Good morning, Alberto, and welcome to Commodity Conversations. Please tell me a little about yourself and your career journey so far.
I’m Spanish, and I live and work in Geneva. I’m 41 years old, married to a Spanish lady, and father of a six-year-old and a five-year-old, both born in Switzerland. They speak French better than Spanish.
I have a master’s degree in electrical engineering from the Polytechnique University of Madrid. When I finished my studies, ABB, a Swiss engineering company, offered me a job in their marine division. One of the conditions of the job was that I should be willing to travel and stay for long periods in the Republic of Korea, which, at the time, was the biggest shipbuilding country in the world. I’m from Madrid, which is as far from the sea as can be in Spain. I had never been on a ship. ABB is a dream company for anyone involved in electrical engineering, so I signed up.
On my third or fourth day of work, I boarded one of the last ships built in the historic city of Bilbao, a 330-meter LNG carrier. I was like, wow, this is big! A few weeks later, I was a commissioning and technical engineer in the Republic of Korea, and I travelled frequently back and forth over the following years.
Eventually, I decided to move from engineering to a more commercial career. The company supported me and paid for me to do an MBA at the IE Business School in Madrid. I stayed with ABB in Spain, developing the local business and working on what people now call decarbonisation, but at the time, it was commonly called energy efficiency.
My wife was offered a job in 2014 in Switzerland, and ABB transferred my contract to Switzerland, giving me global responsibility for their energy efficiency business. I began in product and solution management and moved to business development and sales, where I’ve spent most of my career. I gained exposure to merchant shipping and travelled extensively.
I then had a couple of kids and realised that travelling 80% of my time wasn’t great with a young family. I left ABB for Inmarsat, where I worked in business development and strategy in their maritime business unit.
I did the University of Geneva’s Advanced Diploma in Commodity Trading while at Inmarsat. Once I graduated, I participated as a guest lecturer on the shipping element. It’s a fantastic programme that gives you a 360-degree view of the commodities business. Most of us sit in a specific area of the value chain – shipping, in my case – and it’s interesting to see the whole value chain together. The programme is a good mix, offering both a practical and an academic approach.
Lloyd’s Register knocked on my door in 2022 and asked me to set up and lead an entity in Geneva to cover commercial maritime markets for non-ship-owning entities, predominantly charterers, financiers, and insurance companies.
How big is the shipping sector in Switzerland? Are there owners in Switzerland, or are they mainly charterers?
MSC, the biggest owner in the world, has their head office in Geneva.
Many merchant ship owners in Switzerland sold their tonnage and now operate as charterers or commercial operators. Shipping is huge in Switzerland, but it’s more related to the chartering.
Could you tell me a little bit about Lloyd’s Register?
Lloyd’s Register, commonly referred to as LR, was founded in 1760 at Edward Lloyd’s Coffee House in London, which in the second half of the 18th century was a meeting place for merchants, ship owners and insurers.
The underwriters, owners, and merchants had no standards or criteria to help them evaluate the risk of insuring a ship. They began to employ technical experts to go to the docks, inspect the vessels and rate them against specific criteria. As a next step, they started to develop shipbuilding rules. They published a book, the Lloyd’s Register of Ships, which listed and rated the ships they inspected.
Lloyd’s Register of Shipping evolved into a technical society, simply known as Lloyd’s Register and expanded into non-maritime areas. The company has undergone a transformation in recent times and continues to evolve as a trusted adviser to its partners in the maritime industry. Recent acquisitions, including that of Hanseaticsoft, OneOcean, Greensteam and ISF Watchkeeper, have marked a drive towards maritime digitalisation, with LR’s digital solutions now used onboard over 20,000 SOLAS vessels.
We act as a professional services company with predominantly two lines of work. The first is the inspection and rating business, where we do a lot of work on behalf of governments, representing several flag states and doing inspections on their behalf. Our second line of work is ‘advisory’, anything not exclusively related to the certification of a ship.
LR is 100% owned by Lloyd’s Register Foundation, a UK charity. We have a long tradition of public benefit, with charitable aims for the advancement of safety on land and at sea, along with the development of public education and other engineering and technology disciplines. LR does this by investing in research and development and funding chairs at universities through LRF grants.
So that’s what we’ve been doing for the past 261 years, trying to make the maritime trade and the sea safer for all those working there.
How often do you inspect each ship?
There are different types of inspections. There are annual surveys for the class and the flag state. The same inspector typically does both at the same time. Then, there is usually a significant survey every five years, often occurring while the ship is dry-docked for maintenance. In addition, an insurance company will typically require a class survey after an incident or accident.
When you do an inspection, do you take crew welfare into account?
Class inspectors mainly look at the ship’s physical condition, ensuring it is seaworthy and there is no risk to the cargo.
Flag state inspections apply to IMO (International Maritime Organization) regulations on crew welfare. Every ship management company needs to be audited against these rules.
One of the criticisms levied against shipping is that ships often sail under flags of convenience with poor standards. Is the criticism justified?
There was a debate some 30 years ago as some flags had looser standards than the traditional flags. Many countries agreed to inspect vessels when they came into their ports to mitigate this. Port State Control (PSC) has become an essential element of marine regulation. Inspectors have the authority to detain the ships if necessary.
All the information is public. If inspectors find that ships from a particular flag start to present problems, they might grey- or deny-list that flag. It’s the last thing that a flag wants because any ship under their flag will be inspected whenever they visit specific ports. Generally, inspectors always find something wrong, which helps maintain standards across all flags. Shipowners will choose a flag state for tax reasons rather than to get away with lower technical standards.
How many class societies are there?
There are 20 to 25 class societies in the world. Tier one class societies are members of IACS, the International Association of Classification Societies. If you want to trade internationally, your ships must be IACS registered to be insured. The class societies within IACS are aligned in their approach, and we try to keep a very high standard.
I read about Russia using tankers which are not registered. How does that work?
Tanker vessels engaged in illegal or sanctioned activities which are not registered with a recognised flag State will find it extremely difficult to operate and obtain insurance cover. If such vessels are allowed in and out of ports, it is important to note they have many fewer incentives to maintain safety standards. So, you may have an ageing subset of the world’s tanker fleet without a stringent safety performance mechanism.”
You mentioned decarbonization earlier. What is the solution?
There is no one solution; it will be a combination of solutions.
Ships carry 90 to 95 per cent of the world’s transported goods but are responsible for less than 3% of all GHG emissions. It’s an economically and environmentally efficient means of transport. However, there is room for improvement, and the IMO has set a goal to achieve net zero by 2050.
It will not be easy as alternative fuels do not yet exist in meaningful amounts. It means that the policy will concentrate on increasing fuel efficiency for the next few years. It alone will not solve the problem, but it could reduce it by 20 to 30 per cent.
The goal is to get to a point where most of the ships in the world use alternative fuels. Some of the fuels are carbon-negative; using them will remove atmospheric emissions. By 2050, most of the world’s fleet will be using alternative fuels, a combination of pure synthetic hydrogen-based fuels like green ammonia and methanol, as well as LNG and biofuels.
Will adding sails to cargo ships help?
Absolutely. By the beginning of next year, we should have 50 ships on the water equipped with sails, commonly referred to as Wind Assisted Propulsion Systems (WAPS). And there is an order book of 200 more. The technology is heading for massive adoption in the next five to ten years. You can considerably reduce the use of your main engine by using sails. We’re talking about high single-digit to low double-digit per cent savings in power.
There’s a shipping regulatory framework starting next year in Europe called Fit for 55, where regardless of the flag and the ship’s ownership, any ship entering or leaving a European port will be subject to EU legislation on shipping emissions. The penalties will be significant. Part of this regulation, in particular, FuelEU, will provide incentives for using WAPS. As a result, if you operate a five-year-old tanker regularly visiting European ports, retrofitting it with sails is more than likely economically worthwhile.
What is the life expectancy of a ship?
It depends on the ship type, and it is often more of a commercial consideration than a technical one. For ships that trade internationally, it is roughly 20 years for a bulk carrier ship and 15 years for an oil tanker. There are some 30- or 40-year-old cruise liners still operating.
We often see pictures of workers taking terrible risks breaking up old vessels. Is it controlled in any way?
Dismantling ships is considered one of the most dangerous professions in the world, both for workers and the environment. Injuries, fatalities and work-related illnesses are often because of the hazardous materials onboard the vessels in question.
Controls on ship recycling are, therefore, crucial in order to keep the sector operating safely and efficiently. Policymakers and regulators came together to address this and introduced the Hong Kong Convention for Safe and Environmentally Sound Recycling of Ships (HKC), which came into force in June 2023. As part of the convention, ships must have an Inventory of Hazardous Materials onboard, which must be prepared, verified and kept up to date, in line with the IMO’s guidelines.
Whilst ship recycling remains hazardous due to the above points, we certainly see a shift towards safer and sustainable practices for vessels that have reached the end of their lifecycles. LR is committed to working towards a better future for the environment, those involved in ship recycling and the wider shipping community as a whole.
Thank you, Alberto, for your time and input.
© Commodity Conversations ® 2024
- The flag state of a merchant vessel is the jurisdiction under whose laws the vessel is registered or licensed and is deemed the nationality of the vessel. A merchant vessel must be registered and can only be registered in one jurisdiction but may change the jurisdiction in which it is registered. Source Wikipedia