Buffeted by the triple storms of protectionism, costly regulations and coronavirus, the shipping industry in Asia has been experiencing choppy waters of late. However, lawyers continue to see a steady flow of work, and they are hopeful that things will continue to improve soon.
It hasn’t been smooth sailing for Asia’s shipping industry in the recent past. For one, the U.S.-China trade war, which has impacted businesses and weighed on the global economy over the past two years, has also taken its toll on shipping: Global container shipping demand growth is said to have slowed to 0.8 percent in 2019, according to shipowner association BIMCO. Ian Teo, managing director of Singapore’s Helmsman, a shipping-focused law firm, says that apart from trade war, there are other kinds of protectionist measures that countries are starting to put in place. “All these are affecting the global commodity trade, which in turn is impacting the shipping industry, because the shipping industry is driven by commodities,” he notes.
Then there are the International Maritime Organisation’s (IMO) 2020 regulations that are proving to be a costly proposition to comply with. Under the IMO 2020, starting January 1, ships are to reduce sulphur emissions by over 80 percent by switching to lower-sulphur fuels. “The price differential between a low-sulphur bunker and a high-sulphur bunker on a per-metric-tonne basis is about $300, so it’s a huge difference,” says Teo. Add to that the disruption to trade caused by the novel coronavirus outbreak. “Certain ports are imposing 14-day quarantines on all vessels that come in from China,” he notes. “This is firstly a long period, and secondly there are a lot of costs involved.”
However, for all these industry challenges, shipping lawyers are continuing to see steady work. Take the IMO regulations for example. Tan Chong Jun, executive director of Helmsman, and managing partner of Hong Kong’s Tang & Co. (which operates in association with Helmsman), says that his firm has been approached by a number of shipowners and charterers to advise, negotiate and manage their risks and liabilities associated with the use of “very low-sulphur fuel oil,” or VLSFO. “Associated with that, we have also been seeing an increasing number of disputes involving the alleged use of unsuitable or contaminated VLSFO or unclean tanks, as owners and charterers transition from the use of high-sulphur fuel oil (HFO) to VLSFO.”
Tang adds that another area where his firm has seen work increase is cyber-risks in the form of email hacking, impersonation and spear-phishing. “Despite KYC and client due diligence efforts and warning advisories issued by financial institutions, shipping companies continue to lose millions of dollars to fraudsters in the vessel’s second-hand sale and purchase transactions or hire payments,” he notes. “We are assisting clients to trace and recover these monies, and also to manage their exposure to counterparties.” Then, with the push by international organisations, governments and private companies for the shipping industry to become environmentally friendly, there is has been the emergence of work related to the liquified natural gas (LNG) sector.
Tang and Teo say there is also much hope for the future. Even as the trade war has raged, companies have been looking at alternative opportunities in the form of intra-Asia trade routes or Brazil-China routes. Then, “towards the second half of the year, we saw a bullish market in the tanker segment. Charter rates and prices for second-hand tankers spiked,” says Tang, although Teo adds the caveat that it is still too early to tell how sustainable that is. Finally, there is promise in the push towards digitisation and automation in the shipping industry. “Governments in the region, with China and Singapore as examples, continue to invest significant resources into the area of technology in areas such as blockchain technology, cryptocurrency, and autonomous vehicles,” says Tang. “As shipping lawyers, we can continue to play a fundamental role in shaping the contracts, norms, policies and rules as the shipping industry transforms into the digitization and automation age.”
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