Rough Waters for Spanish Ferries Amid Heavy Regulation and Looming Emission Restrictions
The specialist began the Interview by highlighting that many of the lines in question are subsidised by the government because they operate along routes towards the Spanish enclaves of Melilla and Ceuta, located on the northern shores of Morocco. However, in return for the subsidies, ferry operators must comply with requirements which “are not very logical in many senses”.
Following its acquisition of Trasmediterránea, Naviera Armas, which operates several ferry services, could be well placed to lobby for changes in the way the market as a whole functions, he said. If this were to happen, free market dynamics would be among the key changes requested. “It’s a very political topic… the Spanish authorities will only make as much change as the Moroccan authorities will allow them.”
Looking more closely at the Naviera-Trasmed merger, our specialist said “major savings” could be achieved on factors that depend on economies of scale, such as bunkering. However, this is not a typical merger because the two companies are so different culturally and in their management set up. To capitalise on synergies, a much deeper integration is required.
Meanwhile, the International Maritime Organization has been tightening regulations to reduce sulphur oxide emissions from ships since 2005, with a major restriction effective 1 January 2020.1http://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx This is a significant change not just for the ferry industry but the general shipping industry – and with the restriction just around the corner, many operators “are just not ready”.
If sanctions are imposed on those who fail to comply, up to 60% of the fleet will be stopped, our expert warned. “If the authorities are really going to be tough on this one, which I think they should from a pure environmental point of view… then we will see some major collapses in the industry.”
The Interview also went into detail about seasonal fluctuations, overcapacity issues and other dynamics affecting the Strait of Gibraltar, the Canary Islands and the Balearic Islands.
To access all the human insights from Third Bridge’s Naviera Armas – Spanish Ferries Interview, click below to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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