November 22nd 2016
The International Maritime Organization’s new rules on ballast water management next year will change the supply dynamics of the shipping industry as ship-owners scrap some vessels to comply with the regulations, Claus Beiersdorfer, sales director at global technology provider SKF said in a recent interview.
Ships take on ballast water at sea to maintain stability and minimize stress on the hull. But when they later dispose of the water it can carry bacteria to new locations, a process linked with deadly outbreaks of cholera in humans as well as threats to the marine environment.
As of September 8 next year, the IMO will require all seagoing vessels to have ballast water management systems (BWMS) to kill bacteria in the water before its disposal, although existing vessels will have a grace period to allow them to be retrofitted with the systems at their next visit to dry dock. New builds will have to address this when keel laying after September 2017.
“The main challenge that lies ahead is to retrofit such a huge fleet,“ Beiersdorfer told S&P Global Platts Thursday.
According to Beiersdorfer, only some 2,000-4,000 BWM systems have been installed globally while the addressable fleet for retrofits is around 30,000 ships.
“The installation of BWMS on old vessels is expensive. This is a substantial expenditure for shipowners who are already operating in a financially challenging market environment.”
“Installation of BWMS also requires a lot of space,“ Beiersdorfer said, adding that space would be a significant issue for older vessels.
While the IMO’s BWM convention only received enough signatories to be activated this year, it was adopted in 2004. Beiersdorfer said vessels built in the last seven-10 years have been designed to comply with the convention, but in older vessels owners may struggle to find the space to fit BWMS.
Finding space at shipyards to retrofit the global fleet with BWMS may also pose a problem. Shipyard space is likely to come at a premium in the coming years as many shipowners are expected to fit their vessels with emissions-cleaning scrubber systems to comply with the IMO’s new 0.5% global marine fuel sulfur limit from 2020.
However, the mandatory requirement of installing BWMS will also promote demolitions as some of the older vessels will likely be scrapped.
In the tanker shipping market, for example, global maritime consultant Drewry recently estimated that “about 74 crude tankers (14 million dwt) and 114 product tankers (5.6 million dwt) will have their fourth special survey due between mid-2018 and 2021, making them potential victims of the new regulation [on BWM].“
“We do not expect all these vessels to be scrapped since many of them are on long-term charter at attractive rates, justifying the additional cost of retro-fitting BWMS. As tanker rates will remain well above operating costs during the forecast period, many owners might opt to operate their vessels after incurring this additional cost in anticipation of a recovery in rates,” Rajesh Verma, Drewry’s lead analyst for tanker shipping, said in a note Wednesday.
“However, since the tanker market will be oversupplied, older vessels will find it difficult to get employment, which in turn will force many owners to scrap their tonnage just before their next survey is due,” he said then.
Scrapping the ship earlier and building a new one will take pressure from the current overcapacity, Beiersdorfer said.
“Demand for BWMS will accelerate as ship owners will have no choice but to comply with the regulation,“ he said.
Prompted by the lucrative market opportunity created by the new regulation, quite a number of new players have ventured into the manufacture of BWMS in the last 10 years, he said.
“Then there are some existing players such as us who are well entrenched in the marine components’ market and are aiming to develop and offer BWMS in our product portfolio,” Beiersdorfer said.
While some new players have forayed into or are entering the market, some older players will also likely exit, he said.
Ballast water can be treated in many ways such as electro-chemically and mechanically through electrolysis and UV radiation.
“The IMO has certified more than 50 systems based on these technologies,” he said. However, many of them don’t comply with the US Ballast Water Management regulation yet, Beiersdorfer said.
The requirements and the standards under the IMO and the Management regulation are different for a number of parameters including discharge standard, shipboard testing, hold time and component or environmental testing.
“Only those companies that can meet both will likely continue operations. I would expect some consolidation in the market,” Beiersdorfer said.
With a presence in more than 130 countries, SKF is a global supplier of bearings, seals, mechatronics, lubrication systems, and services which include technical support, maintenance and reliability services, engineering consulting and training.