Some Thoughts on the Current Brexit Related Developments Affecting Marine Industry

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The recent pro Brexit referendum result in UK has opened a Pandora’s Box.  Any number of pundits are commenting on this event.  When one studies the root cause of the working of the minds of the Pro Brexit voters, there are lessons that are relevant to the marine industry.

Is it disillusionment and anger with the rules and laws of the EU dictated to the UK from far off Brussels and an opaque screen which prevented proper understanding of these laws and rules?

It is this one that relates to the Marine industry.  Though the IMO headquarters are located in London, the real power seems to lie with the EU bureaucrats in Brussels who are calling the shots on Environment, Emissions, Global Warming and so many other regulations that have buffeted the marine industry in the recent past.  The regulatory pressures have come at a time when the marine industry itself is suffering the effects of a prolonged depression.

Many in the marine industry are dismayed and angry at the fact that so many regulations are pushed through at a time when the industry is not able to handle the economic pressures of continuous losses.  No doubt the reasons for regulations have been well laid out on paper but the regulators have failed to understand the ground realities of the marine industry.

An industry which carries over 90% of the global goods transportation, contributing only 2.5% to the Greenhouse gas emissions and 15% and 13% of global NOx and SOx emissions has come in for serious criticism and almost branded a criminal.

The marine industry has traditionally been slow to accept changes.  So many changes coming one after the other namely SOx control, NOx Control, Ballast Water, Carbon Emission etc. have together put too much pressure on the industry.  The result is that the industry is not doing anything.  With only 3 years to go (assuming the global 0.5% Sulfur limit will kick in by 2020) neither the refineries, nor the scrubber industry, nor alternate fuels such as LNG are ready to meet the challenges by 2020.  Even assuming that the 0.5% Sulfur fuel is available, the question to ask is how will conformance to these regulations be monitored? Where is the monitoring agency and the infrastructure? Another major question is what do we do with over 200 Million MT of the heavy fuel which will suddenly be available in 2020?

Politicians are vying with each other to pass harsh comments and regulations on the marine industry to show how concerned they are about pollution.  Leaders in the marine industry want to show that they are more loyal than the king and how concerned they are and also keep emphasizing compliance without understanding the realities of implementation and monitoring.

Many in the industry are pointing out that the speed with which these regulations are pouring out of the “Brussels Regulations Factory” confirms the fact that there is no real understanding of the industry and the mood of the people in the industry.  The feeling is very similar to what the pro Brexit voters felt that, Brussels is far off and there is an opaque curtain which prevents them from understanding the ground realities.

The ground realities are that most shipping companies are unable to even break.  Freight rates have collapsed to unbelievable levels except for a limited range of tankers.  A scrubber costs a minimum of $1.5 Million and a ballast water treatment system costs even more. There is no plan or thought of how to fund these colossal expenditures on so many ships at this juncture.

Brexit has added to the confusion and its impact on the marine industry is yet to be felt. Perhaps France, Belgium or Germany may fight to have the IMO headquarters in London to be moved to their capital.  The EU states that they will go ahead with the 0.5% S regulation from 1.1.2020 whatever the rest of the world may decide.  This is again a huge disconnect.

There is an interesting saying in management.  The Boss should be cool in a crisis.  But if he is too cool, maybe he does not know what is going on.  Similarly, it is good to bring in regulations to improve the industry but if the regulatory body thinks that its job is to roll out more and more regulations without caring how these will be implemented, maybe they don’t know what they are doing.

Dr.Vis

President

Viswa Lab

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