It’s those darned “stakeholders” who are the trouble once again. It is one of those words which was unknown in an earlier era of free speech, when you could be quite clear about identifying those you were talking about, without having the lawyers or twitterati on your back. Now it has become common parlance. Those pesky stakeholders came to mind the other day, reading the INTERCARGO bulk carrier casualty report, which covers the latest ten year period to 2021.
In many respects, there would appear to be room for some optimism, as the sector has moved on substantially from the disastrous times of the 1980s and 90s, when large numbers of predominantly elderly bulkers were being lost, usually with their crews. Better maintenance, closer surveillance by people who know what they are looking for and more responsible behaviour by terminal operators, all combined to relegate this awful period to the history books.
The sector also learned valuable lessons about quality and supervision from colleagues running tankers, with the emergence of quality drivers like Rightship preventing any backsliding. One might conclude that the organisation, which has worked hard to promote safety and quality, has some room for satisfaction.
However, there is included in the report a warning against any complacency, as it notes that the menace of liquefaction remains a problem, illustrated by the five big bulk carriers lost with the deaths of 70 of their crews after their cargoes of nickel ore and bauxite liquefied on passage. Altogether, during the ten-year period under review, 27 ships over 10,000 dwt were lost and 92 crew died in these casualties.
According to INTERCARGO vice chairman Uttam Kumar Jaiswal, who focused particularly on the continuing risks of liquefaction, systems, codes and procedures for testing and sampling which are designed to protect the vessels were not being followed. And while emphasising that his remarks were not directed at ship operators, there was “a lack of consolidated effort by stakeholders” when it came to following codes that would keep ships safe.
It was those stakeholders again, whose attitudes, one might suggest, are relics of those found in the past, when casualties were regular occurrences. People like charterers, who would put all manner of pressure on masters to load cargo which they knew had excessive water content, in some rackety bulk terminal, with its stockpiles awash in rain-soaked slurry. People whose attitude to the bulk cargo codes was cavalier, to say the least, with inadequate testing procedures by so-called “surveyors” who were neither expert nor independent, but just a cog in the machine to get the ship loaded and away to sea.
You might suggest that the actual number of casualties, with four attributed to wet nickel ore and one to bauxite was small, over a ten-year period. Yet these were not rustbuckets, but modern ships and those 70 dead seafarers should not have met such a fate. And in the warning against complacency, there is more than a hint that in some soggy creek in South East Asia or West Africa, there will still be “stakeholders” prepared to take short cuts over proper water content testing and pressure still being applied on masters to open their hatches and get the cargo aboard, wet season or not. They don’t seem to realise, or perhaps they just don’t care, what is at stake.
Apart from the completely avoidable liquefaction casualties, the report to the IMO also suggests that grounding played a role in the totality of loss and you have to admit that this is also a cause of loss generally associated with some degree of incompetence. But you have to wonder whether, at least at the end of this period under review, there were more accidents in which the miserable lives being lived by ships’ crew might have been a contributor. Trapped aboard their steel boxes, unable to get ashore or home on leave at the end of their contracts, it would not be a perfect recipe for a focussed and committed workforce, as the long months ticked away.
It will be interesting to see whether there is any related movement in the casualty statistics covering this miserable period of pandemic, when the next report comes around. A rather different set of stakeholders, perhaps, although their influence on casualties should not be altogether discounted.
‘MARPOL at 50 – Our commitment goes on’ has been selected as the upcoming theme for the International Maritime Organization’s 2023 World Maritime Theme, which will culminate in a World Maritime Day celebration on 28 September next year. The theme reflects the organization’s long history of protecting the environment from the impact of shipping via a robust regulatory framework and emphasizes its ongoing commitment to this important work.
IMO Secretary-General Kitack Lim said, “A lot has changed in shipping in the 50 years since the MARPOL Convention was adopted on 2 November 1973, and IMO’s commitment to protecting and preserving the marine environment has remained unwavering. The World Maritime Theme for 2023 will allow us to celebrate this legacy, while also underscoring our dedication to building on the existing foundations as we move towards a brighter future together.
“Our work to reduce Greenhouse Gas emissions is critical, and – given the urgency of the climate crisis – we must act now to strengthen our ambitions on this matter. We must also tackle other issues including protecting biodiversity, biofouling , the transfer of invasive species, and plastic and noise pollution. Protecting the marine environment requires shared action and I look forward to what the next 50 years will bring,” he added.
The theme, which promotes discussions on the next phase of IMO’s work to further protect the planet and the oceans, is also linked to the UN 2030 Agenda for Sustainable Development and the 17 Sustainable Development Goals (SDGs). These include affordable and clean energy (SDG 7); industry, innovation and infrastructure (SDG 9); climate action and sustainable use of the oceans, seas and marine resources (SDGs 13 and 14); and the importance of partnerships and implementation to achieve these goals (SDG 17).
The IMO Council, meeting for its 127th session, endorsed the theme following a proposal by IMO Secretary-General Kitack Lim.
History of the Convention
The Torrey Canyon oil spill in 1967, the largest oil disaster at the time, was one of the key moments that led to the development of the MARPOL Convention. The 1970s saw increased global awareness of the need to protect the marine environment from all sources of pollution, subsequently resulting in the adoption of the MARPOL Convention and the 1978 MARPOL Protocol in 1973 and 1978, respectively. The combined instrument entered into force on 2 October 1983.
MARPOL 73/78 is the most important international instrument covering prevention of pollution of the marine environment by ships from operational or accidental causes. In 1997, a Protocol addressing prevention of air pollution from ships was adopted and entered into force on 19 May 2005.
Evolution of MARPOL
Today, MARPOL covers pollution of the sea by oil, noxious liquid substances in bulk, harmful substances in packaged form, sewage from ships and garbage from ships, air pollution from ships, and regulation of energy efficiency. It also allows for the adoption of special areas with even stricter controls on operational discharges.
The adoption of the Initial IMO Greenhouse Gas (GHG) Strategy in 2018 to decarbonize the sector as soon as possible before the end of this century has set the policy framework for the development and adoption of further measures within MARPOL to enhance energy efficiency of ships.
The marine cargo industry continues to be rocked by the global pandemic, supply chain issues, fluctuating rates, fuel costs, port congestion and the Russia/Ukraine war that has no immediate end in sight.
When normalcy in the industry will return is anyone’s guess, but hopefully – with a slight alteration to one of Abraham Lincoln’s favorite sayings – “These, too, shall pass.”
Ports involved in the roll-on, roll-off sector, however, aren’t waiting for things to pass and are pushing forward with infrastructure improvements to handle the anticipated rebound, especially with automobiles.
On the Move
At the Georgia Ports Authority’s (GPA) Port of Brunswick, for example, things are on the move at Colonel’s Island, one of the nation’s largest auto import terminals. “No other ro-ro terminal in the U.S. can scale up like Colonel’s Island,” says Bruce Kuzma, GPA’s Senior Director of Trade Development for Ocean Carrier & Non-Container Sales, “which features 355 acres permitted for expansion. From channel improvements to new dock space, additional warehousing and greater vehicle-processing capacity, GPA is building the necessary infrastructure in Brunswick to grow along with our customers.”
GPA recently received federal approval to add a fourth berth at Colonel’s Island. Kuzma says the project is currently in the engineering stage and is expected to be completed in 2025. The new berth will allow the port to more efficiently accommodate the 7,000+-unit vehicle carriers that are becoming the industry standard at U.S. ports.
Improvements are also underway beyond the berth including two warehouses totaling 350,000 square feet to serve vehicle-processing and high-and-heavy storage needs. The buildings will support both import and export cargo. Anticipated completion is April 2023.
Like the container sector, ro-ro ships are getting bigger with the largest having capacities of 8,500 units.
Ro-ro traffic at the Port of Virginia is up as shippers look for safe havens from the escalated rates and capacity constraints on the container side, says Aaron Katrancha, Director of Breakbulk & Ro-Ro Sales: “Two of our long-time customers, ACL (Atlantic Container Line) and WWL (Wallenius Wilhelmsen), are building their businesses and increasing their ro-ro volumes moving over Virginia. The conversion of the Portsmouth Marine Terminal into the logistics hub for the Mid-Atlantic’s offshore wind-to-energy industry will definitely create an increase in ro-ro business as well, but that won’t take effect until late next year.”
High-and-Heavy Boom
From the shipper’s perspective, the boom in imports of heavy construction equipment from Europe is helping offset any falloff in ro-ro deliveries.
“When the $1 trillion USA Infrastructure Investment & Jobs Act was signed into law in November 2021,” says Andy Abbott, ACL’s President & CEO, “most experts had anticipated a nine-month lag while project specifications were written and put out to bid. However, the supply chain turmoil of the past year prompted most manufacturers to try to get a jump on the expected boom in construction equipment cargo volume. Oversized import cargo had already been picking up during 2021, but we were caught off-guard by the surge that began in January 2022 and continued to grow with each passing month.”
In other words, the current situation is one of demand exceeding supply. “Ships are now booked out completely with North American imports for eight weeks in advance,” Abbott adds, “yet project specifications are still on the drawing board. The major construction equipment manufacturers are looking to lock in more space, but that’s difficult to do when cargo volume, prices and costs continue to rise.”
He says what happened in the container markets during the past 18 months is now hitting the high-and-heavy market: “Customers who were ‘burned’ by lack of container space last year do not want to make the same mistake again on oversized cargo.”
And the peak is nowhere in sight. “We’re probably at least a year away from that,” Abbott says. “Luckily for now, operators of car carriers have opened up more space for high-and-heavy cargo because of the reduced car volumes associated with semi-conductor shortages. However, the semi-conductor problem will soon be fixed. When that happens, the huge backlog of automobile orders will quickly gobble up a huge amount of the available car carrier space, reducing the space for high-and-heavy cargo significantly.
Meanwhile, on the North American export side, high-and-heavy volumes had begun to pick up at the start of 2022. Since then, however, the impact of the war in Ukraine has cut cargoes into Russia, Ukraine, Belarus and their neighbors to the south. Most units initially destined for those countries are now being diverted back to the U.S.
“As long as the war drags on,” says Abbott, the North American high-and-heavy export market will stagnate. But if the war could be brought to a peaceful conclusion, the construction and agricultural equipment boom would be significant.”
Ro-Ro Revival
Meanwhile, after a pandemic-related decline of 23 percent in 2020, the Port of Galveston’s ro-ro tonnage has fully recovered and is projected to grow in 2022, says Rodger Rees, Galveston Wharves Port Director & CEO.
Located on the Gulf of Mexico, the Texas port moves all types of ro-ro cargoes including new cars, agricultural and construction machinery, heavy equipment and household goods for military service men and women returning from overseas. Ro-Ro accounts for about 10 percent of Galveston’s cargo. Wallenius Wilhelmsen, “K” Line and American Roll-On Roll-Off Carrier (ARC) are some of the ro-ro shippers that regularly call on Galveston.
In 2021, the port invested in infrastructure improvements at its West Port Cargo Complex to consolidate operations and accommodate more large ro-ro construction and farming equipment. The project included new paving, dock repairs, an equipment processing center and an industrial wash pad for equipment exports. The complex is designed to handle a wide range of cargoes including ro-ro, large wind turbine pieces and grain with rail service, laydown areas and more. New imported BMWs are prepared at a separate vehicle-processing center at Pier 10.
“The complex provides direct access to major interstate highways and rail lines, making it an ideal location for efficiently moving ro-ro cargoes to their final destinations,” says Rees.
Sunshine State
The Port of Jacksonville (JAXPORT) is also gearing up to further grow its massive auto business. “The investments underway to increase our auto capabilities, combined with rapid population growth in the southeast U.S. and Florida in particular, make us well-positioned to build on our role as one of the nation’s top vehicle-handling ports in the coming years,” notes Alberto Cabrera, JAXPORT’s Director of Automotive, Cruise & Cargo Development.
Cabrera says demand for vehicles is not slowing down and is likely pent up due to dips in supply stemming from the lingering parts shortages impacting the industry: “While we never want to see volumes decline, the current industry slowdown makes for an ideal time to build new facilities. We couldn’t have picked a better time to make these long-term strategic improvements including the Southeast Toyota expansion and the buildout of our ro-ro berths. We’re building the auto-processing infrastructure now to be ready to serve the needs of the industry when volumes rebound.
In 2019, before the pandemic, JAXPORT moved nearly 700,000 vehicles – a port record. “Over the next three to four years, we expect to return to and surpass pre-pandemic levels, retaining our role as one of the largest vehicle-handling ports in the nation,” Cabrera adds.
The most recent development at Port Tampa Bay is a new tenant, North Atlantic International Ocean Carrier, says Wade Elliott, Vice President for Business Development.
“They’re a North American vehicle transportation and freight forwarding company that has facilities at various ports in the U.S. and Central America,” he explains. “They’re leasing property for the storage and transloading of vehicles for export to Central America. Among the services they will be supporting is the Dole Ocean Cargo Express service to Honduras and Guatemala, which began calling Tampa last July.”
No Delays
At the Port of San Diego, which handled 361,008 autos in 2021, the speed and efficiency of vehicles being off-loaded at the National City Marine Terminal hasn’t been affected by supply chain issues, says Greg Borossay, Principal, Maritime Business Development.
“Both rail and truck services out of this terminal continue to function smoothly,” he says. “There are no waits for vessels and no delays in operations. We’re continuing to see regular business with Mexico including Toyota Tacoma pickups from Tecate,” San Diego is still moving more volume than any of the West Coast auto-processing ports, he adds.
The National City Marine Terminal is now the focus of an environmental review phase for a project that will help improve operations, increase maritime commerce and add maritime jobs.
“The new land use plan will include a road closure that will provide the terminal with more contiguous space to improve terminal efficiency,” Borossay says. “It will also include rail efficiencies with connector track.”
The port has also been working on a project to study ways to improve mobility and safety for users of Harbor Drive, a main link between the two cargo terminals and maritime industrial businesses on the waterfront, and plans to add shore power infrastructure at the National City Marine Terminal.
The Board of Port Commissioners recently approved a public/private project for the acquisition of a bonnet to curtail air emissions. The bonnet will be manufactured and delivered in 18-24 months. This will supplement, not replace, the planned shore power.
Oslo-listed product tanker unit of BW Group, Hafnia, has proposed to increase its authorised share capital by an additional 25%.
In a letter to the shareholders, BW Group chairman Andreas Sohmen-Pao asked to up the share capital from $6m to $7.5m by the creation of an additional 150,000,000 common shares of par value $0.01 each equally ranked with the existing shares of the company, closing yesterday at around $3.14.
The company’s current share capital is divided into 600m common shares of par value $0.01 each, of which close to 500m common shares have been issued.
Sohmen-Pao wrote that the move would provide Hafnia with a “greater degree of flexibility in structuring transactions and would allow it to issue new shares in connection with fund raising opportunities as and when they arise.”
Hafnia commercially operates a fleet of 252 vessels, including newbuilds, of which 146 are owned or chartered-in. The company reported a net profit of $21.3m for Q1 2022, with earnings per share of $0.05.
Port of Los angeles handled more than 5.4 million TEUs at the mid-point of 2022, matching last year’s record-setting pace. Photo from Port of Los Angeles
Port of Los Angeles moved a record 876,611 TEUs in June, edging out its best June in history last year. Neighboring Port of Long Beach also achieved its most active June and busiest quarter on record, moving 835,412 TEUs
LA Port handled 5.4 million TEUs by mid-2022, matching last year’s record pace. Port of Long Beach moved 5 million TEUs during the period
LA Port executive director Gene Seroka attributes the record figures to the port’s success in cutting ship queues by 75%, allowing workers to handle more vessels. Long Beach Port credits China’s lifting of COVID lockdowns for the strong trade
Port of Los Angeles moved a record 876,611 twenty-foot equivalent units (TEUs) in June, edging out last year’s best June in the Port’s 115-year history. Nearby Port of Long Beach equally achieved its most active June and busiest quarter on record, moving 835,412 TEUs.
LA Port has handled more than 5.4 million TEUs at the mid-point of 2022, matching last year’s record-setting pace. Port of Long Beach moved 5 million TEUs in the first half.
The two ports announced their results as hundreds of independent truck drivers protested at the gates of the two California ports against the newly passed state law, AB5 or the “gig worker” law, which sets tougher standards for classifying workers as independent contractors.
“Halfway through the year, we’ve been able to reduce the number of vessels waiting to berth by 75%, allowing dock workers to efficiently process more vessels,” said Port of Los Angeles executive director Gene Seroka.
“We’re already beginning to handle back-to-school, fall fashion and year-end holiday goods. Despite inflation and higher-than-usual inventory, we expect cargo volume to remain robust the second half of the year.”
Seroka announced the June numbers at a media briefing, where he was joined by Retired Gen. Stephen R. Lyons, the recently appointed port and supply chain envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force.
Lyons discussed supply chain challenges across the United States and what is being done to improve the movement of goods and help bring down costs for American families.
June 2022 loaded imports reached 444,680 TEUs, a 5% decline from the previous year, but 12% higher than the previous five-year June average.
Loaded exports came in at 93,890 TEUs, down 2.3% from the same period last year. American exports out of the Port of Los Angeles had declined in 39 of the past 44 months.
Empty containers reached 338,041 TEUs, an increase of 8.1% from last year.
The busiest seaport in the Western Hemisphere, the Port of Los Angeles is North America’s leading trade gateway and has ranked as the No.1 container port in the United States for 22 consecutive years.
The Port of Long Beach also achieved its most active June and busiest quarter on record, boosted by increased consumer demand as retailers stock shelves for back-to-school shopping.
The 835,412 TEUs that dockworkers and terminal operators moved in June was up 15.3% from the same month last year and surpassed the previous record set in June 2018 by 83,224 TEUs.
Imports rose 16.4% to 415,677 TEUs, while exports saw a 1.4% decrease to 115,303 TEUs. Empty containers moved through the Port jumped 21.6% to 304,433 TEUs.
The Port moved 5,007,778 TEUs during the first half of 2022, up 5.3% from the same period last year. It was also the port’s best quarter overall with 2,547,119 TEUs moved from April 1 to June 30, breaking the previous record set during the first quarter of 2022 by 86,460 TEUs.
“We are anticipating a robust summer season as consumer demand continues to drive cargo to our docks,” said Port of Long Beach executive director Mario Cordero.
“We expect to remain moderately busy in the coming months, and we will work to promptly process containers lingering at the port.”
“Our waterfront workforce continues to move cargo at a record-setting pace,” said Long Beach Harbor Commission president Steven Neal. “Our strong partnerships with labor and industry continue to make us a leader in trans-Pacific trade.”
The cargo influx arrived as pandemic-induced shutdowns were lifted in China, retailers stocked up on back-to-school supplies and ongoing consumer demand continued to be robust despite inflation and the potential threat of an economic recession in 2023.
The 3rd edition of Saudi Maritime Congress, one of the Kingdom’s most influential gatherings of professionals from the maritime and logistics industry is set to make a comeback. The event is scheduled to take place in Dammam on 28 – 29 September 2022.
The much-awaited exhibition and conference has garnered great support from major regional and global companies such as Saudi Global Ports Co., DP World, ATCO, Al Tamimi & Co, Red Sea Gateway Terminal, Ince, Columbia Shipmanagement and Inmarsat, among others.
Enriching Saudi’s economy
Saudi Arabia is currently experiencing a boom in the maritime sector due to several mega infrastructural, land and sea projects in progress. The Kingdom intends to issue 12 bids for investment in the development of its ports during 2022 as part of privatisation plans in its maritime industry. In view of these developments, Saudi Maritime Congress will further amplify the success of the sector.
Chris Morley, Group Director – Maritime Events, Informa Markets said, “Owing to the significance of the event in transferring experiences and demonstrating investment opportunities, Saudi Maritime Congress is of strategic importance to the Kingdom and the GCC. We aim to heavily complement the Kingdom’s pioneering model and the objectives of the Saudi Vision 2030.”
Morley added, “In the 2019 edition, in just its second occurrence, we witnessed the presence of nearly 1,000 maritime influencers. This year, we are looking at a drastic increase in the number of attendees as the event is makes its long-overdue comeback after the pandemic. With 30 per cent of the event’s attendees being C-suite leaders and 49 per cent working at the managerial level, Saudi Maritime Congress is a great platform to network with high-level professionals. Additionally, with over 30 countries represented, businesses and professionals can explore multiple opportunities to reach new and potential customers from across the globe. Our ultimate aim is to facilitate fruitful cooperation between the public and private sector entities that are working tirelessly to ensure the progress of the sector.”
As a knowledge-sharing platform, the Congress will also provide key insights on the rapidly progressing shipping and logistics sectors that are key economic pillars, paving the way for economic diversification in the Kingdom. Additionally, the two-day event will offer a platform for insightful discussions among regional and international stakeholders and decision-makers. Some of the key subjects that will be highlighted will be maritime infrastructure and investments, sustainability regulations, offshore developments, FDI opportunities in the Kingdom, and automation and smart technologies.
A new event Ocean Expo Ningbo is promoting cooperation opportunities in the vibrant port city of Ningbo and the one of the world’s largest container ports Ningbo – Zhoushan.
On July 12-13, the Maritime Silk Road · Ocean Expo Ningbo Online was officially launched with over 80 companies participating in an online exhibition as well as a Smart Port Innovation Summit.
Zhigang Li, Deputy Secretary General of Ningbo Municipal Government, conveyed a message from Wei Hua, Executive Vice Mayor of Ningbo that the expo was a vital part of a strategy of “accelerating the construction of a strong ocean province, promoting the co-construction of Ningbo Zhoushan as a Leading Maritime Capital.”
The online Expo and Smart Port Innovation summit saw the participation officials from Singapore, the world’s second largest container port.
Quah Ley Hoon, the Chief Executive of Maritime & Port Authority of Singapore (MPA) said, “China and Singapore enjoy strong maritime relationship. Beyond strong collaboration between our port terminals, China’s Maritime Safety Administration (MSA) and MPA inked a memorandum of understanding (MOU) in 2021 to promote, accept and use electronic certificates for seafarers and ships for port clearance. Thus far, we have conducted more than 10 trials on such operations, and can serve as a benchmark for other ports on e-port clearance.”
Ocean Expo Ningbo is an initiative led by Ningbo Municipal Government and Informa Markets, co-organised by China Shipowners Association and co-hosted by Ningbo Younage Exhibition Co., Ltd.
Bill Zhang, Vice President of Informa Markets (China), sees Ningbo as a natural location to hold the Ocean Expo giving opportunities for business cooperation. “We will take the opening of Ocean Expo Ningbo as an opportunity to introduce more cooperation and merger projects to promote the development of relevant industries in Ningbo,”he said.
Shouguo Zhang, Executive Vice President of China Shipowner’s Association, said they would make full use of this opportunity to enhance mutual understanding and explore cooperation opportunities to promote high-quality development of the global shipping industry.
In addition to the International Summit, Online Show Room, Meet Your Sea Friends and Online Match-making, Ocean Expo Ningbo will hold a larger offline exhibition in November 3 to 5 this year.
With the European Union closing in on the final proposals and then adoption of its Emissions Trading System, Maersk provided an expert opinion to customers on what the impact and cost might be for shipments starting January 2023. The shipping giant acknowledges that key points of the legislation for shipping to be incorporated into the EU Fit for 55 packages still need to be resolved saying nonetheless that the costs for shippers will likely be significant.
Maersk reviews for customers the progress as well as the current differences in the EU proposals while pointing out that the EU measures are likely to be the first ones to enter into force. While they recognize that other jurisdictions are also exploring similar measures, the EU they expect will not only be first but will have more far-reaching consequences. “The EU measures carry a large degree of extra-territoriality potentially affecting cargo moving outside of the EU’s borders.”
Based on the EuropeanCommission’s version of the legislation as the terms are still being negotiated between the different bodies, Maersk makes assumptions on how the ETS “cap-and-trade” system will come into effect and how it will impact shipping. They noted that the concept calls for the emissions cap which is lowered over time with companies buying or assembling allowances. “The price of the allowances is not fixed but fluctuates according to the market demand and supply of emission allowances.”
Based on the latest developments between the European Parliament and the Council of the European Union, Maersk presented a model for the potential costs and what would be passed along to shippers. The model uses the assumption that the price of the European Union Allowance (EUA) will be around EUR 90 ($91.30 at current exchange rates).
Looking at the cost impact on dry cargo, Maersk sets the range of impact between approximately $100 and $200 based on distance and other factors. The average surcharge for shippers of dry cargo they estimate at nearly $160 with the highest cost on shipments between the West Coast of South America and Europe and the lowest from Northern Europe to Asia.
Reefer shippers can expect an even greater surcharge starting January 2023. The average is estimated at $235 with the range between approximately $150 and $325. The high and low are on the same routes as with dry cargo.
“The cost of compliance with the ETS will likely be significant therefore impacting the cost of shipping. It is expected that the volatility of the European Union Allowance (EUA) traded in ETS may increase, as the revised legislation comes into effect,” the expert opinion authored by Sebastian Von Hayn, Head of Network & Market Asia/EU concludes. “To ensure transparency, we plan to apply these costs as a standalone surcharge effective Q1 2023.”
Recognizing that it will be later in 2022 until a political agreement is likely to be reached, Maersk highlights the outstanding differences in the versions. For the purpose of their modeling, they used the European Parliament that abolishes the phase-in period instead meaning that the obligation to purchase allowances would be immediate versus the other drafts that started at 20 percent in 2023 and in the three subsequent years rise incrementally to 100 percent in 2026 and beyond. The proposals also vary if the allowances only pertain to CO2 or also include methane and Nitrous Oxide in the cap-and-trade limits.
Maersk also notes that the charges are linked to the ship and not the cargo making voyage planning even more critical. Some proposals also call for all voyages to be included regardless of if they are departing from a non-EU port or ending outside the EU.
Given the differing positions on elements such as the phase-in period, the percentage for voyages between EU and non-EU ports, and when carbon pricing begins, as well as other non-logistics related issues, Maersk advises customers that the negotiations will take some time before the details of the EU Fit for 55 package and its impact on shipping are finalized.
Despite support packages lined up by governments and power companies, ‘drastic moves’ may become necessary before the onset of winter, Rystad said, predicting that the power crunch is likely to strike earlier than expected.
Warning that it is increasingly a case of ‘when’, not ‘if’, the crisis arrives, Vladimir Petrov, the firm’s senior power analysts said: “Europe’s options with regard to gas, coal, nuclear and renewables filling the power gap are extremely limited and costly. European governments have announced a raft of policies to secure more supply, support consumers, and potentially curb demand should the crisis continue. The point at which the crisis will bite more deeply is looking closer and closer.”
Germany, Europe’s largest economy, has been hit hardest by the energy crisis because Russian gas accounted for about 55% of its supplies. There are few options for extra gas imports at present, Rystad said, although the Netherlands could ramp up output from the giant Groningen field, once Europe’s largest gas reserve. This is politically sensitive, however, following a succession of earthquakes over the last three decades.
Coal plant life extensions
Now, coal plants earmarked for decommissioning to meet greenhouse gas reduction targets are to undergo life extensions. Altogether, 46.7 GW of installed coal power generation was to be decommissioned between now and 2038 and this number was expected to fall to 36.1 GW this year, with the closure of about 24 units.
About 80% of the plants originally planned for decommissioning between 2020 and 2022 burn imported hard coal. Their life extensions will mean more imports. Prices, already dramatically higher than the beginning of the year, are likely to climb further. Rystad noted that AP12 thermal coal benchmark (6,000 kilocalories per kilogram delivered ARA range) is now trading at about $377 per tonne, up almost $250 since early January.
Suppliers of high-energy, low sulphur coal include South Africa, Colombia, and Australia, potentially good news for operators of panamax and capesize bulkers. Exports from South Africa have increased sharply this year, Rystad said, but lifting volumes further is a challenge. Most of the country’s exports are handled by the Richards Bay Coal Terminal which is currently operating at reduced capacity due to disruption on the railway, run by state operator Transnet. Producers are now even turning to road transport for the 90km journey at a price four times higher.
Nuclear power shutdowns
Meanwhile, in Europe, seven nuclear power stations with just over 7GW of capacity are due to be shut down between now and the end of next winter. None of these is likely to have shutdown reversals, with the phase-out of three German plants signifying an end to the country’s use of nuclear energy. However, of the seven nuclear facilities, the three German ones are the most likely to continue operating for a spell, Rystad said, although no decision has yet been taken.
Each nuclear plant generates more than 1GW – energy that the analyst says would greatly reduce some of the stress likely to be evident in the power grid this winter.
One positive note: in separate analysis, the firm has predicted that US natural gas production is set to hit an all-time high in the months ahead and will continue to rise next year. The astonishing difference between the US benchmark Henry Hub price ($7 per MMBtu) and the Dutch TTF, the European marker ($47 per MMBtu) makes production, liquefaction and shipping an economically attractive proposition. However, there is now concern in some quarters over the supply of global LNG shipping capacity.
The UK government should embrace the maritime industry as a means to meet targets on ‘levelling-up’, decarbonisation and economic growth, according to Peel Ports.
The logistics group’s CEO Claudio Veritiero said the maritime sector and government should form a partnership to meet national objectives and overcome the remaining challenges from Brexit and the pandemic.
Peel Ports Group published a 40-page report “A level playing field – The role of ports in achieving better outcomes for the UK’s levelling up agenda,” a response to the UK government’s February 2022 levelling up white paper.
“There has never been a better time, nor a more pivotal time, for us to assert our ambitions, considering the current environment… there is enormous scope for synergy between what is required for levelling-up, achieving Net Zero ambitions and the maritime logistics community,” said Veritiero.
The report said that coastal communities are under particular pressure, and that ports provide well-paying, productive jobs to people from the port hinterland area.
“There can be no levelling-up without giving current and next generations the chance to find their way in rewarding, meaningful work that also affords them and their families a good standard of living and hope for the future,” said the report.
Peel Ports’ own data showed 80% of its workforce of 2000 lives in the port hinterland area, its employees earn 36% above the UK average wage and are 51% more productive than the average UK worker.
The report goes into detail on the effects of its apprenticeship programme in Liverpool, the continued potential of the UK offshore energy sector, and the role of freeports in levelling-up.
Peel Ports said that the imbalance of UK cargo reflects a broader imbalance in the country, with 90% of deep-sea containers coming into the country’s south-east ports despite 60% of that cargo being destined for areas north of Birmingham.
“Levelling-up means looking at the most efficient way to transport goods to and from all parts of the UK, using the full stretch of the country to create quicker, easier and more reliable supply chains. In doing so it will benefit over-heated parts of the country while adding much-needed jobs and business opportunities to regions outside of the South East,” it said.
The group called for a new approach of utilising regional ports to increase capacity and capability, instead of short-term fixes to existing bottlenecks.
“A nationwide approach would result in a more sustainable supply chain, delivering cargo closer to the centres of economic activity, and greener use of the local logistic sector,” said the report.
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By Michael Grey*
