34 January 2015’s


Issue4 2013


///RO RO North Sea: tough market set to get even tougher new sulphur


emissions could have a major impact on North Sea ro ro services, warns the senior vice-president for DFDS’s North Sea activities, Kell Robdrup. The new IMO rules that drastically limit the amount of sulphur emissions from ships in the North Sea “will for sure have a great effect,” he told FBJ. “I think we will see older ships being


scrapped and some routes will start to struggle, and it will cause operators to take tonnage out of the area and put it into others like the Mediterranean, where the new limits don’t come into force until 2020.” The new rules could be the


signal for operators, already struggling with over-capacity and low rates, to reduce services, he


believes. The withdrawal of the rival TransEuropa service and the SOL route from Helsingborg to Travemunde could be the start of a trend. DFDS has been testing scrubber


technology on one of its ‘Flower’ class freight ro ro ships and is satisfied that the system is effective, at


least for the more modern tonnage. There is a weight


Cloud of sulphur hangs over the Channel


It’s not so much the fact of the new emissions regulations that is so troubling the ferry industry – it is not knowing what, if anything, the UK Government plans to do about it, says P&O Ferries’ sales director, business


to business, Ronny


Daelman. “Some governments, like Finland’s, gave said that they will part-subsidise measures like exhaust scrubbers on all Finnish- flagged ships – but the UK has been very, very quiet,” he told FBJ. Ferry operators will need to


take decisions very soon on what to do with its ships – book dry docks for modifications, consider re-engining or even conversion to gas fuel, or to scrap older tonnage.


But none of those can be taken until


the Government reveals


what help, if any, it is prepared to extend to the industry. “Personally, I’m disappointed that there is no firm indication from the UK Government where it wants to take this,” Daelman laments. Meanwhile, various studies


have shown the likely effect of an increase in fuel prices, with migration from shorter to longer routes ranging from zero to as much as 30%. Technically, various options are


being considered, says Daelman. Conversion to LNG can probably be ruled out for the existing fleet, though it might be possible for new-buildings if


the question


of bunkering can be addressed. Some


ships, particularly the


newer ones, might be suitable for retrofitting of exhaust scrubbers, but for the older tonnage there is probably little alternative other than transfer away from the low emission area or scrapping. Meanwhile, the freight market


Ronny Daelman


is unspectacular but not a disaster. P&O Ferries’ new joint service to Bilbao with Transfennica is doing quite well, despite the weakness in


the Spanish economy. For a brief period on the Dover-


Calais route, demand and capacity returned to balance following the withdrawal of the SeaFrance service, but then Eurotunnel stepped in with its MyFerryLink operation using some of the same ships. Uncertainty over the future shape of the market will remain until the competition authorities pronounce on whether Eurotunnel can operate ferries, now expected in June. The ending of the Transeuropa


service will not have a great effect on the market, Daelman considers, as latterly it was only carrying 70- 80,000 trucks a year, a pinprick compared with the million-plus of the main Dover-Calais routes. The brightest spot is perhaps the


Tilbury-Zeebrugge freight route, which has been recording some record weekly carryings lately. The North Sea routes out of Hull to the Continent are also having a reasonable time of it, though the 6-7% growth rates of the middle of the last decade now seem a very long time ago indeed. “These days, even growth of 1 1/2-2% would be welcome,” comments Daelman.


Strong start for the Channel upstart


MyFerryLink recorded revenues of €11.2 million in the Eurotunnel Group’s figures for the first quarter of 2013. Group chairman and CEO Jacques Gounon said that


the


operation had come “from a standing start in 2012” and had had to wait until road hauliers were free from their contracts with competitors before the new line could attract traffic to its three recently acquired ferries. Nevertheless, the figures showed “the increasing performance


of MyFerryLink,” which had “magnificently overcome all the handicaps which have been imposed on it as a result of its late start up in August,” he added. The fact that traffic volumes


had increased every day was “an indication that customers are looking for an alternative maritime operator and real choice in cross- Channel ferry services.” The number of trucks carried increased to 56,795 for the first quarter. However, the preliminary report from the British Competition


Commission, “which was in complete contradiction to the verdict reached by the French Competition Authorities” (which gave the green light to the acquisition of the ships by the Eurotunnel Group in November 2012), and incompatible with the decision of the Paris Commercial Court, “could, if it is confirmed, lead to a situation which would penalise customers,” Gounon warned. The Competition Commission’s


verdict on MyFerryLink is now expected in June.


penalty of around 30-50 tonnes which, as most of it is up in the funnel, has a proportionately greater effect on carrying capacity. However, the technology will only be effective for newer, larger ships that have a reasonable life expectancy in which to show a return on investment on the investment involved. For other, older ships, the only


reasonable option is to switch from marine oil to diesel, which increases fuel costs from about €600 to €900 per tonne and would push up freight rates by around 25-35%,


Robdrup


calculates. The new emissions rules would


not be so much of an issue if the shipping industry wasn’t already struggling with a lacklustre North Sea freight market coupled with already high fuel costs. While now reasonably stable, UK/Sweden and UK/Denmark business has fallen away over the past


few


months. UK industry is struggling to export while Denmark is facing structural change that has seen much of its heavy industry moved to lower cost countries in eastern Europe. Currency movements have also made Swedish exports less affordable for the British. “We don’t see the Scandinavian


market picking up in the near future,” Robdrup says. So far, DFDS has coped with the situation by moving tonnage around – for example temporarily moving some of the larger Flower class ships off the UK routes to the Gothenburg/Ghent service - and through slower steaming, which has reduced fuel costs somewhat but not enough to totally offset the sharp rise in bunker costs. At the same time, “there is continual pressure in the market on sea freight rates. We would like to see an increase but of course our customers too are under pressure, so in general we are now operating


at revenues below our total costs.” The abrupt closure of the


North Sea Ro Ro service from Killingholm to Gothenburg did bring some small relief to DFDS, but not enough to fundamentally change the picture. DFDS has taken two of the chartered North Sea Ro Ro ships into its own fleet; one is chartered out in the Mediterranean while the other was been brought into operation on DFDS’s own Immingham- Cuxhaven (Germany) service. Meanwhile, DFDS has


expressed an interest in buying Scandlines, which operates a mixture of short and longer routes between Sweden, Denmark, Germany and Latvia from current owners, 3i Group and Allianz Capital Partners, who in turn bought the operation from the German and Danish governments. Star Capital Partners Ltd. and TPG Capital are also reported to be in the frame to buy the operation.


Brittany gains in Spain


With the return of the freighter Cotentin on a twice a week schedule from Poole to Bilbao from mid-March, Brittany Ferries is now offering a seven days a week service from the UK to Spain, points out group freight director, Jon Clarke. The new service is in addition to the existing route from Poole to Santander, and helps


avoid weekend truck


bans in France as well as that country’s planned heſty ‘ecotaxes’ on transiting lorries, he says. Originally planned to come into operation on 1 June, the Ecotax has now been postponed until 1 October, and will be an unwelcome addition to the panoply of charges and taxes levied on the road freight industry. It can be far better economics to put the truck on a ferry and avoid France altogether, Clarke says. Moreover, he adds, the French weekend bans are oſten being extended at busy holiday times to the following Monday. The new Poole/Bilbao route


departs mid-mornings on Tuesday calls in Bilbao mid- aſternoon on Wednesday and arrives back in Poole early evening on Thursday. The Cotentin boasts en suite cabins which are allocated on a one per truck basis and the transit times are designed to be fully comply with the drivers’ 24 hour weekly rest period.


The UK/Spain market is still


primarily a driver-accompanied one, despite its length. “In fact, I expected more of a move to unaccompanied,” Clarke says. “It is perhaps the next stage of the market’s evolution.” Operators still need to be convinced that fridge trailers – which make up a very large proportion of the traffic – can be successfully operated and monitored on board ferries. “One inhibiting factor could be that a lot of the Spanish fridge fleets don’t yet have the plug-in system which is compulsory for ferry transport,” is Clarke’s verdict. As a ferry market, UK/France


is still vastly larger than UK/Spain (30,000 units last year to and from Spain versus 170,000 French ones). However, a lot of the trucks themselves do end up in or come from Spain itself, via the land border. Spain is also the fastest- growing market. All operators, whatever their


market, are currently very


exercised by the planned new ship emissions rules for northern Europe. Scrubber systems are unproven and commercial liquefied natural gas (LNG) ships are still some way away, leaving substitution of heavy marine oil with lower-sulphur diesel fuel as the only practical option, Clarke believes. But for ships spending all or most of their time in the low-emissions region, this would increase


fuel costs massively,


without even beginning to take into account the likely effect of increased demand from the maritime sector on diesel prices. It’s not inconceivable that freight rates would have to go up by around 20%, says Clarke. What the new rules are most


likely to achieve is a move away from shipping to trucks spending more time running under their own power – hardly an ecological step forward.


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