Slow steaming is a good way to save on fuel costs and meet the new IMO requirements. So ships have slowed down. But I was amazed at the graph below, showing a trend for quite a while.
Slowing down is an important way of cutting CO2 emissions from fuel oil. It also implies that more ships are needed to meet planned sailings on a scheduled route. It’s a deliberate reduction of individual ship ‘productivity’, since fewer paid cargo-carrying trips can be made in a year. But it may be a better fit with the demand for shipments right now, and it might result in fuller vessels.
We should remember that slow steaming will not eliminate CO2 emissions problems; it’s a stopgap at best. New types of power with very low or zero emissions through their life cycle well-to-wake must be developed. The investments have to be made.
This article features an interview with Michael Webber, who has been tracking corporate governance in ocean shipping firms since 2016. He produces an annual corporate governance scorecard for shipping, now at his own firm, Michael Webber Research and Advisory.
One significant issue in shipping is the constantly changing mosaic of companies. Firms are constantly merging in companies and creating new spinoff firms, some containing only a single ship. It’s a chore to keep track of it all, let alone try to rate how well the firms are looking after shareholders. The ratings Michael provides are simply to inform readers of the practices the firms engage in. This helps investors and traders to understand whether the firm is practicing good corporate governance or engaging in bad practices.
Webber claims that companies that score low on his rating have trouble raising capital using equity. He thinks investors are becoming more selective. It’s not only affecting stocks on the market; IPOS are failing due to governance issues as well.
There are a lot of related party transactions in shipping. Some benefit public investors and some don’t. Because no one was looking very hard in the past, it can be complicated for an older firm, say from the 2000’s, to unwind old structures that were not examples of good governance. Some firms have been successful doing this, but Webber says shareholders are at an informational disadvantage when these transactions are proposed. His rankings try to shed light on the corporate governance of the actors, for the benefit of the shareholders.
Webber thinks governance is improving overall, and shipping has improved its image on Wall Street. His ratings help public shipping companies find opportunities to conform to best practices in governance, and that improves the image and reality.
The scorecard rankings for 2023 are shown below.
(Source: Chart: Webber Research & Advisory)
The stock symbols of each firm are given. Webber has marked the firms that make no carbon disclosures.
Update: The University of Plymouth and the National and Kapodistrian University of Greece have announced a new ESG index to be revealed September 11th. It will be interesting to compare their work against Michael Webber’s.
Bureau Veritas (BV) has produced a feasibility study to estimate the usefulness of carbon capture from marine engines. BV is a multinational risk management insurer and classification society with a strong maritime profile.
Wah Kwong provided two vessels from their fleet to be studied and submitted for approval by BV, one smaller and one larger bulk carrier. QIYAO engineered for each ship the specific carbon capture equipment and storage for the liquid CO2 produced. All the requisite drawings and design experiments were performed as though this was to be a real installation. Everything was created that would be required to actually gain approval to operate these ships with the equipment.
While the technical details are interesting, I found the most interesting part was the financial analysis. It showed that for these ships, carbon capture can be moderately positive for cash flow, under a lot of assumptions, of course. Those might or might not be realistic.
But the most interesting thing for me was the value of the liquid CO2, which could be sold at a substantial p[profit based on current market prices. The value of the liquid CO2 captured is more than twice the savings from emission control. That’s what the study found.
Carbon Capture is a technology that is available now. It can be installed on existing ships with a moderate amount of engineering change. Some cargo space is lost to the liquid CO2 tanks that must be on board, but the value of the CO2 outweighs the lost cargo space value.
So it’s a requirement for this technology to develop the supply chain features at ports for handling the liquid CO2 produced, and to develop markets for it. It’s widely used in industry and should find a ready market. That will unlock the real value in making this type of conversion a reality.
Supply Chain and Logistics 