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EU sulphur directive means hard times ahead for Viking Line

Cruise operator Viking Line is preparing for tens of millions of euros of added operating costs as stricter EU provisions on sulphur emissions come into force in 2015. Adding to the shipping company’s woes, competition has intensified while consumer purchasing power has weakened.

Viking Grace saapumassa Turun satamaan.
The MS Viking Grace cruise ferry in the Turku harbour. Taken into service in 2013, MS Viking Grace is the first large scale passenger ferry to be powered by liquefied natural gas (LNG). Image: Lehtikuva

Headquartered in the Åland Islands, Viking Line is a Finnish shipping company that operates a fleet of ferries and cruise ferries between Finland, the Åland Islands, Sweden and Estonia. Beginning in 2015, the EU sulphur limit for marine fuels will be cut to 0.1 percent in sulphur oxide emission control areas in the Baltic Sea, the North Sea and the English Channel sea areas. This is expected to bring tens of millions of euros of added expense to the cruise operator, which is already feels the squeeze on the market owing to tough competition and weaker consumer purchasing power.

The objective of the new provisions is to improve air quality, especially in coastal areas, and the state of the marine environment. Ships can meet with the new provisions by using low-sulphur fuel, installing scrubbers or shifting to the use of alternative fuels, such as liquefied natural gas (LNG).

Viking Line CEO Jan Hanses says the Baltic Sea currently plays host to too many passenger cruise ships. He says the playoffs have already begun; for example, shipping company Finnlines has transferred one of its ships that used to serve the southwest Finnish city of Naantali to Sweden.

The new sulphur directive means competition in passenger traffic will continue to intensify. Viking Line is expected to incur tens of millions of euros in expenses because of the provision.

No to sulphur scrubbers for now

A cost estimate by Finland's transport safety authority Trafi in 2013 found that the new sulphur provisions will increase the costs of maritime transport to Finland by approximately 460 million euros each year if ships only use low-sulphur fuel, and by 120 million euros a year, if scrubbers are installed in ships.

“We will have to move to the use of distillates, because we don’t believe that sulphur scrubbing technology is developed to a stage in which we would be willing to make investments. It could be that we incorporate this technology within a few years,” says Hanses.

Hanses says Viking Line is not planning personnel reductions, rather the funds necessary to get through the new year must be recovered in sales. The CEO denies rumours that the company might discontinue Viking Grace operations out of the southwest Turku harbour.

“The Turku route is the heart of maritime traffic between Sweden and Finland. We must utilize our most up-to-the-minute equipment on this route, and MS Viking Grace is specifically designed to handle this kind of traffic.”

A consumer spending slump has been apparent on the ferries for some time now.

“It is clear that people are more cautious about spending money and are consuming less than in the past,” says Hanses.

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