Technological developments

Ship sizes seem to be ever increasing as a result of increased competition in the shipping industry; causes are shown in Figure 2.17, combined with the permanent search for cost cutting, and the fact that technologies enable larger ships. Shippers and consumers demand more sea freight, and expect that service to be reliable, and the reaction of the shipping industry is increased capacity but with the same number of ships. This allows better control over the fleet to provide reliability of service47 _{on the one hand, but on the other hand, this also} reduces competition and therefore the number of carriers available for shippers. Ports are reacting to the trend toward larger ship sizes with investments, better access to ports, mainly from already existing mega-ports. This increased capacity is coupled with the growing capacity of terminal operators to handle the cargo within an acceptable period of time, i.e. increased terminal productivity)48. The competition is important because it generally leads to innovations in ship size, advances in information technology, the introduction of low emission ships, tracking, tracing and monitoring, use of composite materials in the shipping industry, and new engines49_{. An increase in average sizes of container ships can be observed over the last 50} years, and even more during the past ten years (see Figure 2.18).

47 _{Sys, C., Blauwens, G., Omey, E., Van de Voorde, E., and Witlox, F., In search of the link between ship size and}

operations. Transportation planning and technology-issn 0308-1060-31, p. 435-463, 2008

48 _Ibid

49 _{Sys, C., Inside the Box: Assessing the Competitive Conditions, the Concentration and the Market Structure of the}

Container Liner Shipping Industry. PhD Thesis. University of Ghent and University of Antwerp, 2010 (Note that the

Investigation covered from 2003 to 2009. This investigation extends that analysis to 2013). 6% 4% 12% 4% 3% 2% 2% 3% 4% 3% 8% 3%

Container Dry Bulk Miscellaneous Tanker

31 Figure 2.17 Trend towards larger containerships50

Source: Sys, C. (2010)

Figure 2.18 Evolution of the container ship size (Cellular Container Vessels)51

Source: Tran and Haasis (2014)

50 _Ibid

51 _{Nguyen Khoi Tran, Haasis H., An empirical study of fleet expansion and growth of ship size in container liner shipping,}

International Journal of Production Economics, Volume 159, Pages 241-253, ISSN 0925-5273, January 2015

- development of 45' high cube/palletwide containers

Terminal operators

- search for competitive advantage - rationalisation/investment

- formation of alliances - the capacity of terminals to load and discharge such vessels within an acceptable time frame

- competitive nature forces to advance towards the next size echelon

- the capabilities of terminals to deliver and despatch large

consignments of containers and the effectiveness of hinterland linkages - permanent strive for cost cutting - technical difficulties, e.g. maximum stack height limitations - to serve expanding market - the ability of container terminals to physically berth such units

Carrier

- the move to individual and confidential service contracting - development of mega-ports - port access Market trend towards larger containerships

- increase of volume of container trade - introduction of containerisation - alter trading patterns - no technical limitations to build larger ships - shift from owner ship towards long

term chartering of new tonnage - construction of adjusted port to shore infrastructure - on-going conversion of cargoes to

containerisation - increased implementation of IT-possibilities

Technology

Shipper/customer (Port) authorities

- increasing demand - ongoing deregulation - demanding greater reliability at lower total cost - environmental reasons

32 Furthermore, much research is being conducted into innovating and improving the characteristics of vessels. Researchers from different organisations have started investigating the possibilities of unmanned vessels. Because of the fact that they require fewer or even no personnel on-board, there needs to be a reliable team to remotely control unmanned vessels. This goes in line with the reskilling of seafarers and candidates to meet the highly competent and capable labour needs for this kind of work. This may be an answer to the problem of making the maritime industry more attractive and sustainable because unmanned ships can reduce speeds, from 16 to 11 knots for example, and in doing so, save up to 50% of the fuel they currently use. CO2 and other emissions will be reduced and the shipping industry can

make massive savings due to lower fuel consumption. Technology is already available to achieve this, but current legislation prohibits unmanned ships. In order to change the law, research must demonstrate whether safety in unmanned vessels is at least as good as on existing manned vessels. Reskilling of seafarers to match their competences and capabilities to the needs of the new job vacancies, should include more rewarding and new and more valuable job vacancies, developing and attracting the best human resources of the EU. (see also section 2.10 on Maritime Labour).

The competitiveness of the shipping industry is also associated with port-related technologies, as the technological development of ships cannot continue without ports being able to support more advanced ship operations. The Port Community Systems (PCS) are one of the most important port related technological developments, designed to match the growing efficiency and levels of operations of the new ships. These PCS allow seamless and reliable information sharing between the ship and all the relevant port and logistics operators.

Technological developments influence the costs (investment and operating costs) for the maritime industry and the levels of competition. Examples of technological developments include increasing ship sizes, unmanned vessels, or alternative methods of propulsion.

Despite the existence of technological developments, there is still no clear understanding of the extent of the diffusion of these innovations at the global level. For instance, while ships will continue to grow in size, optimisation of ship designs could drive technological developments towards a more differentiated design based on the specialised trade lanes that the shipping industry serves. Consider for instance, short sea shipping versus deep sea shipping, or the straits and channels used for sea transport which differ per trade lane.

Recently, the shipping industry introduced a number of technological developments, either due to:

 maritime transport needs,

 environmental, safety, security and labour regulations,  efficiency needs, and

 fuel needs.

Some of the technologies that may respond to such drivers can be introduced either through retrofitting or through new buildings, such as those shown in Table 2.6.

33 Table 2.6 Technological developments under testing by the shipping industry5253

Ballast Water Treatment System Smaller engine/de-rating (speed reduction)

Pure gas engine Low sulphur heavy fuel oil Reduction of seawater ballast capacity Air cushion

Liquefied Natural Gas SCR system Wind & solar power

System efficiency improvement (Aux)

SOx scrubber Ship Size and advanced ship design

Hull shape optimisation Lightweight constructions Unmanned vessels (airplane piloting model)

Waste heat recovery Dual fuel engine Vessels interconnectivity (Ship 3.0)

Propulsion efficiency devices Water emulsification Cargo and ship integrity monitoring systems

Distillate fuel Humid air motor/ direct water injection

New materials

EGR system Hybrid propulsion system Robotics at the sea

Low NOx tuning Counter rotating propulsion Supply chain perspective (coordination with stakeholders)

Shaft generators Self-unloading systems

Source: Own elaboration with enhancements from to DNV (2012) Shipping 2020, Futurenautics (2014) Shipping 3.0, and Skaarup Shipping Corporation (2012).

Table 2.6 list a number of technological developments taken up by the shipping and maritime industry likely to respond to a number of priorities, which are54:

1) Efficient and reduced power used on board vessels,

2) Improved hydrodynamic and performance and reduced vessel impact at the sea, 3) Safer, secure, and efficient maritime transport,

4) Improved overall vessel performance,

5) Efficient and environmentally friendly vessel powering, and 6) New concepts for innovative services.

The above technological initiatives for innovation require different amounts of investments, but also have different operational cost impacts. Depending on the level of pressure to automate or increase productivity, the desire to invest in new technologies will be higher or lower. One of the recent considerations for the maritime industry is fuel-related. The use of Heavy Fuel Oil (HFO)requires less capital investments compared to Liquefied Natural Gas (LNG). However, the operating costs of HFO + scrubber compared to LNG are higher (see Table 2.7). Additionally, although HFO + scrubbers and LNG are comparable regarding their RoI over 15 years, LNG also entails supply chain efficiencies and flexibility, as for smaller ports LNG can be supplied by trucks, rail and feeders.

Table 2.7 Fuel needs and challenges55

HFO + scrubber LNG

Cost of scrubber Extra Capex on engines and tanks

Extra investment with an RoI of 15% over 15 years Extra investment with an Rol of 15% over 15 years Additional OPEX: maintenance cost, extra

consumption, logistics products.

Lower maintenance and operational costs

Existing logistic costs Loss of commercial space

52 _{DNV, Shipping 2020, 2012}

53 _{Futurenautics, Shipping 3.0 The speculation is over, October (2014} 54 _{Sames, Vessels for the Future, European Shipping Week 2015. 2015-03-02.} 55 _{Semolinos, P., LNG as bunker fuel: Challenges to overcome, 2013}

34