"Those who do not learn history are doomed to repeat it."
It's a quote that we all recognise in some form, but I'm told that the full and accurate quote from the philosopher George Santayana is actually "Those who cannot remember the past are condemned to repeat it".
After several iterations of ISO 8217 and of Marpol, it's a genuine fear I hold for the shipping and bunker markets that collectively we have failed or chosen not to learn certain lessons. At NSI where the vast majority of our brokers have great experience having worked through all the Marpol and ISO changes we were discussing what has changed in the market, and what has stayed the same (rightly or wrongly), and I wanted to share this with you to open the debate.
Enforcement - We all agreed that enforcement through ECA 1 and 2 was sporadic, with port state control heavily constrained by budgets thus limiting the number of inspections that are possible. Port state control seemed to focus their inspections on the safety standards of the vessels inspected. We don't see much has changed for port control since the first ECA was introduced. Budgets remain constrained and safety remains the priority.
I remember supplying 0.5% sulphur product in the early to mid 2000's to a RoRo company calling at St Petersburg and know first hand the difficulties in blending, storing and handling the product
Product Blending – We remember the constant stream of quality claims for product testing at 1.07% sulphur. When in 2020 sulphur is going to be a valuable component of the blends we fully anticipate that this situation will return with producers blending products to the absolute limit to extract maximum value. However back then we didn't have the same concerns that we do now about product stability and compatibility. An area I fear many that are new to the market and didn't live that history will have issues. I remember supplying 0.5% sulphur product in the early to mid 2000's to a RoRo company calling at St Petersburg and know first hand the difficulties in blending, storing and handling the product to ensure it stays homogenous and below the 0.5% limit. I also remember the number of retests due to reproducibility of sample!
Waivers – We have all heard anecdotal evidence of waivers being given too easily, but they are very difficult stories to verify. It is clear to some extent that the waiver system will have been abused. Given the new complexities post 2020 it is difficult to see any hope that it will be easier for those tasked with approving such waivers or that the information required will be simpler. We also see reports in the media regarding insurance cover being potentially null and void for vessels bunkering non-compliant fuel. Where waivers fit into this scenario is another grey area.
So what's changed in recent years? The big changes I see are technology, social conscience and end user awareness.
Technology – The options that are available to us all now are phenomenal, gone are the days where we all have to burn exactly the same product. Suppliers and buyers now have genuine options, whether that be converting to LNG, LPG, 0.5% blend, installing scrubbers or focusing on gasoil. There are a diverse range of options all offering their own benefits and drawbacks that need to be analysed. We are working with several owners and suppliers in this area to help them devise future product strategy to give them an advantage basis their infrastructure and trade areas.
Non-compliance with Marpol although offering a significant commercial advantage is beginning to become socially unacceptable
Social Conscience – We are seeing a growing trend whereby companies are operating with environmental policies and a true social conscience. Driving improved compliance not only within their own companies but we see the ripple effect that influences the companies that they in turn trade with.
End User Awareness – We saw last year the likes of IKEA stating they would not buy freight services from non-compliant carriers. We can only see this trend is going to grow, as end users become more aware of their supply chain they will begin to exert more pressure on carriers to prove compliance. Will it also come to a point also where suppliers are 'blacklisted' by owners for supplying non compliant fuel? As we all know different jurisdictions have different laws regarding such practices.
In a world where everyone is rightly seeking a commercial advantage it is clear the way to achieve this is changing. Non-compliance with Marpol although offering a significant commercial advantage is beginning to become socially unacceptable and with growing transparency in the bunker market it will be easier for freight customers to detect non compliance in their freight partners.
I don't believe that the regulators have the resources to properly police compliance and as an industry we have a responsibility to each other to ensure a level playing field and tough but fair competition.
From our side we see players achieving a natural competitive advantage come 2020 without the need for non-compliance due to an increased opacity in product avails and types of products. The key for suppliers and owners alike will be to access the information/analysis to reduce that opacity. As a large global broker we are perfectly positioned to do this and offer our partners the natural competitive advantage. For suppliers we can help bring your product to market effectively and for owners we can map out which suppliers have which product, where and at what price.