate that we’re committed to enhancing maritime and trade relations between the UK, Chile and Latin America. The activity over the coming days will strengthen existing and create new, relationships.

We want this visit to be the start of an enhanced relationship, and we invite you to join us in September 2019 for London International Shipping Week.

Colleagues, thank you, and I look forward to our discussions.