An Analysis of Port Service Quality and Customer Satisfaction*

A Study on Green Shipping in Major Countries: In the View of Shipyards, Shipping Companies, Ports, and Policies 1

GiTae YEOa , Vinh V. THAIb, SaeYeon ROHc

a Professor, Incheon National University, Korea, E-mail: (First Author)

b Senior Lecturer, RMIT University, Australia, E-mail: (Corresponding Author)

c Research Fellow, Nanyang Technological University, Singapore, E-mail:

A R T I C L E I N F O
Article history:
Received 00 September2000
Received in revised form 00 November2000
Accepted 00December2000
Keywords:
Port Service Quality
Customer Satisfaction
Container Port
Korea / A B S T R A C T
The purpose of this study is to define green shipping and eco-friendly vessels and identifies the regulations and current market situation regarding eco-friendly vessels in major countries such as Europe, United States, Japan, China and South Korea within the framework of shipping companies, shipyards, ports, and policies. This conceptual study defines and analyzes the current market situation of green shipping based on the previous literatures as well as the cases of each stakeholder in major countries.
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Introduction

A Study on Green Shipping in Major Countries: In the View of Shipyards, Shipping Companies, Ports, and Policies 1

Because of the world economic downturn since 2008, worldwide cargo and trade volumeshave decreased. The supply–demand imbalance in the shipping market following the decline in cargo volume has led to a decline in long-term freight rates.However, despite the long-term supply–demand imbalance, newbuilding orders have increased. In particular, large-scale ship orders have benefited from economies of scale in the wake of the shipping downturn, although special purpose ship orders have added to oversupply. In this context, the substitution of environmentally friendly, high efficiency vessels for older ships is the main cause of oversupply.

First, the environmental regulations of the International Maritime Organization (IMO)are gradually expanding. In addition, the IMO approved internal guidelines for GHG regulation at the 59th General Assembly of the Marine Environment Protection Committee (MEPC) in 2009 and revised Marine Pollution (MARPOL) Annex VI in order to reduce carbon dioxide (CO2) emissions from ships by 2030 at MEPC’s 62nd General Meeting in July 2012 (Kim, S., 2015).

Currently, eco-friendly vessels are green vessels that meet the IMO Conventions, which came into force in accordance with regulations published by the IMO. Despite the fact that commercialization is yet limited, the introduction of eco-friendly vessels is necessary in order to meet the environmental regulations of international ports and ports in developed countries as well as to handle the replacement of bunker oil, which involves high uncertainty and represents the largest portion of operating costs in the shipping industry (Yang, 2012).

Thus, the purpose of this study is to define current eco-friendly vessels against this background and analyze the need for such vessels, their limitations, and their problems.

Fragmentation has resulted in an explosive expansion in the trade of P/C due to the expansion of back-and-forth transactions in vertically fragmented cross-border production processes (Amighini, 2012).Thus, Kierzkowsk (2011) notes that vertical product differentiation, intra-industry trade and fragmentation of production leading to international outsourcing are important features of the existing global automotive sector. Empirical studies on automotive trade have concentrated on these features.[*]

Literature Review
Definitions of Green Shipping and Eco-Friendly Vessels

Green shipping refers to the use of resources and energy to transport people and goods by ship and specifically concerns the reduction in such resources and energy in order to preserve the global environment from GHGs and environmental pollutants generated by ships. From the operational point of view, green shipping must comply with the environment-related operating conditions regulated by the IMO.These conditions are described by conventions such as MARPOL 73/78, the Convention on Oil Pollution Preparedness, Response, and Co-operation regarding Hazardous and Noxious Substances (OPRC-HNS), the Anti-fouling Systems (AFS) Convention, the Ballast Water Management (BWM) Convention, and the Ship Recycling Convention.They are also discussed in the IMO’s GHG studies.The overall purpose is to manage and monitor all harmful substances (marine pollutants and air pollutants) emitted from ships (Im et al., 2005).

Previous research regarding green shipping mostly focused on finding the antecedents of green shipping or the links with performance. The major studies conducted recently are as follows.

Lun et al. (2015) suggested the concept of Greening and Performance Relativity (GPR) and used an input-output analytic approach to investigate how greening operations are related to firm performance in shipping operations. According to the survey data form the shipping industry in Hong Kong, the results show that there is a positive association between greening and firm performance in shipping operations.

Yang (2017) presented a study which utilized a conceptual framework with institutional theory as its base to empirically evaluate the impact of institutional pressures, internal green practices, and external green collaborations on green performance. Yang (2017) suggests the coercive, normative and mimetic pressures as the key institutional pressures and green shipping practices and green operations as the internal green practices, green collaboration with supplier, green collaboration with partner, and green collaboration with customer as the external green collaborations. According to the SEM, the results show that institutional pressures have positive effects on internal green practices; internal greenpractices positively influence external green collaborations; internal green practices andexternal green collaborations positively influence green performance but institutionalpressure is not positively associated with external green collaborations.

Fig. 1.Trend of China (Unit: US$ million)

Source: Authors’ drawing using China statistical yearbook 1996-2011

2.2.Key Regulations Related to Green Shipping

2.2.1.IMO Regulations

MARPOL 73/78 is an environmental convention to prevent marine water quality pollution and marine air pollution that may occur because of ships. The convention has been continuously revised since its adoption in 1978. Annex VI contains the Convention on the Prevention of Pollution by Air Pollutants, which limits the emission of sulfur oxides (SOx), nitrogen oxides (NOx), and volatile organic compounds (VOCs) (IMO, 2016).

MARPOL 73/78’s regulatory phases are as follows. Step 1: In accordance with MARPOL 73/78, new building regulations concerning NOx were applied to vessels equipped with diesel engines of 130 kW or more from July 1, 2010. Step 2: Secondary regulations, which started in 2011, aimed to cut NOx emissions by a further 15% to 20%. Step 3: Tertiary regulations, which began in 2016, are designed to cut 80% of the current emissions in the ECA region.

MBMs started at the IMO’s 59th MEPC meeting in 2009. They are an aspect of the various types of such measure proposed by numerous countries and maritime-related international organizations for implementation in 2017. Discussions about the selection of options are being undertaken within the IMO.

2.2.2.Changes in IMO Regulations

Over time, environment-related operating conditions, regulations identified by the IMO, and the accepted directions of related players have changed. The major changes from Annex I to Annex VI in MARPOL 73/78 are as follows. First, the scope of application has expanded and standards have been strengthened. In this regard, the direction of pollution reduction has been changed from marine pollution caused by oil and harmful substances generated by ships during operations and berthing to pollution that is harmful to the human body and caused by air pollutants (SOx, NOx, etc.).

Methodology
Conceptual Framework and Measures

The world's shipbuilding and shipping industry is working to develop environmentally friendly shipbuilding technologies with the cooperation of various related organizations.

In Japan, research and development (R&D) of energy saving and carbon emissions reduction for ships is very active. In April 2013, the Japanese shipbuilding industry established the Maritime Innovation Japan Corporation (MIJAC), a collaborative research platform specializing in the R&D of shipping technology.TheOshima Shipyard, Shin-Kurushima Dock, Tsuneishi Shipyard, Sano-Yosu Shipyard, Nihon Yusen, and NK are investors in MIJAC. The research mainly concerns ships’ design, drying technology, ships’ operational technology, the technology involved in reducing harmful materials such as carbon dioxide that are emitted from ships, and the technology behind the utilization of marine energy. MIJAC has the advantage of being able to understand customers' needs directly by conducting joint research with customers such as shippers, shipping companies, shipbuilders, classification societies, and marine equipment manufacturers. MIJAC can also respond quickly to changes in global market trends and circumstances. Examples of the direct results of such R&D follow.

A ship built at the Oshima Shipyard not only has the air lubrication system but also has a new bow design to minimize the resistance generated by the water. Moreover, the pin is placed in front of the propeller and a special device is installed in the propeller’s boss cap. Technology also converts the main engine’s output to propulsion. An important aspect of this example is that Japan is actively encouraging collaboration with the shipbuilding industry; hence, Japan is researching eco-friendly vessels and secure related markets.

Kawasaki Heavy Industries was the first company in the world to develop a system to reduce pollutants, such as CO2 and NOx from diesel engines in ships (Kim, S., 2015).

3.1.1.Major Shipyards in China

China is also striving to develop environmentally friendly ship-related technologies by cooperating with various related organizations. For example, on June 26, 2015 in Beijing, a research project on the “Core Technology for Round-Trip LNG Vessels,” one of the 863 plans initiated by Hudong-Zhonghua Shipbuilding, was finally agreed with support from the Ministry of Science and Technology's high-tech center and various experts. Currently, China is spurring the development of eco-friendly ship technology centered on active LNG.

3.1.2.Major Shipyards in Europe

Several European countries are working together on eco-friendly ships. Moreover, under the leadership of the Dutch Damen Group, 46 European shipbuilders, equipment manufacturers, and research institutes from 13 countries have officially launched a joint research project to develop eco-friendly shipping technologies. This project,called “LeanShips” (low energy and near to zero emissions ships), is an energy-saving and eco-friendly technological collaboration that is working toward effectiveness and reliability. The aim is to reduce ships’ fuel consumption by up to 25%; CO2 emissions by at least 25%; and SOx, NOx, andparticulate matter (PM) emissions to zero.The LeanShips project is one of the marine research initiatives of Horizon 2020, a European research and innovation framework program that is being undertaken by the European Union from 2014 to 2020. EUR 17 million in R&D funding has been made available by the European Commission, with initial meetings beginning in June 2015, followed by full-scale activities.

3.1.3.Major Shipyards in the U.S.

One of the representative examples of eco-friendly ships in the U.S. is the Navy's Ship Service Fuel Cell (SSFC) project.The project has been implemented by the Navy under the auspices of the Office of Naval Research (ONR) to reduce the fuel budget and develop eco-friendly power generation systems aimed at increasing combat power.SSFC uses a 2.5 kW molten carbonate fuel cell (MCFC) as the main power source for ships.The Maritime Administration (MARAD) has reviewed the application of the fuel cell to the 434 TEU feeder, a diesel/electric propulsion ship. The Water Transit Authority (WTA) has also considered it for use on a high-speed ferry (Kim, S. 2015).

3.2.Research Hypotheses

Unlike the situation in Korea, companies that are developing eco-friendly ships around the world are actual users of such ships. These companies include MAERSK, Nippon Yusen Kabushiki Kaisha (NYK), and Mitsui O.S.K. Lines (MOL).These large-scale shipping companies such as MAERSK (whose ships are equipped with environment-friendly paints and waste-heat recovery equipment), NYK (which has designed the Super Eco Ship 2030 concept ship), and MOL (which has launched the ISHIN Smart Ship Project) are developing eco-friendly vessels alongside consortiums that comprise governments, shipyards, and institutes, with their own R&D organizations at the center. In Europe, shipping companies are participating in the development and commercialization of marine fuel cells with projects such as Zero Emissions Ships (Zemships), Fellowship, the Validation of Renewable Methanol-Based Auxiliary Power Systems for Commercial Vessels (METHAPU), and e4ships.

H1: Resources-related PSQ positively influences customer satisfaction.

H2: Outcomes-related PSQ positively influences customer satisfaction.

H3: Process-related PSQ positively influences customer satisfaction.

H4: Management-related PSQ positively influences customer satisfaction.

H5: Image- and social responsibility-related PSQ positively influences

customer satisfaction.

3.2.1.The Maersk Group

Maersk’s environmental business strategy is as follows. In 2008, the company approved and promoted a company-wide eco-friendly policy called "co-efficiency." “Co-efficiency” encourages technological innovation in order to increase energy efficiency, reduce emissions, and lower operating costs. Through its performance indicator monitoring system, Maersk is able to optimize ships’ navigation and minimize fuel use. These achievements include the reduction of fuel consumption through reduced-speed operations, exhaust heat reuse systems, continuous hull cleaning, minimum ballast navigation, and optimized sailing plans.In order to reduce SOx emissions, Maersk is using low sulfur fuel that meets the IMO standard (0.1% m/m of fuel sulfur content). Moreover, if a vessel is in dock, the auxiliary engine is used to reduce SOx emissions.In addition to the foregoing design- and operation-related initiatives, Maersk uses Alternative Maritime Power (AMP) to provide a ship with the necessary power from the landand is pursuing the Green Port Policy. The latter uses natural gas to generate electrical energy for running onshore equipment.

Maersk is hedging against eco-friendly shipping by playing a leading role in introducing ship designs and equipment that increase operational efficiency and decrease environmentally harmful substances. In addition, Maersk has establishedshipping management plans and standards to respond to the IMO Conventions,such as the ballast water treaty and the recycling agreement, in advance. Further,the companyhas reducedthe emission of toxic substances and increased energy efficiency through low-speed operations. In response to green shipments, Maersk will be subject to benchmarking by other shipping companies and will influence the development and operation of ship-related green technologies. Because of Maersk’s shipbuilding orders and the actions of other shipping lines that are benchmarking the company, it is expected that Maersk will influence maritime transactions such as the difficulty in the chartering and trading of ships that do not meet green shipping conditions.

3.2.2.The COSCO Group

The COSCO (China) Group, a leader in the shipping industry in China, is launching an “Ultra Slow Steaming” campaign.“Ultra Slow Steaming” means that a vessel’s speed is very low and less than its normal speed. Normally a container vessel operates at approximately 20 knots. Through slow steaming, the COSCO Group can save 180,000 tons of fuel oil per year and reduce CO2 emissions that are equivalent to 540,000 tons.

The COSCO Group has partnered with Solar Sailor, an Australian Environmental Protection and Navigation Science and Technology Corporation, to install a solar sail in one bulk carrier and one oil tanker in order to promote this maritime environment-friendly ideology.The sail can automatically adjust its angle to match wind direction and sunlight. A ship can then proceed in accordance with the wind, thereby saving 20% to 40% of fuel. Moreover, the sail can provide 5% of the electricity required for shipboard facilities.

3.2.3.The NYK Line

The NYK Line, a large shipping company in Japan, is designing the NYK Super Eco Ship, which could be the ultimate model for eco-friendly vessels, with the goal of introducing the ship into service in 2030. This initiative has spurred the development of related technologies. The ship is a new concept vessel using a fuel cell as the main power source. The fuel cell supplies 40 MW of energy; further, a solar panel and sail produce 1–2 MW and 1–3 MW respectively. According to NYK, 69% of GHG emissions can be reduced compared with the same class of standard vessel if all the technology is completed as designed.

NYK has been conducting pilot tests of air lubrication systems using a module carrier (a special ship that carries heavy items such as factory plant) of the NYK-Hinode Line, Ltd. in cooperation with Mitsubishi Heavy Industries Co., Ltd.

3.3.Eco-Friendly Vessels in Major Ports

3.3.1.The U.S.

The U.S. Environmental Protection Agency (EPA) is implementing an eco-friendly port policy called “Clean Port USA.” It is also introducing the SmartWay Transport Partnership Program to streamline port logistics and reduce GHG emissions.Further,the EPAhas revised the Clean Air Act based on the Marine Vessel Emission Act of 2007 and specified the use of low-sulfur oil with a content of less than 1,000 ppm as the main engine and auxiliary engine fuel for ships entering more than 90% of U.S. ports.

Participating vessels in the policy receive a donation discount. At first, a ship's deceleration measures within a port will be extended to within 20 to 40 nautical miles. In addition, the AMP facility that supplies electricity from the land to a ship when it is at a berth is constructed to simultaneously suppress the emission of the exhaust gas that is generated when the ship is operational. Table 1 summarizes California’s policy for low-sulfur fuel regulation.

Table 1

California low-sulfur fuel regulation policy