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. Several stories in the news this week confirm this turnaround in the market.
General ocean freight news
In the past weeks, ocean freight rates have been going down, but the good news (for shipping companies, at least) is that the downward spiral is coming to an end. It was already looking like many shipping companies trusted that rates would be going up again.
Evergreen president Eric Hsieh has reported that the carrier’s profits last year of $12bn were 40% higher than the previous year, despite the market correction in the second half, and reasserted his belief that freight levels will rebound in H2 this year.
He said: “Due to the Russia-Ukraine war, high inflation and high retail inventory that started last year, the container shipping market was sluggish and the first half of this year continued to be weak.
Market too pessimistic, says Evergreen boss, demand will bounce back
The Shanghai Containerized Freight Index (SCFI) — a closely watched measure of container shipping spot rates — has just risen for the third week in a row after nine months of continuous declines.
The SCFI came in at 1033.65 points on Friday, up 8% week on week (w/w). The China-U.S. West Coast route, which comprises 20% of the index weighting, jumped 29% w/w, to $1,668 per forty-foot equivalent unit.
“Freight rates have rebounded strongly on the back of the mid-April GRI [general rate increase], due mainly to rate increases on the trans-Pacific, Middle East and Latin American routes,” said Linerlytica on Monday.
Container shipping sees signs of a bottom (at least, for now)
The Drewry’s World Container Index (WCI) snapped its losing streak, registering a 3.8% weekly uptick for the index on the back of strong price upswings in the China-US trade route.
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It must be noted that Freightos had also reported an uptick in prices earlier this week, owing to the General Rate Increases (GRIs) even as contracts for the year are being negotiated, reviewed and renewed.
Drewry’s World Container Index registered its best-ever weekly movement since July 2021, a span of about 21 months, having had 15 consecutive weekly declines and registering the second-ever weekly uptick since March 2022.
Drewry’s World Container Index snaps losing streak as Transpacific spot prices shoot up
Led by MSC and CMA CGM, ocean carriers are again scouring the charter and sales and purchase markets for tonnage to boost capacity and increase their market share.
With demand prospects improving, especially for the second half of the year, and freight indices showing weekly gains, some carriers are using the huge cash reserves accumulated over the past two years to bolster their networks and gain a commercial advantage over more conservative lines.
Major carriers still on the hunt for tonnage to boost market share
Two notable stories on ports in China. One on the financial stability of Chinese port operations and one on the growing number of empty containers on Chinese shores.
Asia’s maritime and supply chain industry is on a tumultuous ride, experiencing significant disruptions in trade patterns resulting in container prices dipping, according to the April Asia container market forecaster published by Container xChange, an online container logistics company that provides a marketplace, an operating infrastructure, and a layer of services like payments to container logistics companies globally.
Container oversupply risk looms over China with empty containers at ports
China’s port consolidation under the “One Province One Port” initiative will enhance the operators’ standalone credit quality and increase the potential support from their provincial governments, Fitch Ratings says.
We think port operators will benefit from greater revenue stability, driven by better volume resilience and stronger pricing power after the consolidation, which could enable them to gain market share, reduce competition, improve efficiency and enhance the ability to raise tariffs.
China’s Port Consolidation to Boost Operators’ Revenue Stability, Government Linkage
Sustainability & innovation
Large shipping companies are trying to bring down their carbon footprint in different ways. Some even want to go beyond the IMO emission targets. We applaud that!
Malaysia’s top shipping line MISC has clinched what it says is its first sustainability-linked loan.
The company with more than 100 ships in its fleet, sealed an 11-year, $527m syndicated loan through its subsidiaries in Singapore, for the financing of six very large ethane carriers (VLECs).
The ambitious environmental key performance indicator (KPI) is benchmarked to go beyond the emissions target specified in the International Maritime Organization’s (IMO) 2050 decarbonisation trajectory and the Poseidon Principles, MISC said.
MISC makes green finance debut with $527m loan
Going green can be the more expensive route, or isn’t it?
Maersk recently released a video of the world’s first methanol/HFO dual fuel container vessel in the final stages of construction.
However, the 2,100 teu vessel was seen by some as an unlikely answer to the decarbonisation puzzle, its green methanol fuel, produced from renewable sources, was expected to be too expensive to compete with conventionally powered ships.
However, Maersk is not alone in viewing methanol as a viable alternative fuel, with Stena converting ferry Stena Germanica to operate on the fuel in 2015 and, in 2021, reducing its reliance on diesel further by using ‘Blue Methanol’, recycled from gas by-products of the steel industry.
Green shipping looks expensive, but can be competitive, says ABS
You can find the video of the methanol-powered vessel in this article: Maersk unveils video of the keenly awaited methanol-fuelled ship
Other shippers are using a method called carbon insetting to drive down their environmental impact.
Norden will begin to issue carbon inset tokens with the aim of supporting the decarbonisation of customer supply chains. Carbon insetting is the transfer of environmental benefits derived from initiating low-carbon transport activities to other players in the supply chain, regardless of physical operations (Scope 3).
The Danish owner and operator has teamed up with greenhouse gas insetting platform 123Carbon and its partners, AllChiefs and Verifavia, to tokenise CO2-equivalent reductions made on biofuel voyages and allocate them to customers looking to reduce such emissions.
Norden looks to drive down emissions using carbon insetting
There is also a method of capturing carbon emissions on container ships.
Seabound has developed a patent-pending compact carbon capture device that can be retrofitted into a ship’s engine exhaust at the funnel. The CO2 chemically reacts with pebbles of quicklime, which then convert into limestone, keeping the CO2 locked in. The limestone pebbles are temporarily stored onboard before the ship returns to port, without any need for energy-intensive CO2 separation, compression, or liquefaction. The pebbles are safe, inert and non-toxic; abundantly available worldwide and reasonably priced. Once back in port, the limestone pebbles are offloaded and either sold in pure form or turned back into quicklime and CO2, for the quicklime to be reused onboard another vessel and the CO2 sold for utilisation or sequestration.
Preparations to install this equipment onboard the first ship will take place in May and June this year to run the first-ever pilot project throughout this summer.
Lomar to install carbon capture device on boxship next month
And then, there is a new way of using the same technology that allowed explorers like Columbus to roam the oceans. Innovative wind assist systems can also be used to drive down carbon emissions.
Japanese liner Ocean Network Express (ONE) has decided to install two containerised wind assist units on one of its operated feeder ships before the end of 2023. The 143 m long, 1,036 teu capacity Kalamazoo is owned by Singapore-based Norse and the wind assist systems will be supplied by the Netherlands-based company, Econowind with its VentoFoil suction systems, which are able to generate thrust to save up to 400 kW of engine power.
Two suction sails to be installed on ONE feeder ship
We’re closing off this week with three final interesting reads.
- European Parliament votes in favour of including shipping in EU’s emissions trading system
- The hidden emissions of the shipping industry
- Understanding Alternative Fuels for Sustainable Shipping: A Comprehensive Guide
That’s all for this week!
