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Über dieses Buch

This book examines the current and controversial topic of the sulphur cap in maritime supply chains, a new regulation set to be enforced in 2020. The author presents extensive research on three northern countries - Finland, Sweden and Estonia - and the effects they felt when these regulations were rolled out in 2015. These regional case studies are presented alongside extensive private sector data, annual reports and interviews to assess and forecast how the maritime supply chain will cope with rising costs and alternative approaches to environmental regulations. This book includes advanced regression analyses alongside interactive simulation models for the reader to evaluate new supply chain strategies and study the effects of these regulations.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Transportation logistics and supply chains in general are facing increasing environmental demands. It could be argued that the sector is coming late to the demands for reductions in greenhouse gases (GHGs) and environmental emissions. For a long time it was enough for global policies that trade and economies grew. This is no longer the case. The transportation sector is responsible for a significant amount of emissions, and in Europe, they are still on track for long-term growth. Most troubling among these modes of transportation is truck transportation. The main challenge in maritime supply chains is not the amount of CO2 emissions, but that of sulphur and nitrogen emissions, and the concentration of these emissions to a limited amount of major sea ports.

Olli-Pekka Hilmola

Chapter 2. General Economic and Trade Environment

It is necessary to review the operating and economic environment of Northern Europe in order to understand the implementation environment of the very low sulphur level. The economies of Estonia, Finland and Sweden are in general wealthy, and the two of them have shown clear medium-term growth in GDP. During the examination period, all three countries became net importers, even if the earlier situation was rather different, with constant trade surpluses (in Finland and Sweden). In overall trade, only Finland is showing some long-term weakness, whilst Sweden and Estonia are still experiencing steady growth. When tight restrictions on sulphur levels were implemented in 2015, oil prices were significantly declining, and this helped the region to avoid big cost increases. However, in 2017, oil prices started to show an upwards movement. It is clear that lower sulphur maritime diesel oil has a far higher price tag, and in 2017, its price increased at a higher rate than conventional maritime diesel oil.

Olli-Pekka Hilmola

Chapter 3. Was Sulphur Regulation the Reason for Growth of Unitized Cargo Between Finland and Estonia?

Within the European map, Finland is a little like an island; the country is in peninsula position within the northern Baltic Sea. Therefore, foreign transportation flows are tied to the sea. In the Baltic Sea region, Finland’s most important foreign destinations of unitized cargo (containers, semi-trailers and trucks) are the sea ports of Germany, Sweden and Estonia. Previously, Germany and Sweden were clearly dominating in terms of cargo flows. However, Estonia has continuously grown (and continues to do so) and in 2015 it reached the same levels of volumes with Sweden. There are number of reasons and long-term drivers that make the Estonian route attractive, but its ability to match Swedish volumes in 2015 was mostly enabled by changes in environmental legislation. During 2010 and 2015, the Baltic Sea region faced sulphur regulation changes with companies required to use shipping fuel with a much lower sulphur content. In regression models, both of these years are significant in explaining freight volume change (growth in Estonia and decline in Sweden), however, 2015 in particular was clearly a game changer (with decline even in the German route).

Olli-Pekka Hilmola

Chapter 4. Unitized Cargo: Growing Truck-Based Volumes at the Sea Ports of Estonia, Sweden and Finland

Using trucks in hinterland transportation has a long tradition in Europe. Typically, in a cross-border context, trucks accompanied by a semi-trailer unit are the most commonly used. All northern Baltic Sea countries, such as Finland, Sweden and the three Baltic States rely on these as part of large-scale in European supply chains (after sea port handling volumes): (in tons) or international railway volumes hardly grew. However, trucks accompanied by semi-trailer units have continued to grow. This is mostly seen in the number of truck handling volumes at the sea ports of Estonia, Sweden and Finland. Growth has been strong for the truck and trailer combination—this means that shorter sea journeys have been favoured. In the long-term, trucking units show even better growth than containers, which have experienced some growing pains.

Olli-Pekka Hilmola

Chapter 5. Maritime Supply Chains: How They Experienced the Regulation Change

The change in regulation in the Baltic Sea concerning sulphur emissions from shipping was a demanding change. Finnish and Estonian companies took a ‘wait and see’ strategy approach, where only one major shipping company invested in scrubbers on a large-scale. Many shipping companies have made initial investments in Liquefied Natural Gas (LNG) ships, which are serving, or are going to serve in the near future, RoPax, container and bulk customers. Despite these investments, in the previous decade, shipping company asset amounts have been declining, and revenue growth has been minimal. Yet some actors have shown abnormally high profits, even in this very demanding environment. Hinterland transportation logistics actors did not benefit from sulphur regulation, and an analysis shows that their profit margins are thin and their business risks are high. Some terminals receiving and distributing LNG ships were built during the build up to the environmental emission reduction, but this was for a number of reasons. It remains to be seen whether the transition to LNG is economically sustainable, because its prices fluctuate, and show the same uncertainty as can be seen with oil. The private sector expects a lot from LNG, and this together with seeking new cargo routes were seen as the most important strategies tackling change.

Olli-Pekka Hilmola

Chapter 6. Longitudinal Survey Findings from Northern Europe

Numerous logistics flow direction and warehousing surveys have been completed in Finland and Sweden during the period of 2010–2015. Surveys have been conducted with the largest companies in these countries (excluding banking, finance and the service sector). In 2015, Estonia’s largest companies were also included in these surveys. Based on these surveys, it could be concluded that the most typical transportation unit in companies is semi-trailer/trailer, followed by container, and other units. Companies did not see much change in the mode of transportation used: the surveys indicate that road transport will dominate in the future, followed by sea transport. Most of the companies indicated that tightening environmental legislation will increase their transportation costs and the survey of 2015 clearly showed that Finnish companies were most hurt by the implementation of strict sulphur regulation.

Olli-Pekka Hilmola

Chapter 7. Simulation of Different Supply Chain Strategies

Different future scenarios can be evaluated using computer simulation. This chapter illustrates that changes in the northern Baltic Sea region due to sulphur regulation were driven by speed and other cost items rather than purely freight cost. If the cargo has some value, price erosion and cost of inventory holding represent significant financial burdens in supply chains. These short lead time smart solutions do not experience significant problems if CO2 emissions are put under some payment scheme (since distances are not excessive, even if trucks are used). However, for the global 2020 change and within continental supply chains, speed is not alone the answer. Air freight supply chains emit so much CO2 that payment schemes would have a significant impact upon these chains. An alternative would be to use more hinterland transport (railway) between Asia and Europe and this seems to be a lucrative suggestion—it emits low levels and is also relatively fast since it also reduces total costs. Container shipping supply chains are in a difficult position since their lead time is already high and causes harm to cargo owners. This chapter also incorporates a simulation model to assess sulphur regulation cost effects, in which different factors can be taken into account to analyse what the impacts might be on freight prices.

Olli-Pekka Hilmola

Chapter 8. Conclusions

As the world turns further away from traditional fossil fuels, the business sector is taking significant steps into the great unknown. The forthcoming regulation change in sulphur levels in 2020 represents one of these challenges. Adaptation in Northern Europe to similar regulations in 2015 was rather mixed among shipping businesses and maritime-based supply chains. As an immediate response, shipping companies either started to use low-sulphur diesel oil or invested in scrubbers. However, as a long-term response, LNG is seen as promising new fuel, and new ships are already in use or being ordered by companies. For supply chains, this change in 2015 meant that traditional routes were reconsidered and so was the extent to which different transportation modes were used in these chains. It seems that road transportation was the winner in unitized transport and on the whole shorter shipping routes have become more favoured.

Olli-Pekka Hilmola

Backmatter

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