Improved sea traffic cost efficiency through port arrangements and strong partnerships

26 April 2016
Meriliikenteeseen kustannustehokkuutta satamajärjestelyillä ja vahvoilla kumppanuuksilla

UPM has reformed its sea traffic structures and partnerships in order to maintain a high level of cost efficiency. Improvements in logistics directly affect the competitiveness of Finnish production and the demand for Finnish products. The significant decrease in Finnish export and import volumes and the new sulphur directive that came into force at the beginning of 2015 have meant that sea traffic has been a financially challenging area over the past couple of years. Good collaboration, openness and structural changes have nevertheless enabled UPM to steer through the situation in a competitive manner.

The sulphur directive only resulted in minor additional costs for UPM in 2015. All of the 30 ships owned by UPM partners were equipped with sulphur scrubbing systems that were taken into use in the first half of 2015 according to plan. The new exhaust cleaning systems improve the quality of air and reduce the health hazards caused by sulphur emissions.

The new sulphur directive lowered the permitted sulphur content of fuel from 1% to 0.1% in the sulphur emission control areas in the Baltic Sea, the North Sea and North America. The sulphur scrubbers installed in the ships owned by UPM’s partners have been designed to remove sulphur from fuel with a sulphur content of 3.5%. This fuel is considerably less expensive than fuel with a sulphur content of 0.1%, which means that a payback period for the scrubber investments can be calculated based on fuel prices.

Liquefied natural gas (LNG) will probably be taken into use later once the distribution systems and infrastructure have been developed and the use of the fuel has become significantly less expensive. The shipping companies are responsible for any fuel savings on the routes. Attempts to save fuel are highly recommendable, as skilful navigation and developments in ship technology can reduce fuel consumption by up to 20%.

Sharing the risks of the sulphur scrubber investments

Negotiations with UPM’s new long-term sea traffic partners were held in 2013 and 2014. The risks of UPM’s previous sea traffic solutions grew to be too great with regard to the volume development. The sulphur directive also resulted in major investment needs that were hard on smaller shipping companies. In the current solution, UPM and the shipping companies share the risks of the sulphur scrubber investments. UPM now has long-term partnership contracts with four shipping companies.

In addition to introducing new partnerships, changes have also been made to the routes and ports used. UPM now uses the Finnish ports of Pietarsaari, Rauma and Kotka. In Central Europe, the Benelux countries, and Spain and Portugal, all traffic has been routed to one port. Two ports are in use in North America and the UK.

Saara Töyssy

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