GIG: The coronavirus pandemic has caused international disruptions across sectors, with the shipping industry being no exception: from its effects on crew changes and the closure of international ports, across to shifting country regulations. What is your outlook for the shipping industry for the next 12 months?
Pateras: Within the next year, I believe the issue affecting crew changes will normalize as we will find ways to work with or around COVID-19. It is getting better in certain areas as everybody’s being more flexible. Unfortunately, very few of the charterers are helping, with some of them having stepped away because they don’t want to spend any money – they want the costs to all fall upon the shipowner’s shoulders. But this is quite common and is not something new.
Everybody’s working to find either a cure or a vaccine for the virus, and eventually crew issues will normalize. This will not be a systemic problem; it will resolve itself and we will unfortunately forget all about it far too soon as we always do.
As for the actual markets, I think after the pandemic it will take some time for them to improve, and it will take time for trade to pick up too. I believe there should be, and there will be, a relaxation of fiscal measures around the world in order to enable people to invest, grow, expand, and recover. I see a positive future for the shipping market and believe that bulk and container trading, specifically, will increase, as will gas.
I’m not too sure about the oil trade; it’s a little bit of a dichotomy. We are all talking about stopping the burning of hydrocarbons, and we tell the oil industry to spend billions on producing straight run Very Low Sulphur Fuel, but then say that we don’t want to use them in 10 years’ time. So why should they invest billions?
GIG: What are the biggest challenges that lie ahead for the sector, beyond the effects of coronavirus?
Pateras: For starters, overregulation is a major problem because we are an easy target. No sooner do we get one regulation in place that we don’t then a whole new one is created.
On the other hand, I believe trade wars are going to be the single biggest problem we face tomorrow. We’ve seen how tariffs can adversely affect shipping in a terrible way, and the significant impact trade wars can have on the financial stability of countries.
There is a huge shift in who trades with who as some countries get richer and others get poorer, while people seem to find ways around the trade war by diverting cargoes to alternative ports.
With the normalization of relations between both the United Arab Emirates and Bahrain with Israel a lot of barriers to trade are going to come down in the Middle East. And Africa has a huge future; I think the continent is really going to pick up.
However, there are still a lot of problems that need to be addressed spanning from Iran across to Venezuela, which cause big issues for our business. And at the end of the day, it’s not about business as much as it is about the people who need access to the vital goods that our industry transports.
GIG: The global shipping industry finds itself at the epicentre of environmental and sustainability driven reform, with new and incoming regulations having created a great deal of uncertainty about the roadmap for the future. How is the Greek shipping industry responding to this challenge?
Pateras: I find it rather frustrating that an industry that produces less than three percent of the world’s CO2 emissions is currently being targeted in such a difficult way. If you consider it by ton-miles or work for the energy consumed, we are pretty much the most ecological form of transportation that exists. Yes, we burn residual fuel which is the worst fuel that exists. But now we’ve eliminated the sulphur. I think it was a shame that they allowed scrubbers because it basically took the sulphur out of the air and put it into the sea or onto the land. Burning low sulphur fuel makes a lot more sense, despite the challenges this imposes on ships, which we’ve managed to overcome.
Sulphur is actually the lubricant within the fuel. When you burn fuel, you get black carbon, carbon monoxide, carbon dioxide, and nitrous oxide, in addition to other contaminants, like black carbon. To eliminate this, we tweak our engines so that what comes out is obviously nice and clean. However, we don’t like carbon monoxide because it kills people, so we tweak our engines a little bit more, add oxygen into the combustion, creating carbon dioxide instead of carbon monoxide. But when you do that, the only supply of oxygen we have is air, which is full of nitrogen. So, we make nitrous oxides knowingly because we’re trying to get rid of the monoxide and the black carbon. In effect, we produce CO2 which isn’t poisonous, but does cause other environmental issues.
As a result, we’ve got to reinvent the wheel to stop burning carbon-based fuels. But we’ve reduced our emissions with better hull designs, more efficient engines, and better maintenance. This has been streamlined; the industry has considerably reduced its work versus fuel consumption, meaning we’re transporting more cargoes and we’re burning less fuel. We’re getting there, but it’s not going to become carbon zero, so we’ve invented carbon neutral. But to get to carbon zero, we just have to stop burning carbon-based fuels altogether and focus on alternatives like hydrogen, ammonia, or cold ironing, which is where you put the ship on shore power. But shore power will only be a cleaner alternative if the source of that power is a renewable energy source.
We need to think outside the box, and we need to develop alternatives such as superconductivity at room temperature to improve battery life and the production of hydrogen from seawater using solar energy. A priority is to make more ships electrically driven.
The study that we’re currently undertaking for the renewal of Greece’s ferry boat fleet foresees many of the short sea passages being electrified. However, this entails a reduction in speed because we don’t yet have the technology for high speeds, even for short distances when it comes to electrically driven vessels.
Bearing in mind that a ship’s consumption is a cube of the speed, you really burn a lot of energy just to increase the speed marginally, and we’re going to have to reduce speeds and re-think the routes so that ferry boats can be electrified.
LNG is not a solution for me, and perhaps it’s even past its transient abilities because it produces CO2. And LNG is methane based, so slippage is a major concern because methane is 24 times to 78 times worse than CO2. The European Union no longer funds LNG projects, and our project for the renewal of Greece’s ferry boat fleet does not include LNG.
GIG: There appears to be a bit of a dichotomy because while the shipping industry is one of the most sustainable conduits for the transportation of goods, environmental groups claim that the sheer volume of ships that exists worldwide make it an important contributor in terms of CO2 emissions. How do you strike a balance between sustainability and competitiveness?
Pateras: Supply and demand are a very delicate balance in shipping. One year we have more ships than we need and the next year we don’t have enough, which is why the market fluctuates. But as an entire market that produces less than three percent of the world’s air pollution, while undertaking 90% of global transportation, I think we should step back and take a pat on the back. Not only are we one of the most environmentally friendly industries, we are one of the safest industries when it comes to human lives. And from an environmental perspective, we have achieved far more than what’s expected from other sectors.
In the airline industry, you don’t see planes not taking off because they are routed where there’s a migration of birds. Yet the shipping industry slows down in the Atlantic when whales are migrating. Now, we’re working with the WWF to protect the Hellenic Trench whale – a sperm whale within Greek waters – and ships will be advised, on a voluntary basis, to either slow down or divert. That demonstrates how environmentally-friendly our industry – collectively, not just in Greece – is, and we are exceptionally cautious of the marine environment; from where we drop our anchors across to areas we need to avoid. We are very serious about the advice we provide; it’s not just about pollution, it’s about safeguarding the marine ecosystem.
GIG: The Greek government is currently undertaking a significant reform push and the Minister of Shipping has said this is the year of change for the Greek shipping industry. What is your assessment of the work that’s been done so far?
Pateras: And what a shame it didn’t happen 20 years ago.
Minister Plakiotakis understands the requirements of Greek shipping and is prepared to take the political risk of making changes. I believe that the results are going to be very positive for the Greek state, Greek shipping, and the Greek people, because it’s going to create many jobs and strengthen our fleet.
It’s going to strengthen our Greek flag fleet and it’s going to further improve the quality of our tonnage. There’s a bit more to be done down the road, which is in the process of being enacted at the moment. But the minister has grabbed the bull by the horns and is really doing it, which is phenomenally impressive.
GIG: What additional reforms do you prioritize to enable the wider maritime cluster to take on a more important role in Greece’s economic recovery?
Pateras: There are some crewing issues that need to be resolved with respect to the blue water fleet and the ferry boat fleet. We have too many crew on our ferry boat fleet on the actual ship operation, and this needs to be revised, as do crew requirements for different seasons: in the summer versus the winter. We need new legislation for the development of a tugboat fleet, and, of course, for our yachting fleet. We need to find a solution because it is unfair on Greek flagged yachts to have to compete with non-EU yachts that come here, take advantage of the Greek waters, and disappear without contributing to our economy. We need to find a way to make sure that they don’t fall through the net, and this starts with the creation legislation and its enforcement.
GIG: What is your view of the recent reform that aims to increase the competitiveness of the Greek shipping registry, and incentivize Greek shipowners to raise the Greek flag aboard ocean-going vessels?
Plakiotakis: I always see it as a chicken and the egg situation, but many of my colleagues don’t. You need Greek crew to have a Greek flag; you need the Greek flag to have a Greek crew. Unfortunately, both have dwindled and we’ve reached a critical point now whereby if we wanted to expand our fleet tomorrow morning we wouldn’t have enough Greek crew to man the ships.
Minister Plakiotakis had the brilliant idea of saying “okay, bring me the ship under the Greek flag” – because a Greek flagged vessel pays exactly the same tax as a foreign flagged vessel that is managed in Greece, meaning it doesn’t affect a shipowner’s costs – “and if you can’t find Greek crewmen initially, you can put a non-Greek crew on-board, and up until the second B level of certificates, you can pay International Transport Workers Federation (ITF) wages, and above that level of certification you pay Greek wages.”
I want to bring my ships under the Greek flag for a plethora of reasons, especially pride. I like seeing the Greek flag flying on the stern of my ship, but I also need to find Greek crew. However, this will take a few years. Once the Greeks see the growing Greek flag, they will be more willing to come to the Greek Naval Academy and become highly trained officers. Our schools are very good and produce exceptional officers, but there’s simply not enough of them. We need to incentivize Greeks to enrol in these schools and get a good education because it’s a very respectable and highly paid job.
GIG: What benefits have the privatisations of the ports of Piraeus and Thessaloniki brought about for the sector? What message would you send to investors who are considering investing in Greece’s maritime infrastructure?
Pateras: Well, the Port of Piraeus has now grown to be the largest port in the Mediterranean in terms of throughput of containers. I believe we are now at nearly six million containers a year, 800,000 of which represent Greece trade while the balance are for trans-shipment. It’s given job security to our port workers and has brought on an efficiency which we had not expected. It comes down to trust, and COSCO was trusted. They came here, gave what they promised, and their port workers are happy. They have a secure job, as they do in Thessaloniki, and their investment is secure.
People who come to invest in Greece, especially in marinas, ports, and airports, should understand that it’s a secure investment because we have the know-how. Investors are getting labour and partners that know what they’re doing.
Infrastructure assets are major parts of our economy, and you’re dealing with highly knowledgeable people who have studied, are educated, and have worked in these industries.
We have the highest percentage of university graduates within Europe, and we have exceptionally hard-working people. If you look at the European average of how many hours are worked, the Greeks are the hardest working based on the hours they put in. So, you’ve got the right quantity of people and right infrastructure.
We are lacking a little bit on the management side because national industry can never compete with a privatised version of the same industry. I think that was our problem; we had too many industries that remained nationalised after the Second World War. We didn’t have a chance to catch up with the privatisations that were undertaken in the rest of Europe. But now we’re privatizing and creating better and higher paying jobs. We are going down the right path. Perhaps it’s a political risk, but our current government is prepared to take that risk. And I believe it will be the reason why we will recover sooner rather than later. I think for the investor it’s a no brainer. This is one of our best industries and this is something that we deal with very well.
GIG: Going back to the effects the pandemic, yachting and cruising are the two segments most directly and adversely affected. What measures or actions would the chamber welcome to mitigate these effects?
Pateras: We’ve been working with all the relevant ministries to manage the capacity issues associated with the ferry boat fleet. We are assisting the sector and they are now coordinating targeted measures with the Ministry of Finance to enable them to defer some expenses, because it’s been a difficult year. We’re also helping them to rebuild their fleet and access the financing to do so. The new vessels will be ecologically sounder and more economic to operate.
As for the yachting fleet, I’m surprised the sector has been impacted so negatively because yachting is the only way to naturally isolate; you’re not in a hotel with another 500 people. While this is a big advantage, it took us quite a long time to persuade the epidemiologists that this is the way to go.
However, to assist this sector, we need to improve our legislation through a homeporting strategy: the problem doesn’t reside in the growth of the Greek fleet. The real problem lies in the growth of the industry within Greece.
Legislation must be written so that if you want to homeport, you will pay what Greek flagged yachts pay to do so. It’s not fair for the Greeks to pay VAT and expenses, and for foreigner to then load up in Albania or in Turkey, come into Greece, and then get off in Albania and Turkey, without Greece seeing any financial benefit. We must bite the bullet, create legislation, and say okay, a visitor can come and homeport, but they need to pay to do so.
GIG: It’s been said that digitisation of the shipping industry and the wider cluster could transform the sector from the design of ships and custom clearance across to smart operations. And there’s even talk of autonomous shipping. How do you expect this to shape the future of the sector?
Pateras: Digitalisation is already here. Customs documentation are no longer done by hand, they are all digital, as are bills of lading. In fact, one of the leaders in the market in digital documentation and digital bills of lading, which are helping trade to run much more smoothly and prevent theft and fraud, is a Greek company.
The shipping industry went digital a long, long time ago. And I think that it’s here to stay and it’s going to improve. While it will improve our efficiency, more than anything, it prevents mistakes.
But I don’t think the industry is ready for autonomous ships for two reasons. One being that I’m not going to send my USD 70 million ship out to sea without a guy on board to save 20,000 bucks a month. Secondly, would you really trust it?
Airplanes can land and take off with the touch of a button, without any pilot intervention. When you walk into an airplane, you always walk in through the same forward portside door, and instinctively look towards the cockpit where you’ll find a pilot and a co-pilot going through a checklist instilling confidence in passengers, after which you’ll go to your seat. However, if nobody was in the cockpit, would you fly on that plane? I don’t think you would. So, in that same way, I don’t think autonomous shipping is going to materialise.
GIG: And as Greece looks to bouncing back from the effects of the coronavirus pandemic, what are your key priorities moving forward at the Shipping Chamber?
Pateras: The Hellenic Chamber of Shipping is working on several projects at the moment. Fifteen per cent of the Greek population lives on our islands. Greece’s connectivity is based on its infrastructure and that is fundamentally sea lanes, not roads. Our main priority in maintaining and upgrading our ferry boat fleet so that it is ecologically sound.
Moving forward, our second major priority is working closely with the WWF to try and preserve the ecosystem of the Aegean. We are also focused on promoting the yachting industry as best we can and finding ways to help the industry as a whole.
Yes, my priority is the Greek flag, but my responsibilities are not only to the Greek flag, but to the Greek economy. While I need to make sure our yachting industry expands, I also need to make sure that the yacht owners that are not Greek flagged pay their fair dues. And, of course, to support any other projects within Greece that are of a maritime nature.
Another interesting project that we’re working on now is in assisting the Sea Scouts. They are the young people who we want to attract to the shipping sector because they represent the mariners of the future. So, we’re undertaking a big project now to assist the Sea Scouts around Greece. And of course, continuing our permanent work to upgrade and modernise our maritime academies in order to produce professional and well-educated officers for tomorrow’s needs.