Moore Stephens LLP - Singapore Shipping Forum 2019: Current Shipping Developments & Green Shipping

By Chris Johnson, Senior Partner and Head of Shipping and International at Moore Stephens LLP, Singapore

The Singapore Shipping Forum 2019 was successfully concluded at The Westin Singapore on 11 April 2019 with an attendance of some 250 international delegates. This event, organised by Moore Stephens in conjunction with co-sponsor BNP Paribas, was conducted in conjunction with the Singapore Maritime Week 2019, an event supported by both the Singapore Shipping Association (SSA) and the Maritime and Port Authority of Singapore. 

The event was kicked off by Guest of Honour Mr. Esben Poulsson, who is President of the SSA, Chairman of the International Chamber of Shipping, Executive Chairman of Enesel, and also serves on the Board of many companies and organisations. Mr. Poulsson spoke on the future of the industry and opined that the pace of changes and technological transformation will only pick up in the years ahead. Mr. Mick Aw, Senior Partner of Moore Stephens LLP, agreed, but also highlighted other watchpoints for the industry including the Vale crisis in South America, tightening sources of financing, and geopolitical/economic developments especially the US-China trade war and the Belt-Road Initiative.

These geopolitical/economic developments include megatrends that are affecting the global economy and consumer confidence, with follow-on consequences for general consumer demand and shipping, according to Ms. Tamara Henderson, ASEAN, Australia & New Zealand Economist at Bloomberg Economics. These megatrends include an aging global population, slower global population growth, increased job insecurity arising from robotic automation, and increasingly challenging economic headwinds that growth, production and export indicators from around the globe are pointing towards. 

Despite these economic challenges, global economic growth is only one factor affecting shipping profitability, and should be balanced against other factors such as seaborne trade growth, shipping supply, and shipping sentiment, in the view of Mr. John D’Ancona, Senior Analyst and Divisional Director – Dry Cargo at Clarksons Platou Asia. Mr. D’Ancona pointed out that Clarksons expects seaborne trade growth for all commodities to remain positive in 2019. Shipping supply is also expected tighten due to declines in fleet growth and shipyard output across all sectors except LNG carriers, which bodes well for the industry. Shipping sentiment, however, is less positive, being affected by uncertainty over IMO2020 among other factors.   

Acknowledging the cost challenges presented for the industry by IMO2020 which are expected to exceed $50 billion per year, Mr. Guy Platten, Secretary-General of the International Chamber of Shipping, nevertheless, hailed it as a regulatory game changer that will enable the industry to play its part to preserve the environment. Mr. Platten expects more environmental regulations to follow, starting with IMO’s commitment to reduce greenhouse gas (GHG) emissions by at least 50% in 2050. Mr. Platten opined that the GHG reduction initiatives will stimulate massive research and development to achieve the 4th propulsion revolution, as the GHG targets are unlikely to be achieved using current carbon propulsion systems.  

To finance these huge costs from environmental regulations, the industry can consider tapping on green finance. Mr. Nicolas Parrot, Managing Director and Head of Transportation Sector, Investment Banking Asia Pacific, BNP Paribas Singapore, and Ms. Marisa Dupuis, Vice President, Shipping & Offshore Finance, Investment Banking Asia Pacific, BNP Paribas Singapore, shared insights on a broad variety of sustainability financing products for the industry including green bonds, green oans, and sustainability-linked loans (SLL). Green bonds and green loans can only be utilised for eligible capital expenditure that support the environment, such as scrubbers, ballast water treatment, LNG bunkering vessels, etc. SLL, however, can be deployed for working capital and general corporate purposes. All products require borrowers to be subject to annual independent certification on the extent of achievement against relevant sustainability frameworks. 

Mr. Alan Hatton, Managing Director of Foreguard Shipping, next took the stage to provide the shipowners’ perspectives on the shipping landscape presented by previous speakers. Mr. Hatton noted that shipowners face a dilemma because they need to act but at the same time lack clarity on the future variables e.g. clean fuel prices. Mr. Hatton considered that one way to manage this is an actively-managed capital structure that provides optionality through the transition period which is likely to see significant volatility in rates and asset values. Mr. Hatton also observed that shipowners that use low-sulphur fuel face additional challenges from operational issues, including compatibility of various fuel blends, fuel testing issues, legal and contracting issues, crew training challenges, etc.

In the face of myriad uncertainties, LNG may present the best solution, according to Mr. Thomas Hansen, Commercial Director of Eastern Pacific Shipping (EPS). Sharing his views on why EPS elected dual-fuel LNG on its 15,000-TEU newbuilds, Mr. Hansen opined that LNG is a clean, competitive, and future-proof fuel. Other than marked reductions in emissions compared to other fuel types, LNG is also supported with good infrastructure and availability, and offers competitive fuel consumption. 

The seminar ended with a panel discussion, moderated by Mr. Chris Johnson, Partner and Head of Shipping, Moore Stephens LLP Singapore, and Mr. Andrew Gallagher, Partner, Moore Stephens LLP Monaco.  Topics discussed focused on a wide variety of subjects including the shipping outlook, finance, technology, and commercial aspects of dealing with green regulations. Panellists discussed certain technologies such as 3D printing that may impact the longer-term demand for shipping.

The event ended at 1.00pm, followed by a lively post-event networking lunch session. 

chrisjohnson@moorestephens.com.sg