Ocean Freight Update: Lower Rates, Supply Chains Stabilising, Greener Fuels Getting Cheaper and more…

What’s happening in 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

2022 was a good year for shipping companies. With demand at peak, prices went through the roof, with strong earnings as a result. Times are considerably more interesting this year. Container News reports:

The combined EBIT figure for the 12 lines having announced their EBIT figures in 2022-FY was US$95 billion and adding in these remaining carriers increases it to an estimated US$208 billion, according to Sea-Intelligence report.

However, the Danish analysts noted that there is a weakness in the market that is highlighted by a sharp contraction in transported volumes, while the freight rates, though higher Y/Y, also seem to have slowed down.

Container lines post strong earnings/TEU in 2022: Sea-Intelligence analysis

Now that volumes are down, the shipping lines are sending their vessels in for maintenance and repair.

“Ship repair is definitely profitable, and margins are at least 10%. It takes at least three weeks to repair a ship, and in the past two years, when liner operators had incredibly good business, they were loath to send their ships for repairs and maintenance, unless absolutely necessary. Since the second half of last year, container freight rates have been falling and cargo volumes had declined substantially. It was at that time that we started receiving more requests to repair and service container ships.”

More container ships go for repairs, maintenance, as freight market flattens

While demand and prices are going down, there was also some positive news this week.

Some liner services are reported to have full ships again, container spot rates have stabilised, the charter market is bullish and ocean carriers are back at shipyards ordering new tonnage.

It seems the week has started positively for carriers and shipowners, with ’green shoots’ of a recovery starting to emerge.

Container shipping can see ‘green shoots’ of freight demand recovery

Maersk sees supply chains stabilising, and we are arriving at a new equilibrium.

Indeed, its Asia-Pacific March update is generally upbeat, advising that demand across its network is either stronger, or is about to strengthen, particularly on secondary trades.

However, it said that consumers were receiving “mixed signals” on the state of their economies, and that weaknesses from the combination of high inventories – especially in North Europe – and low confidence in future consumer demand were a negative influence.

Supply chains ‘finally beginning to stabilise’, says Maersk

Sustainability

The shipping industry is responsible for around 3% of global carbon emissions. Decarbonisation of the industry is an important initiative to bring down its carbon footprint. According to Martin Crawford-Brunt, emissions lead for the Baltic Exchange, this decarbonisation is causing a lot of confusion and ambiguity.

“The EU ETS is obligatory and a traded instrument. The UK ETS has not included shipping yet but be absolutely assured it will cover shipping at some point in the not-too-distant future. This is something that’s going to have global impact on businesses,” he said.

Meanwhile, navigating the world of shipping contracts is never easy, and the current situation with carbon emissions and regulations is only adding to the complexity,

Also, the problem with carbon intensity is not just an owner’s issue, as there are many shipboard impacts that also affect carbon intensity. Additionally, there are aspects that neither party has control over, such as adverse weather, which can have a serious impact on fuel consumption.

Navigating shipping’s ‘confusing’ and ‘ambiguous’ decarbonization

The International Maritime Organization (IMO) is discussing more stringent regulations on carbon emissions.

The 14th Intersessional Working Group on Greenhouse Gases (ISWG GHG 14) met last week at the headquarters of the International Maritime Organization (IMO)…

…two-thirds of those who spoke last week were clear that international shipping needed to reach zero GHG emissions by 2050. To help stimulate the uptake of new fuels, there was broad support for a fuel use target of 5% by 2030, albeit with no agreement on the subset of fuels this would be applied to. A majority of countries wanted a 2040 GHG reduction target to be defined, at a magnitude of GHG reduction in line with the 1.5 degree temperature goal set in the Paris Agreement of 2015. Nearly all countries who spoke want to see these reductions regulated by a technical element such as a fuel standard, and an economic element such as a carbon levy, with these policy measures designed to support the transition.

IMO green gathering points towards stricter regulations to come

Greener fuels are a good way to lower carbon emissions, and it looks like the price of these fuels are going down to levels below fossil fuels soon.

The relative price of greener fuel, particularly methanol, will dip below the cost of fossil fuels by 2025, according to the latest report by UK-based Longspur Capital.

Attention All Shipping, published last week, says the EU Emissions Trading System (EU ETS), the FuelEU Maritime initiative and the Energy Taxation directive will have a significant impact on the cost of fuels by 2025.

Greener maritime power will be cheaper than fossil fuel by 2025

Innovation

The next story could just as easily have been in the previous section, as it combines innovation and sustainability. Samskip is testing an innovative system to reduce emissions from its vessels.

Samskip’s Carbon Capture and Utilization system is a smart and sustainable application that catches 30% of CO2 emissions from combustion engines in real time and saves it in portable batteries.

These batteries can then be shipped to companies that use CO2, such as farming customers and greenhouses, which currently use gas-powered equipment to generate the CO2 required to promote product development.

The captured CO2 can then be used directly, eliminating the need for gas-powered equipment and thus decreasing the use of natural gas.

Samskip launches new green project to reduce emissions from its vessels

Our final story this week is one from the Port of Rotterdam, where they are testing smart berths. To gain more insights into the effect of ships on their port environment, they are using smart bollards.

The six bollards, which were developed in collaboration with Straatman BV, Zwijndrecht, are positioned side by side at one berth for large container ships. Since the bollards measure the strength of the mooring lines, more insight is gained about what the consequences of berthing, docking and idling container ships at the quay are.

Port of Rotterdam Authority tests smart berth at ECT

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