Shipping industry fails to reduce carbon emissions

Shipping industry fails to reduce carbon emissions

If the container shipping industry fails to proactively act on reducing carbon emissions, national and regional regulation will likely impose a heavy burden on shipping companies, an international working group looking at the issue of decarbonising shipping said. 

The group at the Danish Maritime Forum called for the establishment of an industry task force to come up with a plan to reduce the emissions in a unified and global context. As other sectors decarbonise, shipping’s share of global CO2 emissions will continue to increase. There is a clear risk of national or regional regulation if the industry does not act, said a report on the findings of the group. 

One of the main concerns of the industry currently is the possibility of being subjected to national reduction targets if it does not deliver a strategy within the International Maritime Organisation, the report noted. This will undermine the global nature of shipping and will lead to competitive distortions and increased administrative burdens on companies. 

Last year the IMO set 1 January 2020 as the implementation date for the reduction of marine fuel sulphur content from 3.5% currently to 0.5%. Several key industry groups welcomed the decision. However, there is a high degree of concern over how the target can be reached from a practical point of view and over its potential cost to shipping companies, particularly for operators of less efficient equipment and because of the scarcity and expense of low sulphur fuel. Low sulphur marine gasoline oil is around double the price of high sulphur residual fuel oil. 

Neither the refining industry nor the shipping industry is likely to be prepared for a 2020 implementation date. (JOC)

Container leader woes tells a story

The largest container shipping line in the world Maersk Line’s turnover (including MCC Transport, Safmarine, Seago and SeaLand) contracted by 13% to $ 20.7 billion, whilst EBIT turned from a positive $ 1.43 billion in 2015 to a negative $ 396 million last year. Due to a tax refund, NOPAT (net operating profit/loss after tax, thus excluding interest payments) was a slightly better minus $ 376 million. Its quarterly result was somewhat better than in the same quarter of 2015, but deteriorated compared to 3Q2016. 

On a corporate level, the A.P. Moller-Mearsk group did not perform well either, with a net loss of $ 2.35 billion, compared to a profit of $ 425 million the year earlier. The situation was particularly bad for Maersk Drilling (minus $ 649 million) and Maersk Supply Service (minus $ 1.23 billion), due to massive impairment losses. (DynaLiners)

Supreme Court blow to Port of Hamburg 

As referred to in DynaLiners, the German Supreme Federal Court has dealt a blow to the deepening of the River Elbe, giving access to the port of Hamburg, ruling that the project is partly unlawful and the plan has to be improved to better protect a rare plant species (Hemlock Water Dropwort). Although this may not be the end of the project, it will delay it by at least two years.

Global full container volumes up by 3.5%

In 2016, global full TEU volumes climbed by 3.5% year-on-year to 153.7 million TEU, according to (provisional) figures from Container Trades Statistics (CTS). Inter-continental trade rose by 2.9% to 101.7 million TEU, whilst intra-regional volumes grew by a higher 4.6% to 51.9 million TEU. Except for Sub Saharan African where numbers contracted by 1.2%, export container trades were higher for all corridors, with Australasia standing out with no less than 7.1% growth. Also the relatively small volumes from Middle East/Indian Sub-Continent and Latin American grew fast. Exports from the three main continents increased much less, with Europe the worst of the class. (DynaLiners)

Russia fines shipping lines

Russia has (initially) fined five carriers, CMA CGM, Evergreen, Hyundai, Maersk Line and OOCL, a combined RUB 1.5 billion ($ 22.5 million) for the co-

ordinated setting of freight rates on the Far East-St. Petersburg route in 2012 and 2013. However, after negotiations with the country’s Federal Anti-Monopoly Service (FAS), Maersk Line managed to reduce the initial $ 12 million to just $ 230,000. Other carriers are likely to be treated similarly, while FAS has reportedly promised to bring the Russian regulations up to international standards. (DynaLiners)

Asia-Europe spot rate continue to contract

The rate continues to slide despite reports that space on vessels is limited. Spot freight rates on the Asia-Europe trade continued to weaken as demand drops off and tight capacity management by container lines is unable to stop a slow but steady slide from January’s highs. The Shanghai-North Europe 

rate fell 6% this week to $ 858 per 20 foot equivalent unit, with the Asia-Mediterranean rate dropping 4% to $ 844 per 20 foot equivalent unit, according to the latest reading of the Shanghai Shipping Exchange SCFI. This is the seventh consecutive week the Shanghai-Europe rate has declined, falling from a high of $ 1,168 per TEU reached on Dec. 30. However, the year-over-year comparisons show the current spot rate to be two and a half times higher than the rate in the same week in 2016. (JOC)

Chinese exports surge

The port of Shanghai’s container throughput rose 12% in January year-over-year. Container shipping continued to enjoy stronger demand for ocean transportation in January, something that was clearly reflected in China’s robust export growth for January to its two largest trading partners, the United States and Europe. Exports to China’s biggest trading partner, the European Union, grew 13.6% in January compared with the same month in 2016 and exports to the United States rose 17.2%. 

Overall exports in January were up 15.9% and imports grew 25.5% according to China Customs. A rush to get goods on the water before factories closed for Chinese New Year drove up the number of containerised exports in December and into January. China’s largest container port, Shanghai, experienced its throughput in January grow to 3.3 million twenty foot equivalent units, a 12% year-over-year increase. This growth in volumes leaving the mainland benefited ports on the other side of the world. (JOC)

Increase in idle container vessels

Compared to two weeks earlier, the 6 February idle fleet grew by 6 ships/26,000 TEU to 342 units/1,323,500 TEU or 6.5% of the global total. In the smallest category (<1,000 TEU) the number of vessels declined by five, but this was undone by strong growth in the segment just above it and small increases for the larger size categories.

[The writer, a Maritime Economist, is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP).]