Incoming regulation to cut greenhouse gas emissions in shipping will not only raise operating costs of European shortsea ro-ro vessels, but also change supply chain logistics and push cargo back on to roads, a DVB Group study concludes. The German bank's research and strategic planning unit forecast gloomy prospects for the global fleet of 1,973 ro-ro vessels, set to be the most affected sector in shipping by the new emission rules.

Already battered by a 35%-40% cut in revenues, ro-ro owners and operators face regulations that mandate the use of more expensive, lighter fuel oils in European waters, as well as international energy efficiency rules to cut greenhouse gas emissions. These regulations will drive the industry to use larger ro-ro ships, cut volumes and create new trading lanes, and see owners and operators shift to LNG to power ro-ro vessels, the report says.

Under the new regulations, sulphur fuel content used by ships in the Baltic Sea, North Sea and English Channel regions falls to 0.1% from January 1, 2015. In international waters, sulphur content falls to 0.5% from 2020. Fuel costs comprise about 36% of ro-ro operating costs based on a Finnish government study conducted last year. The same study also found that fuel costs for ro-ros operating in the Baltic Sea region would rise by 54%, and total operating costs by 25% using more expensive fuels.

One ship operating on a route from Travemunde, Germany, to Trelleborg, Sweden, faced additional costs of €35,000-€40,000 per week at today's fuel prices, DVB said. On top of this, shortsea ro-ro vessels would also have to travel at much slower speeds than original engine designs in order to meet efficiency levels spelled out in the IMO's proposed Energy Efficiency Design Index. The index - which measures ships' greenhouse gas emissions based on a formula considering fuel consumption, distance and amount of cargo carried - is expected to be approved and implemented as early as 2013. This index is "most polemic" for ro-ros out of the entire global merchant fleet, said DVB Bank's report. It cited a Finnish consultancy, Deltamarin, that concluded that all ro-ros would have to operate at sub-optimal levels in the larger transportation chain if the EEDI formula was applied.

"We could well see emission limits for each vessel type with differentiation drawn between ro-ros engaged in vehicle trades, as well as separately for those on volume and weight trades, the report said. For ro-ro vessels engaged in volume trades and shortsea trades, it could require the vessel to reduce its speed to meet the index requirements and thereby make the sea route option less attractive compared with road transportation. This, of course, is counterproductive as currently road transportation has greater emissions per unit of cargo. Furthermore, the index requirements could see new ships built with lower design speed where the intended route deployment necessitates higher speeds".

The world's first LNG-powered ro-ro vessels are still under construction, with six being built for Sea-Cargo of Norway, and scheduled for delivery in late 2010 or early 2011. The 1, 150-lane metre ships were ordered at Bharati shipyard, India, for a cost of $14m each, according to Clarkson Research Services.

While the European Union's Marco Polo initiative is seeking to remove freight from roadways, the International Maritime Organization's 0.1% sulphur regulations that come into force in 2015 will push cargo back on to the roads."

Source: Lloyd's List