This week was a busy week at Zergratran with the launch of our new website. We are happy with and proud of the result. As Hannibal (sort of) used to say:
“I love it when a website comes together.”
John “Hannibal” Smith
What’s happening in and around our oceans?
This is the first edition of our weekly ocean freight update, where we highlight interesting news and background articles we came across this week. We focus on general ocean freight news, innovation, and sustainability.
General
The Suez Canal
The Suez Canal is the fastest way to get from the Atlantic to the Indian Ocean. Traversing the busy shipping route became a lot more expensive last year. The Egyptian authorities hiked the prices three times last year, leading to record revenues for the canal.
Egypt’s Suez Canal revenue saw a record high of 18.2 billion Egyptian pounds ($594 million) in December 2022, according to data released by the Central Agency for Public Mobilization and Statistics.
The figures come after the Suez Canal Authority announced 2022 delivered an all-time annual revenue record for the waterway, earning $8 billion in transit fees.
The income from the canal was about 25 percent higher than the $6.3 billion netted in 2021, following a series of toll hikes to help pad Egypt’s siphoned foreign reserves.
Suez Canal revenue hits record monthly high of $594m in boost to Egypt’s economy
Capacity, Prices, and Reliability
We have seen a continuing drop in ocean freight rates for weeks, making ocean carriers lay up dozens of ships. That number will go up further as many new builds that were ordered are expected to be entered into service shortly.
According to the latest survey by Alphaliner, taken on 13 February, 366 vessels were idle, including those owned by lessors and non-operators, for a capacity of 1.6m teu, representing 6.2% of the global cellular fleet.
This compares with the 260, for a capacity of 1.3m teu, 4.9% of the fleet, noted by the consultant on 16 January.
The data shows a significant increase in carrier-operated idle tonnage, from 70 ships for 509,000 teu in mid-January, to 117, with a capacity of 734,000 teu, a month later, and a big spike in lay-ups of vessels of over 12,500 teu from 14 to 25.
Containership lay-ups continue to spike as demand slump rolls on
At the same time, shipping lines are still chartering ships, but those are considerably smaller in size. Also, compared to the shipping boom of the last two years, the contract durations are much shorter. Shipping companies are chartering smaller ships to increase their flexibility.
Charter activity is not evenly spread, however. Almost all of it is the midsize and smaller ship categories, vessels with capacity of around 10,000 twenty-foot equivalent units or lower.
The reason is that almost all of the larger vessels were put onto multiyear charters during the boom. Those contracts won’t expire in the near future. Furthermore, larger vessels whose charters were coming up for renewal this year were “forward fixed.” New charter extensions were already agreed to last year.
Container lines still chartering ships despite drop in cargo demand
Ocean freight rates are not the only thing going down. The container lines had slightly less reliable schedules in the first few months of this year, but they were still better than the past two years—some interesting graphs in the article below by container-news.com.
Sea-Intelligence reported that while schedule reliability continued to increase for much of 2022, in January 2023 there has been a month-to-month decline of 3.8%, reaching to 52.6%.
Container lines’ schedule reliability dips slightly at start of 2023
The Ukraine-Russia War
The war in Ukraine has reached a point we hoped we would never reach: a first anniversary. Freightwaves rounded up the impact the conflict has had on shipping.
[Container shipping] Virtually all of the major container shipping lines suspended all service to Russian ports shortly after the war broke out and have not returned. Maersk and CMA CGM have divested Russian port holdings.
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[Tanker shipping] Evercore ISI analyst Jon Chappell called the war “a generational geopolitical event that is likely to change seaborne flows of the world’s most important commodity for years.” Chappell believes “the redrawing of the global trade map has only entered the early innings.”
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[LNG shipping] The loss of pipeline gas led to a scramble by Europe to find replacement supply. An armada of LNG carriers delivered cargoes from the U.S. Gulf last year. At the peak of the demand frenzy, spot rates for LNG carriers reached $500,000 per day, the highest day rate ever paid for any commercial ship in history.
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[Dry bulk shipping] The war effect on dry bulk goes well beyond Ukrainian grain exports. Russia is the world’s third largest exporter of coal. The EU has banned imports of Russian coal since August.
One year later: How Ukraine-Russia war reshaped ocean shipping
Sustainability
There is an increased focus across supply chains for sustainability, which is much needed. What jumped out at me this week when it comes to ocean freight and sustainability were articles about alternative fuels for ships. The bunker fuel they currently use ranks among the dirtiest fuels available. No wonder there is so much attention on alternatives like bio-ethanol and hydrogen.And not only ships are looking at cleaner energy, Ports as well!
Methanex Corporation and Mitsui OSK Lines (MOL) have completed the first-ever net-zero voyage fuelled by bio-methanol.
The Cajun Sun, operated by Methanex’s subsidiary Waterfront Shipping and chartered from MOL, departed from Geismar in the US on January 17 and arrived in Antwerp, Belgium on February 4. By blending ISCC-certified bio-methanol that has negative carbon intensity with natural gas-based methanol, net-zero greenhouse gas emissions on a lifecycle basis were achieved for the 18-day transatlantic voyage.
Net-zero voyage across the Atlantic completed using bio-methanol
The container segment is leading shipping to green new pastures, taking a massive lead when it comes to investing in methanol propulsion.
According to Alphaliner, methanol boxship orders have grown more rapidly than LNG in the last six months, while carriers have all but ditched orders for conventional fuel oil tonnage with just 8% of orders by capacity so far this year going for the old fashioned bunker fuel…
Methanol boxship orders growing more rapidly than all other fuel types
‘Don’t forget that we not only generate more electricity from our North Sea wind farms than we actually need but also that all that electricity does not fit into our electricity grid. We are therefore happy to convert some of the electricity into green hydrogen. What is this hydrogen good for? The hydrogen we produce and import here is intended as a renewable energy source or feedstock for industrial and mobility applications in North-West Europe. We are also the transit port for this hydrogen.’
Port of Rotterdam: Energy transition in the pipeline
I also came across an article from the highly innovative transportation start-up Einride about scope 3 emissions. For companies that will use our green shipping corridor between the Atlantic and the Pacific: it is zero-emission, so no scope 3 emissions to report for that leg.
Scope 3 emissions: These are all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
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Measuring and reporting Scope 3 emissions is an effective way for companies to show stakeholders – including investors, customers and employees – that they understand their impact on the environment, and are working actively to consciously reduce their overall footprint.
What are Scope 3 emissions? And why should you report them?
Innovation
One of the key features of Zergratran’s shipping solution is the two automated ports that will be built on Northern Colombia’s Atlantic and Pacific coasts. For many people, the word automation sounds scary; they are afraid that robots are coming to take away their jobs. We don’t believe that is the case. We do believe that humans will move to different jobs where they can add more value. We agree with the White House’s supply chain envoy…
“Automation has to be part of the solution going forward, but it doesn’t have to be at the expense of labor,” Lyons said. “Labor has to be part of the solution.”
It’s reasonable for businesses to look at investments in technology that would enhance production and efficiency, Lyons said.
Supply Chain Envoy Says Automating Ports Doesn’t Have to Cost Jobs
The final item for this week has to do with the digitalization of ocean shipping. The end of the paper bill of lading is finally in sight.
With an eye on switching to a fully standardized electronic bill of lading (eBL) by 2030, the Digital Container Shipping Association (DCSA) recently announced its nine ocean carrier members have pledged to commit to 100% adoption of an eBL, which will be based on DCSA standards.
Based in Amsterdam, the DCSA is a neutral, non-profit group comprised of major ocean carriers, with a focus on digitizing and standardizing the container shipping sector, as well as increasing the transparency of container transportation services.
Digital Container Shipping Association members herald commitment to eBL by 2030
The transition to eBLs is expected to save stakeholders billions of dollars.
9 ocean carriers commit to 100% electronic bill of lading by 2030
That’s all for this week!
