The inability of the International Maritime Organization (IMO) to identify a desirable fuel for shipping in order to transition smoothly into the “green” era is highlighted by Almi Marine Management CEO Christos Hatzigeorgiou.
The result is that the IMO follows the European Union and the US and regional regulations in the shipping industry increase.
In his interview with “N”, Mr Hatzigeorgiou points out that none of the so-called alternative fuels currently has any guarantee of widespread use in shipping and proposes a flexible design for new ships so that they are ready to adapt to developments, when the “green” landscape becomes clear.
Almi Marine Management was one of the first international shipping companies to decide to invest in newly built bulk carriers powered by conventional fuels but with advanced energy design, noticing the constant delays in fuel decisions. Other companies later followed suit. However, Hatzigeorgiou believes that the shipbuilding rally will be halted, due to the “tight” situation in the shipyards.
Of course, the conditions in the dry cargo market and the imminent favorable momentum could not be left out of our discussion.
Mr. Chatzigeorgiou’s interview on “N” in detail:
The bulk freight market ended the first half of the year with satisfactory performance. What is your assessment of the evolution of rates, based on the balance between supply and demand?
The assessment for the future of the market is positive based on current data. In general, new ship orders have been very moderate, which means that the supply side has developed well.
At the same time, demand has increased due to the practical closure of the Suez Canal crossing, resulting in an increase in the tonnages required. Therefore, if we do not see a drastic change in demand, a positive development is expected in the near future.
Almi Marine Management has recently implemented a major shipbuilding project. Is there a plan to further expand/renew the fleet and if so, will the focus be on newbuilds again or are you looking at the secondary market as well?
At the moment we are satisfied with the revenues from the newly built ships and their gradual inclusion in the fleet.
We believe that the time is approaching when we will see ships using alternative fuels and methods for their propulsion and general operation and we will then carefully consider our next steps.
We have noticed in recent years that investments in new bulk carriers are, to a certain extent, limited. How necessary is fleet renewal in the market? Do you think we will see more orders in the near future?
Investment in new bulk carriers has been limited in recent years, mainly due to uncertainty surrounding alternative fuels. There has been some inactivity in the shipbuilding sector as we await a clearer horizon on fuels and the regulatory framework.
I would say that we were one of the pioneers in ordering ships with EEDI 3 technology, which is the ship design efficiency indicator, when we discovered that significant decisions about fuel were constantly being postponed to the future. That is why we preferred to order ships that consumed 50% of the oil per unit of cargo carried rather than idly watching the non-development.
It is precisely this delay in taking substantial decisions on the fuel issue that has led to significant ship orders lately.
However, most yards are currently full until the end of 2027 and therefore I estimate that the pace of placing new orders will slow down.
Almi Marine has ordered vessels with advanced energy design, compatible with all environmental specifications and conventional fuels. Is this currently the only solution for shipowners who want to order vessels? Is building vessels with alternative fuels a gamble?
For ships to be delivered from 2028 onwards and based on the new regulations to be adopted in 2025, special care must be taken. It is appropriate to analyze what the word alternative fuels, which we have been using a lot lately, means.
What are currently considered alternative fuels are:
Ammonia – the slightest spill of which results in instant death. I do not believe it can become a fuel with wide application in maritime transport. In the first fatal accident it will be banned.
Methanol – the green methanol we are looking for exists in insignificant quantities and its production requires enormous amounts of energy. I see no prospect of producing it on a large scale including shipping.
LNG – was considered the alternative until some time ago. Its component is methane, whose leakage causes a multiple charge in relation to oil. Efforts are made to minimize leaks to acceptable levels.
Hydrogen – a possible fuel of the future. Problematic in the required storage volume, as well as in the liquefaction temperature.
At the moment, some shipyards are producing some types of ships with some of the above-mentioned fuels as alternative solutions. However, we have noticed that large companies in the sector that had loudly announced the choice of a type of fuel, such as methanol, have subsequently quietly abandoned it.
Also implicitly abandoned is the ‘XXXX ready’ fashion which, with an essentially insignificant increase, took on the title of a ship which, in order to be transformed into the alternative fuel, required huge costs.
I think the bet is to design ships that have such a flexible design that they can adapt to developments as they become clearer.
At the same time, I believe that the enormous increase in electricity production with photovoltaics and the corresponding rapid reduction in production costs could lead to a radically different approach to all issues related to energy use and the production of alternative fuels. Especially for ships, the production of hydrogen by electrolysis and then methane by absorption or recycling of CO2 could lead to widespread production, e.g. green LNG. A significant number of ships are currently powered by LNG, for which there is also a distribution network, which is particularly important for the sustainability of this alternative fuel.
I also think that it is also possible to switch to hybrid electric propulsion on ships, as is the case with cars, with the difference that depending on the development of technology and the availability of alternative fuels, the method of generating electricity, which will naturally be produced on board, will change. Therefore, the ability of ships to transform the method of generating electricity will also ensure their longevity. Here, too, there is the issue of designing ships in such a way that they are easily transformable. The establishment of such a framework could already have been done by both the IMO and the IACS.
The IMO and the EU are implementing measures to reduce emissions from ships. What changes do you think will occur in the bulk market as a result of this strict regulatory framework? Will two-speed markets be created?
The regulatory framework will undoubtedly affect the viability and cost of owning and operating ships. Unfortunately, the IMO member states have not done their basic job of finding/identifying the desired fuel and producing and making it available in sufficient quantities worldwide.
Unfortunately, the IMO also lacks the capacity to impose measures on member states, e.g. on the production and disposal of fuels, and the Agency’s regulatory system is the result of political compromises between groups with quite different goals. Instead, the main policy pursued is to impose taxes on polluting emissions. Valuable time has been lost in substantial R&D on alternative fuels and ship design.
Let’s not forget that, for example, oil tankers began to have double hulls after the US initiative following the Exxon Valdez accident. This is where the planet is burning and the IMO is theorizing. Over 20 billion dollars have been spent in the last 20 years to install scrubbers on ships so that refineries can “sludge” shipping, i.e. remove sulfur from the atmosphere and dump it into the sea, respectively, exorbitant sums have been spent on the Ballast Treatment System, also a system of dubious substantial value to the planet.
So we see the IMO closely following the EU and the US. The result of this is the situation we are in today where virtually no one knows what to do, resulting in delay and geometrically increased costs when something is decided.
For this reason, I am of the opinion that we should act more quickly and design and build ships in such a way that they will not become useless in the medium or even long term. Because I am very afraid that shocking events related to climate change will dramatically accelerate any decisions in the future and it is good and beneficial to be proactive and not reactive.