Ocean Freight Update: Alternative Fuels, Trading and Capturing Carbon, Composite Containers, and more…

What’s happening on and around our oceans?

This is our weekly ocean freight update, highlighting interesting news and background articles we came across this week. We focus on general ocean freight news, innovation, and sustainability.

General ocean freight news

As we wrote in last week’s update, the downward spiral of ocean freight rates seems to have come to an end. Not only have freight rates gone down, freight volumes have as well. A trucking executive in the US recently called it a freight recession.

Data from CNBC Supply Chain Heat Map provider FreightWaves SONAR details the weakness in the sector. When comparing current ocean freight orders leaving from all ports in the world and arriving at all ports in the United States, year over year, the levels are half. The decrease is felt both on the rails and roads with less freight coming into the country.

The economy is in a ‘freight recession,’ with China trade decline continuing

In Europe, things are looking slightly better, but Europe is dealing with the aftermath of strikes in ports in France and Germany. Another issue is the situation at container depots, which are filled to the brim.

The problem of overloaded depots persists in Europe throughout. There are more containers coming back to the depots as compared to the number of containers going out of depots. We see lower freight rates and heavy price competition, especially for small freight forwarding companies.  

While the overall economic outlook for Europe brings signs of rebound, the container logistics industry in general is grappling with many struggles like depots being overwhelmed, rates bottoming out, the global bank crisis, and overshooting demurrage and detention costs. Companies are struggling to find their feet on the ground, and it will still take a few months before the demand recovers. Till then, the industry players are focusing on improving their margins and sustaining their business.

Europe’s Economic Outlook Improves, Container Logistics Companies Struggling

The freight recession mentioned earlier is also connected to the large drop in volume of freight being shipped from Asia to the United States.

…demand has been sluggish for a long time, with Asia-US volumes declining by double digits for seven consecutive months. Its statistics show that last month, container traffic from 10 Asian countries to North America decreased 32%, year on year, to only 1.22m teu.

China, the largest exporter of consumer goods, shipped 646,000 teu to North America in March, 37% less than the previous year, while South Korea, the second-largest, saw its volumes drop 17% year on year, to 162,000 teu.

Vietnam, which has been growing as a manufacturing centre at China’s expense, saw a 31% decrease in its March exports to North America, at 105,000 teu, and Taiwan exported 65,000 teu, down 33% from a year ago.

Declining Asian exports another blow to transpac contract hopes

Still, the cargo throughput in Chines ports was higher in Q1 compared to last year.

The overall container volume of major Chinese ports rose 3.5% year-on-year from January to March reaching 69.7 million TEUs.

For the same period, the overall cargo volume of the Chinese ports climbed to over 3.8 billion tons translating to a year-on-year growth of 6.2%.

Chinese ports close to 70 million TEUs in Q1, lower volumes for Shanghai and Shenzhen

Innovation & Sustainability

A lot is happening in the world of alternative fuels. It is a development we applaud. Global footprints need to come down across industries, and the global shipping industry is an important part of that. The use of alternative fuels is a sure way to bring down its emissions.

A recent survey has found that shipping companies are actively looking for ways to minimise their footprint through the use of alternative fuels.

Presently, 46 percent of surveyed companies (12 respondents) say that they have already run pilot programs involving one or more low-carbon fuels (for instance, operating ship engines on biodiesel instead of traditional fuel oil) and have established plans for further implementation, whereas 35 percent (nine respondents) have taken no action regarding greener fuels.

Making the leap to a greener-fuel future will require decades of work, but our respondents are clear on what they will need to accelerate the transition. More than 80 percent of respondents indicate that the following four developments would be most transformative: greater availability of alternative fuels, cost reductions for alternative fuels, customer willingness to pay a “green premium,” and regulatory change.

Charting fuel choices as the shipping industry sails toward net zero

In Australia a consortium, including CMA CGM and Maersk, is looking at green methanol.

The Port of Melbourne, Maersk, ANL (a subsidiary of CMA-CGM), Svitzer, Stolthaven Terminals, HAMR Energy, and ABEL Energy have signed a Memorandum of Understanding (MoU) to investigate the commercial potential of building a green methanol bunkering centre at the Port of Melbourne.

The collaboration will examine a potential project involving the transportation of green methanol from production sites in Bell Bay, Tasmania (ABEL Energy) and Portland, Victoria (HAMR Energy) to Port of Melbourne for storage and bunkering services.

Maersk and CMA CGM among partners for establishing a green methanol bunkering hub at Melbourne port

Governments are trying to get a grip on carbon emissions in different ways. An important piece of legislation is the obligatory administration of carbon emissions. The European Union has recently taken big steps when it comes to shipping, making maritime shipping part of their emissions trading scheme. Please find a short quote below, but we recommend you take a look at this article if you do any trading to or from the EU.

“The EU ETS will be extended to cover Maritime Transport in respect of (i) 100% of the emissions from intra-EU maritime voyages; (ii) 100% of emissions from ships at berth in EU ports; and (iii) 50% of emissions from voyages which start or end at EU ports, where the other destination is outside of the EU.”

A greener voyage: the EU emissions trading scheme finally given the all clear to set sail for maritime

Next to using alternative fuels, another way of lowering the carbon emissions of shipping is by capturing the actual carbon that is emitted.

Whilst CCS technology could allow shipping to carry on burning cheaper fuels, and meet emerging environmental legislation, it also offers a new source of cargo demand for the industry, which could over time help offset lost demand from a declining trade for conventional hydrocarbon cargoes”.

…“unsurprisingly, there is significant interest in the sector, with some new projects under construction and significant design and feasibility work underway for potential future projects. Currently, North America leads the way, accounting for approximately half of the installed, under construction or planned CCS capacity. Europe then accounts for around 35% of planned projects, which is unsurprising given the region’s stricter environmental targets.

Shipping Decarbonization Through Carbon?

And an interesting shipping innovation caught my eye this week. It is a new type of container.

As the 20 ft container is made of composite materials, it is much stronger than today’s steel boxes, able to carry 28 rather than 24 tonnes. The developers claim also that its aerodynamic exterior leads to 4% savings on fuel consumption.

Last year AELER completed 80 pilot projects with blue-chip companies like Procter & Gamble and production is now being ramped up to thousands of containers.

Container made out of composite on show at Sea Asia

That’s all for this week!

About the author:

Martijn Graat

Martijn is Zergratran’s Head of Content. He writes about the latest trends and innovations in logistics and anything related to Zergratran