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
For shipping companies, the freight rate decline may become a problem. It is a positive thing for consumers, as it means prices for many products are decreasing. If you consider that 90% of all things you see around you have been transported by a container ship, that statement will start to make sense.
Data collated from the 500 SMEs surveyed by the online freight platform indicated that lower-than-expected freight costs have had a macro-economic impact, with some 25% reducing product prices and still achieving a 15% bump in margins.
Lower freight rates means lower prices for consumers, says new survey
Although rates on some lanes are slowly going up again, contract rates are down.
June is bearing few surprises for container shipping, with demand continuing its inexorable downward correction.
In its latest XSI report, Xeneta’s index of rates is down by 42% year on year, May marking the ninth consecutive month of dropping rates.
And long-term rates fell 27.5% last month alone – prompting Xeneta CEO Patrik Berglund to say that “collapse” was the only appropriate descriptive word.
“This is the largest drop we’ve ever experienced on the XSI, which charts real-time global rates developments, and it paints a bleak picture of the state of the industry,” he said.
Container freight rates: ‘collapse’ is the word, says Xeneta
Shipping lines have pulled Asia-U.S. spot rates off the floor, but it’s a slog: two steps up, one step back, another two steps up, a slide back again.
The general rate increase (GRI) on Thursday was partially successful, clawing back some ground lost after the April 15 GRI.
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The normalization of spot rates and cargo volumes to pre-COVID levels was expected by ocean carriers after one-off pandemic drivers eased. Another expectation was that annual trans-Pacific contracts for the May 1, 2023, to April 30, 2024, period would sink back toward normal price levels. That too has come to pass.
Trans-Pacific spot container shipping rates are inching up
Ocean carriers are trying to find new ways to deal with the fluctuations in demand and prices.
Ocean carriers constantly reassess network coverage to cope with the impact of demand fluctuations but, post-pandemic, this has translated into widely different trading patterns for the top-ranked lines.
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Looking at the total containership fleet, Alphaliner said 21% of all liner capacity, including the largest 24,000 teu vessels, was deployed between Asia and Europe, with Asia-North America second with 18%.
However, the comparison is somewhat skewed by the much shorter transit from Asia to the US west coast, thus those loops require less tonnage.
Nevertheless, if container spot and contract rates on the Asia-Europe and transpacific tradelanes settle at just above breakeven levels, more carriers may decide to rethink their exposure to east-west routes and look in the direction of Latin America, Africa and the Middle East, or endeavour to seek out niche trades.
Major ocean carriers set course for more-profitable routes
Other interesting news stories:
- Chinese ports’ container throughput up 4.8 pct in first four months
- Hapag-Lloyd CEO bullish on prospects for a peak season
- ONE joins GBSN after trial of blockchain platform
- ONE to receive its first 24,000 TEU class Megamax vessel
Innovation & Sustainability
For starters, we’d like to share two articles on the impact climate change has on the Panama Canal, one of the most important shipping routes.
Panama Canal Administrator Ricaurte Vásquez Morales said the current conditions have produced the driest year on record since 1950. The last severe drought reported was in 2019 through 2020 when precipitation in the canal watershed was about 90% below the historical average.
Panama Canal on alert as low water levels could affect transit
The climatic emergency decreed by the Panamanian National Government reinforces what the Panama Canal has been stating regarding the reality of a shortage of fresh water. “This is an issue that the Panama Canal has been warning and preparing for; however, we could not have predicted exactly when the water shortage would occur to the degree that we are experiencing now,” said Canal Administrator Ricaurte Vásquez Morales.
Panama Canal prepares for the impact of climate events
It looks like the shipping industry is also slow-steaming regarding decarbonizing.
Dr Simon Bullock… on shipping climate targets ahead of the upcoming MEPC80 at the IMO.
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The tendency to focus on the long-term targets, (to reach net zero by 2050), ignores the hard truth; what is most important is action this decade. If we do not at least halve global emissions before 2030, enough CO2 will already be in the atmosphere to overshoot the Paris 1.5°C climate change goal. Temperature rise and all its attendant damage will be locked-in, as will growing risks of passing climate “tipping points”, where climate impacts jump-shift into a new and mostly irreversible state.
Shipping and climate: all hands on deck
Some doubt has arisen about one of the strategies shipping companies are using to lower carbon emissions (and limit the tonnage supply). It increases the importance of ports’ role in bringing down carbon emissions.
Real-world evidence indicates that the relationship between ship speed and fuel consumption is more nuanced than previously believed, challenging the assumptions underlying the International Maritime Organisation’s (IMO) Carbon Intensity Indicator (CII) regulation. This calls for a re-evaluation of strategies.
Instead, a greater focus on the role of ports in achieving emission reduction goals is beginning to be recognized and their role in helping shipping lines achieve emission reduction targets. Acknowledging ports as key partners in the fight against emissions highlights the need for a comprehensive approach to environmental sustainability in the maritime sector.
Ports play a major role in reducing shipping emissions, highlighting the limitations of slow-steaming
PortXchange is also emphasizing the importance of the role of the ports.
PortXChange is pitching port call optimisation to reduce emissions from ships. Because vessels must run their generators while alongside, or while waiting in a queue, it is thought that major reductions in total CO2 emissions could be made by increasing the speed of port operations.
PortXChange has had its own successes at Rotterdam. It said it had internally verified numbers claiming a 20% reduction in CO2 emissions and a 15% decrease in NOx emissions from ships in the port using its PortXChange Synchronizer tool. This is an advanced scheduling system which aligns port services, including bunkering, unloading and ship services, to shorten each port stay.
Cleaner shipping should be powered by port optimisation, says PortXChange
Shipping lines are still launching new sustainability initiatives.
Many logistics services companies have launched environmental, social, and governance (ESG) programs in recent years, but few of them seem to have hit the ambitious targets necessary to produce real climate results.
Still, some are doing a better job than others. One example is Taiwan’s Yang Ming Marine Transport Corp. In Q4 2022, Yang Ming outperformed the other container carriers in 13 main trade corridors in terms of carbon efficiency, according to the latest Carbon Emissions Index (CEI). Created last year by Xeneta, a Norwegian ocean and airfreight rate benchmarking and market intelligence firm, the CEI is designed to provide global shippers with the data they need to make informed “green shipping” decisions.
Container carrier cracks the code for “green” operations
HMM tops the emissions rankings for the US west coast-Far East tradelane, according to Xeneta’s latest ‘naming and faming’ list – though the results have damning implications for American Jones Act carrier Matson.
Following recent criticisms of the IMO’s CII as an ‘own-goal’, on the grounds it unduly punishes the operating profile of feeder vessels, the regulatory microclimate of the US Jones Act market provides an early warning of the implications of long-term neglect in this crucial market segment.
HMM tops Xeneta ‘name and fame’ list of greenest shipping lines
COSCO SHIPPING Heavy Industry Technology (Weihai) inked an order agreement for methanol fuel supply system for four 16,000 TEU container ships with COSCO SHIPPING Heavy Industry (Yangzhou).
COSCO signs methanol fuel supply system deal for four boxships
Yesterday classification society DNV awarded the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping in collaboration with Nordic Green Ammonia Powered Ships (NoGAPS) partners BW Epic Kosan, Yara, MAN Energy Solutions, Wärtsilä, Global Maritime Forum and Breeze Ship Design an approval in principle (AiP) for the design of the futuristic looking gas carrier.
Futuristic looking ammonia gas carrier project moves ahead at Nor-Shipping
Other interesting reads we came across in the innovation and sustainability category::
- This unlikely fuel could power cleaner trucks and ships
- This startup is zapping seawater to tackle climate change
- Redefining commercial models in shipping
- Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping and Chilean Ministries of Energy sign green corridor agreement
That’s all for this week!
