World Maritime News
WMNF 16/10/2024
Maersk chief Clerc stresses urgent need to close green fuel price gap as newbuilding orders imminent
Maersk’s CEO, Vincent Clerc, has emphasized the urgent need to close the price gap between green and fossil fuels to make green fuels economically viable. This call to action comes as Maersk faces challenges securing sufficient green fuel supplies for its dual-fuel methanol ships, which are part of its ambitious decarbonization plans. Despite these challenges, Maersk is expected to sign new building contracts for more ultra-large containerships soon. Clerc and other shipping leaders urge the International Maritime Organization (IMO) to implement a robust regulatory framework to support the transition to greener fuels. Maersk’s frustration over green fuel scarcity is compounded by the higher costs of these fuels, which are two to three times more expensive than conventional fuels. This cost disparity places a financial burden on customers, creating a dilemma between affordability and environmental responsibility. To address this, Maersk has proposed a ‘green balancing mechanism’ to the IMO, rewarding those using greener fuels and helping make the green choice more economically viable for all stakeholders. Additionally, Maersk’s new Gemini Cooperation with Hapag-Lloyd will launch in February 2025, offering services via the Cape of Good Hope due to safety concerns in the Red Sea.
Read more: Lloyd’s List
New risk landscape emerging for shipping
Drewry Shipping Consultants managing director Tim Power told the following at the International Association of Ports and Harbors’ World Ports Conference in Hamburg.
The shipping industry, known for its resilience, faces emerging risks that could challenge its stability. Despite a seemingly stable global economy, several threats loom:
[Short-term Risks]
Overcapacity: Particularly in containerships and LNG carriers, with a significant orderbook against modest growth rates. Freedom of Navigation: Increasing geopolitical tensions could restrict navigation, undermining the industry’s resilience.
Regulatory Distortion: New regulations, like the EU Emissions Trading System, are already impacting transshipment volumes and could increase shipping costs.
[Medium-term Risks]
Energy Transition: The shift to alternative fuels like ammonia poses risks due to their toxicity and uncertain emissions benefits.
[Long-term Risks]
Decarbonization: The move to a lower-carbon economy will alter the types of cargo shipped, potentially reducing demand for bulk carriers and oil tankers.
Geopolitical and Trade Shifts: Increased protectionism and localized production could reduce the need for intercontinental shipping, leading to a decline in global maritime trade. These factors combined could fundamentally change the shipping industry, challenging its long-standing resilience.
Read more: Lloyd’s List
MSC puts ports at centre of network strategy
MSC (Mediterranean Shipping Co) focuses on ports as the core of its network strategy to enhance agility, adaptability, and operational flexibility. At the World Ports Conference in Hamburg, CEO Søren Toft highlighted the need for extensive port coverage due to changing supply chains and the importance of not relying on a few countries. MSC’s new network aims to handle market conditions swiftly and efficiently, with direct port calls increasing from 12 in Asia to 13 in northwest Europe, offering 1,900 direct port combinations.
Key points include:
Diversified Supply Chains: Moving away from reliance on a few countries.
Direct Port Calls: Enhancing agility and reducing transit times.
Investment in Ports: Owning stakes in 100 ports to maintain control and efficiency.
Climate Goals: Emphasizing the need for efficient ports to save fuel and contribute to climate targets.
Fuel Strategy: Advocating for a pragmatic approach to fuel availability, focusing on LNG and potential future fuels.
Despite challenges, Toft remains optimistic about the container shipping sector, citing continued GDP growth and healthy container volumes.
Read more: Lloyd’s List
EU shipping emissions fell in 2023
In 2023, the European Union’s shipping CO2 emissions fell 8% to 127 million tonnes, driven by reduced imports and exports. Dry bulk vessel emissions saw the largest drop at 23%, while containership emissions fell by 6%. Overall, maritime transport, which constitutes about two-thirds of EU trade, experienced lower activity, contributing to the decline in emissions. Tankers and gas carriers were the largest emitters, followed by containerships and dry bulk vessels. Despite the decrease, emissions are expected to rise in 2024 due to disruptions in the Red Sea, causing ships to take longer routes around Africa. The EU Emissions Trading System (ETS) tax, based on 2023 emissions data, is estimated to cost $2.6 billion (€2.4 billion) in 2024, with costs potentially rising to $6.6 billion (€5.98 billion) by 2027 as the system phases in. However, these costs could decrease if EU Allowance prices remain below €70 per tonne of CO2 equivalent.
Read more: Lloyd’s List
Long-term offtake contracts among challenges to alternative fuel adoption
Adopting alternative fuels in shipping faces significant challenges, particularly regarding pricing and long-term supply contracts. Producers of green fuels require shipowners to commit to long-term offtake agreements at specific prices, which is problematic for shipowners, especially those in tramp trades. These agreements can heavily impact shipowners’ balance sheets and contradict conventional business practices. Susana Germino of Swire Shipping highlighted the difficulty of committing to a specific fuel type without a clear regulatory framework or future trading scenario. This issue is also prevalent in green corridors, where similar long-term commitments are expected. The main challenge for shipowners is adapting their business models to accommodate fixed fuel prices.
Read more: Lloyd’s List
Small ports face big challenges to decarbonize
Small ports in developing nations face significant challenges in decarbonizing due to higher maritime transport costs and the impacts of climate change. The International Maritime Organization’s 2023 greenhouse gas strategy emphasizes a “just transition” to net zero by 2050. Smaller economies need enhancements to port facilities to improve services and reduce costs. Frank Luisman, senior partner at consultants MTBS, spoke at the International Association of Ports and Harbors’ World Ports Conference in Hamburg. Carbon pricing mechanisms could disproportionately affect these countries, making it crucial to reinvest financial resources to support their transition. Ports in smaller economies prioritize resilience over decarbonization due to their vulnerability to climate shocks. Funding allocation is challenging, and building new facilities is often more cost-effective than upgrading existing ones.
Read more: Lloyd’s List