Shipping Financial Woes Threaten Hong Kong's 'Fair Winds Charter'

By MarEx 2012-03-26 15:20:40

In 2010, a group of 17 cruise and shipping lines offered to begin burning more environmentally friendly fuel when docked in Hong Kong’s waterways. Surprisingly, this came at no small expense to their shareholders.

Now, at a time when the shipping industry is suffering from billion-dollar losses, this “Fair Winds Charter” is also in trouble. The agreement is set to expire in December, and without increased support from the government, the revival of the charter is uncertain. 

Two of the most prominent involved parties, Orient Overseas International Limited and Maersk Line, both took a hefty slide in profit in 2011. The container shipping industry has been badly battered by high spikes in fuel prices and slowing trade volumes and is still struggling to recover from a $19 billion industry-wide loss in 2009, according to the Wall Street Journal.

Last month, in an attempt to support the Fair Winds Charter, Hong Kong’s government began reducing port dues for shipping companies that switched to low-sulfur fuel at berth. The targeted lines state that this grant would only compensate for about 40% of the costs involved in using the more efficient fuel.

Orient Overseas Container Line has publicly announced that it will continue its clean fuel burning practice after December, but no other companies have done so yet. Maersk officials have stated that their decision is still up in the air, as their participation in the charter cost them more than $1.7 million in 2011.

Traditionally, ships at berth in Hong Kong have burned bunker fuel which produces far more pollution when burned than fuels such as diesel. Though burning cleaner fuel may be more expensive, environmentalists say such costs are a bargain compared to the environmental toll of burning bunker fuel in proximity to Hong Kong’s heavily populated shores. According to a 2007 study by University of Delaware professor James Corbett, pollution caused by the shipping industry kills an estimated 60,000 people a year globally. On top of that, Hong Kong is the third-busiest port in the world, with about 425,000 vessels flowing into the city’s waterways in 2010 alone.

Given the impact of shipping pollution, in recent years, governments in Europe and North America have also begun requiring ships to burn cleaner fuels when entering their waters. Currently, even with the Fair Winds Charter in place, only about 10 percent of ships making port calls in Hong Kong are currently switching to cleaner fuels while at berth. Larger companies that aren’t presently participating in the Fair Winds Charter include companies such as the Mediterranean Shipping Company, “K” Line Logistics and China Shipping.