Review of Maritime Trade Self Effort

8/2/2019 Review of Maritime Trade Self Effort

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1. IntroductionFirst, we may begin to wonder what maritime trade is. Simply, maritime trade isthe buy and selling which is done by shipping goods from one port to anotherusually across states. Often transported by ships are crude oil, iron ore, grain and

containers.

We live in a global society which is supported by a global economy and thateconomy simply could not function if it were not for ships and the shippingindustry. Shipping is truly the lynchpin of the global economy: without shipping,intercontinental trade, the bulk transport of raw materials and the import/exportof affordable food and manufactured goods would simply not be possible.Shipping is perhaps the most international of all the world's great industries andone of the most dangerous. It has always been recognized that the best way of

improving safety at sea is by developing international regulations that arefollowed by all shipping nations. 1 Regulating the maritime industry to promotesafety and security and prevention of pollution from ships worldwide has beenthe function of the International Maritime Organization since its inception in1959. 2 The work of IMO is well documented through its numerous conventionsand codes and on the Organization's website.Of all the sectors that make up the global transport infrastructure, shippingprobably has the lowest public profile and the least representative public image.Its importance is not well known although not a single area of our life remains

unaffected by it. The IMO Council at its 93rd session in November 2004 endorsedthe proposal that the theme for World Maritime Day 2005 would be"International Shipping - Carrier of World Trade ". The theme was chosen toprovide an ideal opportunity to draw attention to the vital role that shipping playsin underpinning the international economy and its significant contribution tointernational trade and the world economy as the most efficient, safe andenvironmentally friendly method of transporting goods around the globe.2. Globalization and International TradeShipping has been an important human activity throughout history, particularly

where prosperity depended primarily on international and interregional trade. Infact, transportation has been called one of the four cornerstones of globalization,along with communications, international standardization, and tradeliberalization.

1 2


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It may seem obvious to say that, today, we live in a global world, and it is certainlytrue that international trade among all the nations and regions of the world arenothing new. From the Phoenicians, through the Egyptians, the Greeks and theCarthaginians, the Chinese, the Vikings, the Omanis, the Spaniards, the

Portuguese, the Italians, the British, the French, the Dutch, the Polynesians andCelts, the history of the world is a history of exploration, conquest and trade bysea.But there is no doubt that we have now entered a new era of globalinterdependence from which there can be no turning back. In todays world,national boundaries offer little impediment to multi-national corporations: carswith far-eastern brands are not only sold but also assembled in Europe, whileEuropean brands are assembled and sold in North America; western energycompanies invest millions of dollars in Asia and the Far-East and the strategy and

investment decisions they make can affect millions of people all over the world.The high-flyers of the business world can cross oceans in just hours,communicating by e-mail and mobile phones as they go. In the financial markets,brokers and traders have thrown off the constraints of time zones and distanceand now access the world markets via computer. In the 21st century, industriessuch as computer software, media and fashion have no obvious geographicaldimension and recognize no physical boundaries. In todays consumer world, thesame brands are recognized, understood and valued all over the world.Looking back into history, we can trace the stages through which we have

progressed to arrive at this new world order. There was a time when, for anygiven community, the most important raw materials, the most importantproducts and the most important markets were essentially local. But, asinteraction between communities grew, trade developed and regional specialties,often founded on the availability of particular raw materials or on saleable skill-sets that had been developed over time, began to emerge.As the world became more developed, proximity to raw materials and to marketsbecame the factors that, above all others, shaped the worlds economy and, inparticular, the major trade patterns and shipping routes. Eventually, the great

seaborne trades became established: coal from Australia, Southern Africa andNorth America to Europe and the Far East; grain from North and South America toAsia, Africa and the Far East; iron ore from South America and Australia to Europeand the Far East; oil from the Middle East, West Africa, South America and theCaribbean to Europe, North America and Asia; and now we must add to this listcontainerized goods from the Peoples Republic of China, Japan and South -east


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Asia to the consumer markets of the western world. Global trade has permittedan enormous variety of resources to be widely accessible and thus facilitated thewidespread distribution of our planets common wealth.


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Today, international trade has evolved to the point where almost no nation canbe fully self-sufficient. Every country is involved, at one level or another, in theprocess of selling what it produces and acquiring what it lacks: none can bedependent only on its domestic resources. Global trade has fostered an

interdependency and inter-connectivity between peoples who would previouslyhave considered themselves completely unconnected. The potential benefits areclear: growth can be accelerated and prosperity more widespread; skills andtechnology can be more evenly dispersed, and both individuals and countries cantake advantage of previously unimagined economic opportunities.Shipping has always provided the only really cost-effective method of bulktransport over any great distance, and the development of shipping and theestablishment of a global system of trade have moved forward together, hand-in-hand. Those with access to natural resources; those with the ability to convert

those resources into useful products for the good of mankind; and those with arequirement and the wherewithal to utilize and consume those end products areall joined by the common thread of shipping. The eternal triangle of producers,manufacturers and markets are brought together through shipping. This hasalways been the case and will remain so for the foreseeable future.2.1. Shipping and the global economyIt is generally accepted that more than 90 per cent of global trade is carried bysea. Throughout the last century the shipping industry has seen a general trend of increases in total trade volume. Increasing industrialization and the liberalization

of national economies have fuelled free trade and a growing demand forconsumer products. Advances in technology have also made shipping anincreasingly efficient and swift method of transport.World seaborne trade figures i.e. the amount of goods actually loaded aboardships have incr eased considerably since the 70s and in 2008, reached 8.2 billiontons of goods loaded. As with all industrial sectors, however, shipping is notimmune to economic downturns and 2009 witnessed the worst global recession inover seven decades and the sharpest decline in the volume of global merchandisetrade. In tandem with the collapse in economic growth and trade, international

seaborne trade volumes contracted by 4.5 per cent and total goods loaded wentdown to 7.8 billion tons in 2009. However seaborne trade bounced back in 2010and grew by an estimated 7 % taking the total of goods loaded to 8.4 billion tons.Developing countries continued to account for the largest share of globalseaborne trade (60% of all goods loaded and 56 % of all goods unloaded),reflecting their growing resilience to economic setbacks and an increasingly


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leading role in driving global trade. Developed economiesshares of global goodsloaded and unloaded were 34 % and 43 % respectively. Transition economiesaccounted for 6 % of g oods loaded and 1 % of goods unloaded. Developingcountries are expanding their participation in a range of different maritime

businesses. They already hold strong positions in ship scrapping, ship registrationand the supply of seafarers, and they have growing market shares in more capital-intensive or technologically advanced maritime sectors such as ship constructionand ship owning. China and the Republic of Korea between them built 72.4 percent of world ship capacity in 2010, and 9 of the 20 largest countries in shipowning in January 2011 are developing countries.


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Dr Martin Stopford, Managing Director of Clarkson Research Services Ltd wrote inhis paper - How shipping has changed the world and the Social impact of shipping , that the world is well along the road to an economically integratedglobal economy and shipping has played a crucial and highly effective part in the

process. If the trade growth trend of the last 150 years continues, he estimatesthat by 2060 the 8 billion tonnes of cargo will have grown to 23 billion tonnes ,and unless something is done about it, it will expand the shipping carbonfootprint by 300%.2.2 Current economic outlookThe IMO Secretary-General in his recent speech at Nor-Shipping in June 2011offered his views on the current economic outlook. Container trades, he said, arefacing their shortest ever cycle, with freight rates plummeting again after thecrash of 2009 and the relative boom of 2010; similarly, in the dry bulk markets,

freight rates remain far from the partial recovery of 2010.Owners, who placed orders for new tonnage in the euphoria of 2004 to 2007, maylive to regret their decisions, as growth in the supply side of shipping is seeminglyset to outpace growth in short-term demand and fleet utilization to drop belowthe levels usually regarded as comfortable.To make crystal-ball gazing even more difficult, completely unpredictable eventshave recently served to make an already opaque picture even more disjointed.Floods in Australia, the earthquake and tsunami in Japan, and unrest in NorthAfrica and the Middle East, for example, have all had a detrimental effect on

certain trades, and it is still not known what the full consequences of thesituations they created will be.Against this gloomy background, there are indications that long-term demandcontinues to grow. Both India and China, for example, where even modest percapital growth in consumption is expected to generate strong demand in thecorresponding trades, are now embarked on huge power-generation projects. Thecoal and iron ore sectors are expected to be the major beneficiaries, with??????????????????????????????????? Source: UNCTAD Review of Maritime Transport 2011 p 10This document is a compilation of internal and external statistics: please check source and disclaimer on page 1


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In January 2011, there were 103,392 commercial ships in service with a combined tonnage of 1,396 million dwt.Looking at individual sectors, oil tankers accounted for 475 million dwt and dry bulk carriers for 532 million dwt,representing an annual increase of 5.5 % and 16.5 % respectively; the containership fleet reached 184 million dwtin January 2011(8.7% over 2010). The fleet of general cargo ships stabilised at 109 million dwt. The tonnage of liquefied gas carriers continued to grow, reaching 43 million dwt (an increase of 6.6%). ( Source: UNCTAD Review of Maritime Transport 2011, p. 36)

3.3. Age distribution of the world merchant fleetThe average age of the world fleet of propelled sea-going merchant ships of no less than 100 GT is 22 years andthe average age of the world cargo-carrying ships 19 years. (Source: Lloyds Register/Fair play - World Fleet Statistics 2011)

3.4. Developments in shipbuildingAs a result of orders placed prior to the 2008 crisis, new building deliveries reached a new record in the history of shipbuilding. There were 3,748 newbuildings with a gross tonnage of 96,433,000 GT.In terms of gross tonnage, 45.2 % of deliveries were of dry bulk carriers and 27.7 % were of tankers. Newcontainerships accounted for 15.2%.Figure 2 - World Tonnage on order (2000-2010) (thousands of Dwt)


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The Global Economic Role of Maritime Shipping7. Marine transportation is an integral, if sometimes less publicly visible, part of the global economy. Themarine transportation system is a network of specialized vessels, the ports they visit, and transportationinfrastructure from factories to terminals to distribution centers to markets. Maritime transportation is anecessary complement to and occasional substitute for other modes of freight transportation. For manycommodities and trade routes, there is no direct substitute for waterborne commerce. (Air transportationhas replaced most ocean liner passenger transportation and transports significant cargo value, but carriesonly a small volume fraction of the highest value and lightest cargoes; while a significant mode in tradevalue, aircraft move much less global freight by volume, and at significant energy per unit shipped.) Onother routes, such as some coastwise or shortsea shipping or within inland river systems, marinetransportation may provide a substitute for roads and rail, depending upon cost, time, and infrastructureconstraints. Other important marine transportation activities include passenger transportation (ferries andcruise ships), national defense (Naval vessels), fishing and resource extraction, and navigational service(vessel-assist tugs, harbor maintenance vessels, etc.).8. Globalization is motivated by the recognition that resources and goods are not always collocated withthe populations that desire them, and so global transportation services are needed (and economically

justified if consumer demand is great enough). For example, until the 1950s, most crude oil was refined atthe source and transported to markets in a number of small tankers [sized between 12,000 and 30,000deadweight tonnage (dwt)]. However, economies of scale soon dictated that oil companies would bebetter off if they shipped larger amounts of crude from distant locations to refineries located closer toproduct markets. Product could then be more efficiently distributed to points of consumption using a hostof 7

transportation modes. This realization ultimately led to the emergence of large tanker vessels(e.g. , greater than 200,000 deadweight tons) and drove down the per-unit cost of intercontinental energytransportation. 9. Similarly, rather than palletize grains, minerals, and other commodities, dry bulk cargo


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ships were designed to deliver cargoes in raw or semi-raw condition from where they were found orgrown to processing facilities ( e.g. , mills and bakeries) closer to final market. Along with containerizationand advances in cargo handling and shipboard technology, these measures reduced crew sizes andlongshore labor requirements which also reduced the per-unit cost of ocean cargo transport. 10. Lastly,globalization identified labor markets overseas that encouraged transport of semi-raw materials and

intermediate products where manufacturing costs were lower. With low-cost petroleum energy for vesselpropulsion, facilitated by vessel economies of scale, the per-unit costs of semi-finished and retail productswere minimized by multi-continent supply chains. Today it is common for agri-products to be harvestedon one continent, shipped to another for intermediate processing, transported to a third continent for finalassembly, and then delivered to market. For example, cotton grown in North America may be sent toAfrican fabric mills, and then to Asian apparel factories before being returned to North America for salein retail stores. Orange juice, wine, and other products have also found markets on continents whereseasonal or climatic limitations require an offshore source, or entered into competition with domesticproduction at higher labour costs. 11. Another trend associated with globalization is the pace at whichtrade occurs. Globalization has encouraged transactions of goods and services in smaller packetsdelivered just -in- time. This has increased the velocity of freight which justified in the 1970s faster,small containerized vessels, and over the last two decades justified faster, large containerized vessels. In aglobalized economy, containerization offers the advantage of integrated freight transportation across allmodes. Analogous to the more uniform transport of liquid crude oil or unprocessed grains,containerization standardized the shipping package, reducing the per-unit cost of transporting mostfinished goods. 12. Data showing the effect of globalization on unitized cargoes is shown in Figure 3,where increased container shipping represents significant increase in global transport of finished andsemi-finished products from regions with inexpensive skilled labor to consumer markets. The fact thatcontainerized cargo has outpaced other bulk cargo is a testament to the impacts of globalized tradeinvolving consumer products and international labor (as opposed to just raw materials). 13. Therelationship among maritime shipping, economic growth, and trade is depicted in Figure 4. This figure

shows trends over the past 16 years for OECD countries in terms of gross domestic product (GDP,measured in year 2000 US$), trade (measured as exports plus imports in year 2000 US$), and fuel sold forinternational maritime transport (measured in thousands of tonnes). Figure 5 shows the relationshipbetween trade and GDP for OECD countries as measured in year-to-year percent growth between 1992and 2006. The figure and accompanying linear regression equation indicates that for every percentageincrease in GDP for OECD, there has historically been ~4% rise in trade. Similar data are shown for theUS in Figure 6 (a) and (b). These figures show scatter plots relating US GDP and freight movement(measured in terms of ton-miles and container traffic in twenty foot equivalent units, or TEUs


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Maritime Transformations Responding to Globalization14. Aside from the shift of human labor (oars) to wind-driven sail, the first modern energy conversion inmarine transportation was the shift from sail to combustion. Two primary motivators for energytechnology innovation greater performance at lower cost caused this conversion. Figure 7 and Figure8 illustrate how this shift was completed during the first half of the 20 th Century, using data from LloydsRegister Merchant Shipping Return for various years. Essentially, newer and larger ships adoptedcombustion technologies as part of an economy of scale. These technologies enabled trade routes toemerge regardless of the latitudes without consistent winds (referred to as the doldrums), supporting bothinternational industrialization and modern political superpower expansion. As shown in these figures, the

conversion of fleet tonnage to the preferred technology was achieved much more rapidly than the phaseout 10

of smaller ships using the outdated technology; this lead in conversion by tonnage was becausethe new technology was installed on the larger and newer vessels. Initially, these ships were powered bycoal-fired boilers that provided steam first to reciprocating steam engines and later to high-speed steamturbines that drove the propeller(s). Later, the introduction of the industry

s first alternative fuel petroleum oil enabled the introduction of modern marine engines. This pattern is repeated in manytechnology changes for marine transportation: some ship operators continue to use long-lived vesselspurchased on the second-hand market while industry leaders replace their fleets to achieve new marketsor realize economies of scale. 15. The switch from coal to oil was motivated by a desire to reduce costsand improve vessel performance. According to British Admiral Fisher

s remarks to Winston Churchill in1911 (quoted in Yergin

s 1991 book, The Prize , page 155), a car go steamer could save 78 percent in fuel and gain 30 percent in cargo space by the adoption of the internal combustion propulsion and practically get rid of stokers and engineers. Essentially, the commercial sector (and soon followed bythe military) converted to oil-fired boilers and oil-fueled internal-combustion, compression-ignitionengines in order to save money and achieve performance advantages. 16. Globalization motivations toreduce the per-unit cost of shipping were the primary purpose for this conversion to alternative fuel inthe early 1900s, rather than energy conservation or even fuel cost savings. Oil-powered commercial ships


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required fewer crew and enjoyed a greater range of operations between fueling. This was not only of commercial interest; military vessels appreciated these advantages and the fact that refueling at sea couldbe accomplished more quickly and easily. Oil powered ships also accelerated more quickly than coal-powered systems, and could achieve higher speeds. Given these strong incentives, international shippingswitched virtually the entire fleet from coal to oil over five decades. 17. Figure 7and Figure 8 also

illustrate the conversion from steam to motor power. In 1948 steam ships accounted for 68% of the shipsin the fleet and 79% of the fleet tonnage, while motor ships accounted for 29% of ships and only 20% of the tonnage; sail still powered 4% of vessels but only 1% of registered ship tonnage. By 1959, motorships accounted for 52% of vessels and 39% of registered tonnage in the fleet, and in 1963 motor shipsrepresented 69% of vessels and 49% of registered tonnage. By 1970, motor ships dominated the fleet bothin terms of ships and cargo tonnage, with 85% and 64%, respectively.


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In January 2011, there were 103,392 commercial ships in service with a combined tonnage of 1,396 million dwt.Looking at individual sectors, oil tankers accounted for 475 million dwt and dry bulk carriers for 532 million dwt,representing an annual increase of 5.5 % and 16.5 % respectively; the containership fleet reached 184 million dwtin January 2011(8.7% over 2010). The fleet of general cargo ships stabilised at 109 million dwt. The tonnage of liquefied gas carriers continued to grow, reaching 43 million dwt (an increase of 6.6%). ( Source: UNCTAD Review of Maritime Transport 2011, p. 36)

3.3. Age distribution of the world merchant fleetThe average age of the world fleet of propelled sea-going merchant ships of no less than 100 GT is 22 years and the average age of the worldcargo-carrying ships 19 years. (Source: Lloyds

19. The shift to registering ships internationally was preceded by and continues to be associated with ashift to more international seafaring labor although it must be noted that seafaring has long been aninternational industry. This has resulted in multinational crews ( e.g. , officers largely from one group of nations and unlicensed crew from overlapping or different nationalities). With very explicit internationalqualification standards, crew training, and port state authority to inspect ships, most modern ships areoperated by talented international labor. Except where flag registry includes citizenship requirements, likein the United States, qualified seafarers are largely hired according to economic rather than residencycriteria. A recent global labor market study obtained a sample of international seafarers by nationality andflag of service [ Obando-Rojas , 2001]. As shown in Figure 10, most seafarers work on vessels that areregistered in nations other than their nationality.20. Maintaining a professionally skilled and motivated labor force of seafarers across ranks andnationalities remains an issue of international importance. Maritime transport involves labor that residesat their place of work, where between 10 and 35 crew per ship operate the largest moving vehicles ever 13constructed 24 hours per day for most of the year. The working conditions routinely involve motion,noise, vibration, and highly technical tasks that are associated with long working hours, varying shiftpatterns all elements contributing to workplace fatigue that increases risk of human error duringoperations that can lead to environmental incidents and catastrophes. Although full discussion is beyondthe scope of this chapter, these issues are part of the globalization of maritime transport and on theenvironmental performance of shipping.

The expansion of goods movement to meet the needs of a globalized world does not come free. Inparticular, there are a number of energy and environmental impacts associated with the movement of goods. For example, the energy use and emissions associated with transporting freight can be significant[ Energy Information Administration , 1998; Organisation for Economic Co-Operation and Development (OECD) and Hecht , 1997; Skjlsvik et al. , 2000]. According to the U.S. EPA, heavy duty truck, rail, andwater transport together account for more than 25% of U.S. CO 2 emissions, about 50% of NOx emissions,and nearly 40% of PM emissions from all mobile sources [ Environmental Protection Agency , 2005a; b].In Europe, these modes generate more than 30% of the transportation sector

s CO 2 emissions [ Bates et al. , 2001].22. That said, shipping is not only among the least costly modes of transportation, but also the mostenergy efficient (with some exceptions generally proportional with high vessel speed and low service 14


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capacity). Because fuel costs can represent between 20% and 60% of shipping costs, operators havestrong economic motivation to operate ships efficiently and to employ propulsion technologies thatreduce fuel consumption per cargo ton-km. For example, the use of high-temperature, high-pressure(HTHP) engines that can combust low-cost residual fuels (a byproduct of petroleum refining) stemsdirectly from the desire to reduce fuel expenditures. 23. Nevertheless, a consequence of marine enginetechnologies is increased air pollution. These HTHP engines oxidize nitrogen effectively (therebyincreasing NOx emissions), and emit many of the impurities of residual fuel (including sulfur, toxics, andheavy metals) out the ship stack. Among freight modes, waterborne transportation has been shown tocause significant air pollution locally in port communities, add to long-range pollution transport in coastalregions of heavy trade, and contribute to climate change on a global scale [ Capaldo et al. , 1999; Corbett and Fischbeck , 1997; Corbett et al. , 1999; Corbett and Koehler , 2003; 2004; Endresen et al. , 2003;Kasibhatla et al. , 2000; Lawrence and Crutzen , 1999; Skjlsvik et al. , 2000]. Oceangoing shipping is alsothe least regulated freight mode, at least for air pollution. These issues are discussed in more detail in thefollowing sections.

5.1 Energy and power trends in maritime freight transportation```111111111111111111111111111111111111111111111111111111111111111

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24. The global fleet of oceangoing vesselsnumbers over 108,000; of these, ~46,000 are used to move cargo. These ships areresponsible for 2-4% of the world

s annual fossil fuel consumption [ Corbett , 2004]. Aprofile of the internationally registered fleet of ships greater than 100 gross tons is shownin To reduce operating expenses, marine engines have been designed to burn the leastcostly of petroleum products. Residual fuels are preferred if ship engines canaccommodate its poorer quality, unless there are other reasons (such as environmentalcompliance) to use more expensive fuels. Of the two-stroke, low-speed engines, 95% useHFO and 5% are powered by MDO [ Corbett and Koehler , 2003]. Fuel consumed by 70%of the four-stroke, medium-speed engines is HFO, with the remainder burning eitherMDO or MGO. Four-stroke, high-speed engines all operate on MDO or MGO. Theremaining engine types are small, high-speed diesel engines all operating on MDO orMGO, steam turbines powered by boilers fueled by HFO, or gas turbines powered byMGO. 25. The nations selling the most fuel to commercial ships are typically nationswith strong interests in the cargoes or services those ships provide. Organization of Economic Cooperation and Development (OECD) nations account for roughly half of these fuel sales and provide one illustration of historical consumption trends in theoverall fleet [ Energy Information Administration , 2001; International Energy Agency ,1977-1997]. Table 2 summarizes fuel quantities sold by the top nations sellinginternational marine fuels [ International Energy Agency and Organisation for EconomicCooperation and Development , 2007a; b]. The US currently provides ~15% of theworld

s marine fuels, similar to the volume sold by Singapore. 26. Transport vesselsaccount for almost 60% of the ships and nearly 80% of the energy demand of theinternationally registered fleet (not including military ships). Considered along withmilitary ships, cargo ships account for 40% of the world fleet of vessels and 66% of world fleet fuel use. The registered fleet has approximately 84,000 four-stroke engineswith total installed power of 109,000MW and some 27,000 two-stroke engines with totalinstalled power of 164,000MW. Engines with unknown

cycle types and turbines

together make up only about 2.5% of total installed power for main engines.27. Fuel types used in marine transportation are different from most transportation fuels. Marine fuels, orbunkers , can be generally classified into two categories: residual fuels and other fuels. Residual fuels, alsoknown as heavy fuel oil (HFO) or intermediate fuel oil (??

Review of Maritime Trade Self Effort

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