Shipping lines face host of obstacles in jump to cleaner fuel

Shipping lines want to embrace low-sulphur diesel but cost, technical challenges and fears their rivals won't switch are holding them back

PUBLISHED : Monday, 14 January, 2013, 12:00am
UPDATED : Monday, 14 January, 2013, 5:12am

Cost, technical and commercial issues are among the reasons more shipping lines have not joined marine fuel switching initiatives that aim to cut air pollution from ships in Hong Kong, experts say.

Ship owners and operators have registered more than 560 ships with the Environmental Protection Department's incentive programme to use low-sulphur fuel since it was launched in September.

Around 18 shipping lines also signed the Fair Winds Charter, a voluntary scheme in which they agreed to switch to low-sulphur diesel "to the maximum extent possible" for two years from January 2011.

In return, the firms wanted the Hong Kong and Guangdong governments to introduce laws mandating the use of cleaner low-sulphur diesel by December 31, 2012. While regulations have yet to be introduced, several carriers including Maersk and CMA CGM indicated they would continue to support the charter in return for a government commitment to regulation.

Under the EPD scheme, ship operators get a 50 per cent reduction on port and navigation charges if registered vessels switch to burning low-sulphur diesel while berthed or anchored in Hong Kong. But low sulphur diesel is about 40 per more expensive than more heavily polluting marine diesel and the EPD scheme only covers between 30 and 45 per cent of this higher cost.

As a result, while shipping companies including Maersk, Orient Overseas Container Line, Mitsui OSK Lines and Hyundai Merchant Marine have registered fleets of 10-90 ships, other cost-conscious carriers have been more reticent.

APL and Hanjin Shipping were among the firms that signed the Fair Winds Charter, but neither has registered any ships with the EPD incentive scheme.

Hanjin spokeswoman Sonya Cho said: "I've been informed that we are in the middle of reviewing which vessels to register for the programme."

Singapore-headquartered APL did not respond to requests for comment. Evergreen Marine spokeswoman Crissy Liu said just one container ship was registered because of "cost saving considerations". Figures compiled by the South China Morning Post show just 13 per cent of ocean-going ships calling upon Hong Kong each day have been registered, although the figure rises to 24 per cent of massive container ships using Kwai Chung port.

Roberto Giannetta, representing the Hong Kong Liner Shipping Association, outlined reasons why shipping lines did not sign the charter or register ships with the EPD. He said: "There is a significant financial commitment to switching fuel" and estimated using low-sulphur diesel cost lines an average of US$500,000-US$800,000 extra per year even with the EPD rebate. With today's thin margins, there could be a significant competitive disadvantage if one's key competitor on a given market is not switching fuel."

He said some carriers might have non-commercial or non-operational reasons for not participating. "I know one prominent carrier who is switching fuel in Hong Kong, but does so quietly without joining the charter or the government scheme because if they do so here in Hong Kong, they would face tremendous pressure in their home country to do the same. Yet there are specific reasons why they don't want to do that at home."

Veronica Booth, Civic Exchange senior project manager, said: "In my mind, it's less important how many vessels actually switched in a two-year period compared with the public declaration of support for regulation which would be permanent."