Editorial:

Positive signs at the horizon

Most signs are positive for short sea shipping in our region. The World economy is set to accelerate and the Baltic Sea Area has the fastest growing economy in Europe. Most shipping segments will benefit from this, but there are also some mainly politically driven development forces that will have significant impact on short sea shipping in the near future.
    One is the EU enlargement, which in general is positive for maritime transport, but it is also a major challenge, especially for the passenger ferry and cruise shipping sectors. The loss of tax-free sales, lower taxes on alcohol and increased alcohol allowance for travellers, means that ferry companies and cruise lines have to adapt to a new market situation. An even larger problem for Nordic ferry operators will however be the increased competition from operators based in the new EU member countries where operating costs are so much lower in this personnel intense shipping sector. In general, the out-look for passenger services must be seen as bright. The fundamental factor in the market is people’s demand for travelling, and this demand will increase as wealth is being built up in all parts of the region.
    Supply and demand are of course the main driving forces in the ro-ro market. Political decisions will, however, have major impact on the future size of this market. Ro-ro transport is a relatively small and highly specialised shipping sector. The vessels are built to last, which in a way poses a problem for the future ro-ro market, since the going freight rates are based on a significant supply of older vessels. Today, the short sea and medium range parts of the market are characterised by a relative balance between supply and demand, but with freight rates at a too low level to boast newbuildings.
    The basic market forces need a helping hand from the society through our politicians, and their driving forces will be environmental concern and rising costs for the land-based infrastructure. And remember that being a small market place, also relatively small changes will have an effect on freight rates and the size of the order book.
    It is up to the politicians if society is to take full advantage of the potential of ro-ro shipping. So far, much has been said and little has been done when it comes to the numerous political initiatives to relieve the land-based infrastructure by moving cargo transport to the sea. If concrete measures are introduced and implemented successfully, and if the result is that current cargo flows actually change, then this will have significant impact on the ro-ro market.
    Today there are plenty EU sponsored ro-ro R&D studies carried out around Europe. If some of those actually are launched remains to be seen. It isn’t enough to have developed technical solutions to environmental and logistical problems if there isn’t a market to supply sufficient transportation demand and to promote the freight rates needed to support state of the art vessels. But if actions such as the German road tolls – although delayed for technical reasons – and the French decision to support “motorways of the sea” are concrete examples of politicians taking action for a fundamental change in the transportation market, then the future is bright for ro-ro shipping.
    The tanker market has already changed considerably in our region and there is a firm trend towards an increasing demand for modern vessels and suddenly there also seems to be an economic incentive for tanker owners to build and equip their vessels above international safety and environmental rules. This is a change based on political decisions triggered by a growing public concern for the marine environment and it is a development that will accelerate the day we’ll see another Prestige or Fu Shan Hai like disaster.
The largest player in the Russian oil market place in the Baltic Sea, the French oil giant Total, has recently taken two product tankers currently being built in Croatia for Concordia Maritime on long-term charters. Those 49,900-DWT vessels are built to the Stena in-house MAX design, featuring safety standards well above the international compulsory level. Broström, a tanker specialist which for many years have had safety and reliability as corner stones in their business idea is today a success at the stock exchange with a share price development beating all indices.
    If all factors above coincide, such as economic growth in the world and in the region, concrete political actions and increased public awareness, shipping in our region could very well be heading towards a golden era of historical proportions.

Rolf Petrén Nilsson
Editor-in-Chief