Jonas Vedsmand is marketing director, Swedish Maritime Authority. He said the authority looks at transport air, road and rail as well as water as one system. It has four main focus areas to ensure the efficiency of Sweden's water-based transport system: the customer; modernization; economy (domestic and international); and, environment - not only the sulfur directive but other European objectives such as reduced CO2 emissions. "We need to ensure the competitiveness of Swedish industry but balance it with environmental concerns."
Vedsmand sees both challenges and opportunities in the issues that industry faces. He said that Sweden can compete when it comes to developing new environmental technology such as alternative fuels. He added that delegates must see the world as a whole: "Think big, act small."
He described one such development: dynamic route planning. Called the Mona Lisa Project, one test sea trip between Helsinki and New York showed fuel consumption could be reduced by 10%, which could ease the challenge of the sulfur directive.
Closer to home, Vedsmand said work needs to be done to eased blockages in the Swedish transportation system. Investments in infrastructure have grown but major ports such as Stockholm and Gothenburg still face problems. Perhaps better use could be made of the cities' large adjacent lakes to ease transport bottlenecks.
In response to a question, Vedsmand said he did not know if there was any possibility of postponing the sulfur directive."From our point of view, unless someone says differently, it will come into effect in 2015."
Work on alternative fuels will continue. Vedsmand spoke of another project with the mining industry that is testing hydrogen-powered barges.
Tommi Sievers is the managing director of Kotka Hamina Terminals. He discussed the amalgamation of the ports that came into effect in May 2011(IFPTA Journal, Q1 2012, p.11). Things have progressed well and Sievers said, "Life is easier for us now."
The port of HaminaKotka is Finalnd's largest transit port; its proximity to Russia makes it ideal and it has the same rail gauge as Russia. It is also the country's largest container and export port. Covering 11,000 ha, there is room for an expansion of 5,000 ha.
With numerous Baltic ports, 60 in Finland alone, efficiency will be the key for future logistics. Sievers said he believes more consolidation is on the way. Bigger ports and full service operators are needed
The inclusion of Russia into the WTO opens new possibilities for the port, Sievers added. As well the port hopes to open a sulfur extraction facility in 2015 that will produce low-sulfur content diesel. Sievers said the investors and location are there but construction has not started. The project is still a "maybe" but he hopes for a "positive announcement" soon.
Initial plans call for a capacity of 300,000 tonnes/yr with future capacity rising to 1.2 million tonnes/yr. Byproducts will be sulfur and bitumen.
Rail over sea?
Will rail conquer the sea? If he has his way, Mats Erkén, CEO of ScandFibre Logistics, says it will. Established in 2000 as a subsidiary of Assi Doman, the company is owned equally by five major forest products producers: Smurfit Kappa, Mondi, Billerurd, Korsnäs and Holmen.
He spoke of three phases to the company's growth. Currently it is in Phase 3, lasting until 2016 and taking in 10 mills with a total capacity of two million tonnes/yr of pulp, paper and board.
In Sweden, there is a high focus on freight traffic issues. Bottlenecks are a concern before new traffic capacity comes online. Erkén said he hopes Sweden will allow longer and heavier load trains, up to 750 m long, following the rest of Europe.
ScandFibre owners see cost as the main motivating factor behind Phase 3 of its plans. Other potential advantages for ScandFibre's system are increased delivery reliability, reduced cost and distance for secondary transport, the potential to build value and, environmental issues.
The company has fixed departures from its hubs to regional areas. Daily departures go to Malmo in southern Sweden and then over the bridge to the mainland. There are two connection points in Germany: Hamburg and Dortmund. Average lead time is 5.5 days. About 33,000 wagons leave Sweden annually and there is about a 36% loaded return rate. This is key; without returns, the system would be expensive. Return goods include secondary fiber, dry foodstuffs and furniture.
Erkén said the company's owners believe rail traffic will increase and sea traffic will fall because of the sulfur directive. "Rail has proven its reliability in Sweden." Now, about 40% of the five owners' forest products exports go by rail, the same by sea. By 2015, Erkén estimated this could rise to 60% with the seabound share dropping to 25%. "We should prepare for that."
He added that the company is changing perceptions about rail culture that it was slow and less adaptive to change. Key performance indicators are cost and delivery reliability. By pooling resources, rail systems can be built with high reliability and lower costs. The sulfur directive as well as improved rail service has created an increased interest from pulp and paper producers.
Room for the little guy
Established in January 2012, North Sea Ro/Ro is a newcomer to the scene. Managing director Dan Eriksson went over some of the market trends: • Consolidation; • Changes in economic cycles: there is shorter period between the ups and downs; • Unwillingnessfrombothsidestosignlong-term contracts: Long term now is three years.
Do network builders meet the demands from the market? Eriksson said that in some corridors, there is little or no competition. What are the drivers for the carriers? Profitability, reliability and growth. On the customer side, it's reliability and value for money. Is there a conflict between the two? Eriksson said there can be.
Is there room for a small independent line across the North Sea and the Baltic? Obviously, Eriksson believes so. "We need to respond quickly to customer demands. In the future we will need to work with other, smaller companies."
North Sea Ro/Ro has two vessels on charter that sail three times weekly on a fixed schedule between Gothenburg and the UK. Eriksson sees 2015 as an opportunity, not a threat. "We see Gothenburg as a strategic location if you want to go to the UK. We have strong partners in the producers, ship owners and terminals."
Christer Schoug is CEO of the Swedish Ship Owners Association, representing about 70 ship owners that control about 600 ships, approximately 120 of which are Swedish flagged. Schoug said that shipping by water does not have the same infrastructure challenges that road and rail have. It is global with global rules but suffers from local and/or regional regulations that penalize competitiveness.
He stated that the Swedish government does not care about Swedish shipping. Speaking specifically about the sulfur directive, Schoug said it would lead to higher costs or potentially reduced availability of sea transport that could result in a modal back shift to road. The association is seeking an extension of the 2015 deadline.
Addressing possible solutions, he said no proven technology is yet available although research projects are underway. The association is collaborating with industry and government on a number of test platforms that come under the Zero Vision Tool. There are 10 different joint industrial projects. Each of the 10 has different partners depending upon their expertise. Among the things being looked at are alternative fuels and technologies such as scrubbers.
Schoug looked at specific examples such as liquid natural gas (LNG). Gas prices compared with oil can be attractive. However, there are legislative challenges when handling LNG in an urban setting. The low energy density results in high space needs. There is a need for more frequent refueling. At present, there is a lack of infrastructure. Still, it is a clean fuel. A new Viking line ferry will be LNG powered.
On scrubbers, Schoug said it is still an unproven technology. They can be heavy and affect stability. Corrosion, energy use and wash water discharge are also questions that need answering.
There are ongoing studies using methanol with a pilot installation aboard a RoPax vessel expected to start up in 2013. He added that the solution will probably be a combination of things
There are enormous challenges, Schoug said, but solutions are being sought. "We need time and money. We can fix it but we can't do it by 2015. It's depressing how decisions are made and pushed through without seeing what will happen."
In a Swedish TV debate about the issue, the industry was accused of being "asleep". Schoug said that the industry was not asleep; it just felt that authorities would see the reason in what the shippers had to say.
Modern ship design: The box is free
To kick off the second day of papers, Magnus Wikander, FKAB, gave delegates something to think about with many new possibilities for advanced ship design. FKAB is an independent marine consultancy established in 1961 that does marine design and engineering.
He noted that many other regions in the world are looking to regulate emissions downward in the future, not just the SECA. He spoke of the Energy Efficiency Design Index: the lower the number, the better. And numbers keep dropping. As he said, there are many ways to make a ship environmentally and energy friendly through modern design.
Opportunities also exist to retrofit ships to help reduce emissions and save energy: bilge and ballast water treatment; waste heat recovery; fuel conversion; and, exhaust gas cleaning. Of course, it depends on the vessel itself whether a retrofit project can be accommodated.
Wikander said a new design 8,500 DWT vessel designed for pulp and paper shipments could reduce fuel consumption by as much as 36% compared with a conventional design. Design features could include advanced aerodynamics, reduced ballast water needs and engine load optimization. "A new generation of vessels is on the way. It can be done." Some day in the future, he added, we will see ballast water-free vessels.
Other design improvements include propulsion systems that feature larger propellers or twin overlapping propellers when one large is not possible. Waste heat recovery is another idea which, Wikander said, was borrowed from the pulp and paper industry. Exhaust heat recovery can be used to generate electricity for propulsion or to help reduce the need for the oil-fired boiler.
Wikander said the FKAB EVOlution design chemical and product tanker is designed to be a zero emission vessel.
He noted that discussions about alternative fuels began in 2006. "Regardless of the fuel, the more you save the better it will be." He added that there is so much going on: methanol, transport fuels from black liquor. "The technical issues can be solved. There is a lot of gas in the world and oil prices will not decrease in the long-term."
In response to a question about scrubbers, Wikander said he thinks it will be done on some existing vessels. It is easier on larger vessels because of the space needs. It does add weight to a ship, however, and, Wikander added, it is an "end of the pipe" solution. "We are looking to get away from those."
Shippers always look with dread at oil prices. Johan Bauhn, Nordea Bank, gave an update on oil markets and risk management in practice. In his view, oil prices are still too cheap and they won't go any cheaper. At about $110/bbl, he sees this level sticking around for the next two years.
Global energy consumption will continue to be dominated by fossil fuels with an increased demand for diesel. Chinese demand will continue to increase.
Moving into lower sulfur content fuels puts pressure on refineries and leads to increased prices. Bauhn says various regulatory directives will lead to a mix of fuels being used including distillates and LNG.
Diesel prices will remain high in the medium-term and the premium compared with crude oil will remain high. Middle distillate (gas oil, diesel, heating oil) demand will increase global oil demand. Fuel oil demand could flatten in the medium-term and then fall post-2020. Regulatory changes for shipping fuels from 2015-2020 will create higher prices.
Why is price risk management a good idea? Hedging increases the predictability and stability of cash flow. It also increases the probability of profitability in every market environment. Risk management allows companies to concentrate on their core business. Hedging will never be a guarantee for cost savings but it will mean there is more time available to adapt to changing market conditions. It leads to reduced volatility in earnings.
Managing price risk will be very important over the next 10 years especially with the regulations that are being passed.
A tsunami of information
Wrapping up Baltic Shipping Days, Christopher Pålsson, CEO of Maritime Insight, provided a market analysis and the forecast for shipping in Europe. He noted that there is a "tsunami" of information available.
There are some definite, though. There is an accelerated move to the east. Globalization has just begun. For the time being, fossil fuels will continue to dominate. With the increased competitiveness of container shipping, it will cannibalize other modes.
The European economic recovery will drag on. Greece will not be back to pre-recession GDP levels until 2029; Spain and Italy in 2020. As a whole, Europe will only be back on track around 2015.
Average GDP growth until 2030 will be about 3.3%/yr. China, India, Brazil as well as some other developing countries will see their share of global GDP grow from its current 13% to 23% in that time. Pålsson said that in terms of GDP per capita, China is now where South Korea was in 1990. Following GDP, raw material imports to China, India and what Pålsson termed the rest of the world are about 20% of the world total. This should go to about 33% 20 years down the line, following GDP.
This article appeared in the Winter 2012 issue of the IFPTA Journal, published by RISI.Click hereto learn more about the IFPTA Journal, the professional journal of the International Forest Products Transport Association.