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
The shipping rates are still going down. The question is whether this is a good or a bad thing for the logistics industry as a whole. Prices have dropped as low as $1500 per TEU on the Asia to Europe lanes. Transpacific routes have prices as low as $1000, while the prices on the transatlantic routes are still around the $5000 mark, even with demand dropping. Another question is whether shipping companies will be able to turn a profit.
In fact, ocean carriers appear now prepared to take radical action on restructuring their networks to meet the reduced demand, as evidenced this week by the culling of the AE1/Shogun Asia-North Europe loop by the 2M Alliance, after blanking the service for consecutive weeks.
Rate erosion may be easing, but rock-bottom prices are ‘not good for anybody’
The factors which enabled regular line shipping companies to rake in colossal profits in 2021 and 2022 have disappeared. In this early part of 2023, demand is weak and freight rates, particularly for goods leaving China, have slumped as a result.
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The shipping companies’ return to financial solidity is good news, since it is not in the interest of any operator in the logistics chain to work with partners in a fragile state. At the same time, not all shipping companies have the same capacity to resist the reversal of market trends.
Will the shipping companies make a profit in 2023?
While shipping demand is decreasing, some regions are unaffected, like one of China’s largest ports.
The Ningbo Zhoushan Port, one of the country’s busiest ports, has seen no slump in its cargo throughput since the beginning of this year, dispelling fears of dwindling foreign trade in China. The port’s cargo throughput exceeded 1.25 billion tonnes in 2022, ranking first globally for the 14th consecutive year. Its container throughput hit 33.35 million 20-foot equivalent units (TEUs) last year, ranking third globally.
China’s major port sees no slump in cargo throughput
Empty containers are stacking up at various Chinese ports, which can indicate a rise in China’s foreign trade.
China’s foreign trade is expected to maintain a consistent growth momentum this year, bolstered by an overall improvement in the country’s economic situation, said Yu Jianhua, minister of the General Administration of Customs at a news conference in Beijing.
The official’s remarks came in response to a media inquiry regarding the recent influx of empty shipping containers at Chinese ports.
This situation can be attributed to various factors, including the overproduction of new containers during previous period, low storage costs of domestic ports, seasonal regularity effect and the short-term return of containers due to the easing of the COVID-19 pandemic abroad, said Yu.
Empty shipping containers sign of China’s economic prowess
Other interesting stories:
- Crunch time for trans-Pacific container shipping contract talks
- Brazilian container terminal invests in port equipment amid increasing box volumes
- Why ocean shipping is less anti-competitive than lawmakers think
Sustainability
Ocean freight is responsible for 3% of the total carbon emissions. Lowering the sector’s carbon emissions has a significant and direct positive impact on the climate. We’re happy to see the developments over in Europe, where the European Commission has launched an act that may propel shipping forward regarding sustainability.
The European Commission launched its Net-Zero Industry Act yesterday, legislation that could see carbon capture technology rolled out more rapidly to ships.
With the Net-Zero Industry Act, the European Commission will reduce the administrative burden and simplify permit-granting processes for renewable energy projects, accelerate the use of CO2 capture and storage and improve conditions for investment in net-zero technologies.
European Commission launches Net-Zero Industry Act
Already shipping companies are piloting new and more sustainable ways of powering ships. Two excellent examples from Maersk and Samskip are below:
Green Methanol
Maersk has unveiled the design of its first green fuel-powered container vessel on Twitter.
The Danish ocean carrier said it expects to receive the first boxship of this type by South Korea’s Hyundai Mipo Dockyard soon.
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Our feeder vessel has a dual-fuel engine and will be able to operate on Green Methanol.
Maersk unveils the design of its first green fuel powered vessel
Hydrogen
European containerline Samskip has contracted India’s Cochin Shipyard to build a pair of hydrogen fuel cell-propelled boxships. The contract comes with options for two more vessels. The ships, due for delivery from the second half of 2025, will be able to carry 365 45 ft long high cube containers.
Samskip contracts Indian yard to build up to four hydrogen-powered boxships
Another way of reducing carbon emissions is using carbon capture solutions.
A consortium of global shipping organisations and the Oil and Gas Climate Initiative (OGCI) have received approval in principle from the American Bureau of Shipping (ABS), the US ship certification agency, to use a carbon capture system onboard an oil tanker.
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The project aims to demonstrate the feasibility of using carbon capture onboard a vessel and is one of the largest of its kind. Approval in principle allows the consortium to consider whether the project will move to the next stage, which includes engineering, procurement and construction.
Landmark carbon capture project onboard a Stena Bulk tanker moves ahead
Some are worried that all these new sustainable propulsion technologies will lincreaseBunker Adjustment Factors, as shipping lines will want to pass on the additional costs to their customers.
“What we will have is the mother of all BAFs. Carbon taxes won’t work unless there is a penalty on the carriers too, they cannot be allowed to simply pass on those charges,” said Mr Hookham, who added that the introduction of low-sulphur fuel regulation three years ago saw the costs all borne by shippers and none by carriers.
The ‘mother of all BAFs’ looms for shippers as green targets advance
Other interesting sustainability stories:
- The impact on the operational profile of different ship types and solutions for future-proofing existing
- Shipping emissions – is your sustainability strategy prepared for what’s next?
- Netherlands Plans World’s Largest Offshore Hydrogen Production Site
- Cooking Oil Shortage Looms as Biofuels Gain Appeal
- Europe close to sealing ‘world’s most ambitious’ shipping decarbonisation deal
- Carriers turn their gaze back to scrubbers as voyage results tumble
Innovation
Two stories caught my eye this week when it comes to innovation. The first one I wrote about earlier. The first one would fit perfectly in the sustainability category as well, and the second one is about cybersecurity. Whatever role your company plays in a supply chain, port, shipping company, trucking company, logistics service provider, or customs broker, cybersecurity is vital. What if a hacker takes over a container ship?
An innovation several large shipping companies are currently testing is the windshield.
The shields that are being installed on the bows of some of the largest container ships out there are very similar to the windshield you see on top of semi trucks. The shields improve the aerodynamics of the ships, reduce drag, and thus improve fuel efficiency. Less fuel means fewer emissions.
Shipping Lines Introduce Windshields to Reduce Fuel Consumption
In its 2022 Risk Report, the Norwegian National Security Authority (NSM) points to a threefold increase in the number of serious incidents and cyber operations from 2019 to 2021. The corresponding report for 2023 addresses the issue that there are many vulnerabilities in unclear supply chains, and that with more unpredictability the industry needs to be better prepared.
The maritime industry has worked with digitalization in both traditional information technology systems (IT systems) and in operational technology in systems for automation, propulsion, management and other control systems. The greater the use of remote connection, integration and digitization in operational technologies, the more vulnerable the operation can be.
What Do You Do if a Hacker Takes Control of Your Ship?
That’s all for this week!
