The marine industry’s move toward more environmentally friendly shipping is driving new vessel technology, but it’s also contributed to an increasingly complex regulatory framework that vessel operators must adhere to. This is not likely to change. In fact, one can easily imagine a further tightening of regulations as the industry pursues the IMO’s climate goals and reckons with the added safety requirements of the COVID-19 pandemic.
These new regulations are bringing important, necessary change to the industry, but they can be expensive to implement. They add complexity to an already highly regulated industry, and the monetary cost associated with meeting the new requirements can put added pressure on tight shipping-industry margins, made worse by overcapacity and the trade uncertainty brought on by COVID-19. This is especially true when it comes to upgrading existing vessels.
As costs and complexity rise, business models in the marine industry have begun to shift. And though the concept is not new, marine service providers are moving toward models that incorporate elements of servetization, wherein a customer buys a desired outcome rather than a discrete product or service.
The cost of complexity
The regulatory complexity isn’t just a result of the IMO’s climate goals. The marine sulfur cap created the need for alternative fuels or technical solutions, such as scrubbers. The ballast water convention resulted in the development of ballast water management (BWM) technology. The US Environmental Protection Agency rules required ships hoping to trade in US waters to use environmentally acceptable lubricants (EALs), which are now commonplace across the industry.
All of these rules, and the technology that allows operators to comply with them, come at a cost. Newbuilds are constructed with the above challenges in mind, but upgrading existing vessels is a more complicated process. The price per vessel to add a BWM system can run well into six figures, depending on vessel size. Scrubber cost is also vessel-size dependent and, like ballast water systems, can be incredibly expensive. In 2019, a fleet of 72 tankers paid more than $2 million per tanker for its scrubbers.
In addition to completing costly upgrades while adhering to strict budgets, ship managers might have questions about component compliance with different maritime rules, both local and international. Answers are not always straight forward.
From service provider to partner
Instead of a ship manager ordering a list of components from service providers a few months prior to a planned drydock—a practice that is still quite common—wise shipping companies now seek long-term maintenance partnerships. This recent shift in focus allows for better planning and a fleet-wide focus for meeting new requirements, performing upgrades and routine maintenance, and managing spare parts.
The partner approach comes with a number of benefits. Because the planning can be done fleetwide and months in advance, often at the beginning of the year, fleet managers have more flexibility to work inside their budgets and optimize their overall approach to maintenance and upgrades. And because partners carry much of the responsibility of ensuring the components are fit for service in areas where the vessels will operate, the approach can lessen the risk once borne entirely by operators.
Perhaps the greatest benefit to a service partner is the knowledge exchange, and the customer’s ability to make choices based on long-term service goals. Old business models relied on a “hit and run” sales strategy that existed previously, in which companies sold individual parts or services and waited until those parts needed to be replaced. Now, the partner shares the long-term goals of the customer.
Considering the options
Sterntubes are a good example of how partners can make a difference. EAL-based sterntubes have become the most common solution for vessels operating in US waters. But there are several equivalent solutions that also meet the regulations. For example, due to the cost of EALs, a customer might find that an air chamber sterntube solution is a better fit, as it could lower the long-term operating costs of a given vessel. Service partnerships can help customers plan out and compare conversion costs and long-term maintenance, so they make the decision that is most appropriate for them.
Furthermore, new technological solutions, like a more environmental-friendly shaft seal, can come to market without a ship manager’s knowledge. It’s up to the partner to make sure all the options are on the table. And given the challenges with COVID-19, global partners are also better equipped to ensure the necessary personnel and the necessary equipment are where they need to be when they’re needed.
A good partnership helps ensure regulatory compliance and vessel optimization. The freedom of choice and expert guidance help ship managers find solutions that fit their budgetary constraints. The result is peace of mind for ship managers, maximum uptime, and an already complex job that’s now just a bit more manageable.