Sea Archives | Page 53 of 71

EU carbon tax on shipping is additional cost to IMO2023

Feb 2, 2023 | Environment, Sea

Ships emit around one billion tonnes of greenhouse gases every year, or 3% of global emissions and despite IMO 2023 aiming to reduce carbon emissions from international shipping by 40% by 2030 and 70% by 2050, the EU is including maritime emissions in its emissions trading scheme (ETS).

The EU plan will include shipping emissions in the bloc’s ETS, with a three phase-in from next year and means shipowners, regardless of the flag they fly, will have to buy carbon allowances known as EU Allowance contracts (EUAs), to cover all emissions during voyages in the EU and half of those generated by international voyages that start or finish at an EU port.

Vessel operators will need to surrender EUAs in 2025 for 40% of their emissions in 2024, in 2026 for 70% of their emissions in 2025, and in 2027 for all of their emissions in 2026, based on the preliminary agreement. Full coverage will continue thereafter.

In contrast to the EU’s plan, the UK government is currently proposing only targeting domestic shipping, but there are suggestions that not including international shipping in the UK’s Emissions Trading Scheme will be in breach of its legally binding climate obligations.

Experts suggest that EU ETS carbon prices of around $95 per tonne of CO2 would not make a significant impact in closing the price gap between fossil fuels and zero-carbon fuels for shipping, with a recent report by the University College London’s (UCL) suggesting that an average carbon price of just under $200 per tonne of CO2 is needed to fully decarbonise the shipping industry by 2050, according to the analysis.

“Initially, the ETS is not going to create a hugely impactful [carbon] price, but it will generate a significant amount of revenue,” said Dr Alison Shaw, research fellow at University Maritime Advisory Services and co-author of the report.

Based on the scenarios outlined in the UMAS report, the ETS would raise $5 billion in 2030 at a price of around 50 euros ($56) per tonne of carbon. If this price increased to 103 euros per tonne of carbon ($116) by 2030, the total revenue generated from shipping would be $9 billion, according to Shaw.

The inclusion of shipping in the EU ETS will drive up operating costs for container shipping lines and those costs will inevitably be passed onto shippers, in the form of surcharges.

The first customer circulars on the EU ETS issue from the carriers were in the third quarter of 2022, when the industry was expecting that emissions trading for shipping would come as early as 2023, but due to difficult negotiations at EU level, the plan has been postponed by a year, which is a relief for everyone involved.

The first calculations on cost effects estimate the cost of pollution rights for transports from the Far East to Northern Europe is 170 euros/FEU, and 99 euros/FEU in the opposite direction.

For shipments from European North Range ports to the US East Coast the estimate is 184 euros/FEU, with the costs for reefer transports significantly higher due to the additional energy requirements at 276 euros/FEU from Northern Europe to the US East Coast.

Shipowners, unsurprisingly, strongly oppose the EU measure, which they believe puts the EU in conflict with the IMO 2023 initiative and may lead shipping lines to consider shipping hubs outside the EU to lower their costs.

They could, for example, finish voyages in the Mediterranean (or maybe even the UK) and transfer containers to smaller feeder vessels, with a lower carbon output.

Its seems unavoidable that the shipping lines will not pass on these additional charges in coming years and that additional cost will be added as a result of the ETS scheme in Europe, and by default the UK.

There will be many factors that influence the costs accrued by EU ETS and we will be doing everything we can to mitigate its impact on our customers.

We will follow carriers adoption of cleaner fuel technology, the economies of scale offered by the largest vessels, the benefits of different routing options, intermodal opportunities and anything else which may provide cost and efficiency savings.

The ‘free of charge’ Eco module, that sits in our MVT supply chain platform, monitors the energy emissions, emission costs and CO2 equivalent emissions, of our customer’s consignments, by every mode.

The module is under continuous development, with regular updates, including distance calculators, that can be adapted to measure liabilities under the new EU ETS regime. When it is rolled out.

To request a demo or discuss your requirements, please EMAIL Simon George, who can outline our ECO strategies and offset projects.

Asia blanked sailings, rolled cargo and detours

Feb 2, 2023 | China, Sea, Supply Chain

Shipping lines have cancelled almost 30% of pre and post Chinese New Year sailings from Asia, with THE Alliance cutting 36% to Europe and diverting backhaul sailings around the Cape of Good Hope, which adds two weeks transit time to China.

In a normal year, the weeks building up to China’s Lunar New Year holiday see a spike in export shipping demand from China to most global destinations, including the UK and Europe, as orders are shipped before the factories close and production halts. This year, however, there has been no demand spike and carriers across the three alliances have cut 15 westbound departures, with just 69 ships departing on a round-trip to North Europe or the Mediterranean since the beginning of the year and the start of CNY.

In the period from 1st January to 17th February, Alphaliner calculated that the three big carrier alliances are planning to skip 27% of their originally scheduled Asia – Europe sailings.

Across the Alliances, there has been a 29% reduction in the number of 2M sailings in the first seven weeks of the year, while OCEAN Alliance has reduced the number of westbound voyages by 23% and THE Alliance has cut most sailings from the Far East to Europe, with a 36% reduction. This is partly due to the fact that their carriers are diverting more backhaul sailings from the Suez Canal to the Cape of Good Hope, which adds two weeks to vessel arrivals back in China.

The shipping lines have also been creating roll pools, so that vessels leaving during the CNY holidays have boxes to load, while factories are closed. This occurs every year but, with less demand, it is having less impact than the previous three to four years.

Despite all the cancelled sailings and diversions, Hapag Lloyd has announced a new Asia-Europe service, FE9, that is actually a slot charter agreement with an alliance competitor, CMA-CGM.

Prior to the current three alliance setup, the shipping lines operated a complex web of slot charter agreements and it seems likely that the current high sailing cancellation levels are reducing service coverage, and an obvious solution for a carrier is this type of cooperation, that we may see accelerate in the wake of the 2M break between MSC and Maersk as they part company at the end of their 10 year agreement.

The 2M break may even result in a reshuffle of alliances, as carriers reshape the industry over the coming years on all trades. Although the focus has always been on the lucrative Asian markets - the transpacific and westbound European trades are the largest volume global lanes- one thing is for sure, there will be a lot more change, as a consequence of the unravelling situation in container shipping. It looks like a case of 'from boom to bust’ – although hopefully not quite so dramatic as we saw with Hanjin in 2016.

We work closely with our partners in China to monitor which lines are rolling cargo, and use our space agreements across all alliances wisely to ensure our containers are always lifted, though expectations are that roll pools will be cleared through weeks 5 to 8.

To learn how we can help you avoid blanked sailings and rolled cargo, or to request our regular ocean market report, please EMAIL our chief commercial officer, Andy Smith, who can advise on the best solutions for your ocean supply chain. We will always deliver the most appropriate service in an ever disrupted market and provide all options available to ensure that your product reaches the right destination, at the right time and at the right cost. Considered solutions are what we achieve.

Complaints by shippers to FMC soar

Feb 1, 2023 | Sea, United States

The US Ocean Shipping Reform Act (OSRA), which was passed into law last June, gives the Federal Maritime Commission (FMC) more power to deal with shipping lines and mitigate supply chain disruption, leading to a slew of claims and jealous European shippers.

In just six months the Federal Maritime Commission (FMC) has received more than 200 complaints since the Ocean Shipping Reform Act of 2022 (OSRA) was enacted, with over 30% of those complaints meeting threshold requirements to be referred to investigators.

Key points of the Reform Act:

- require ocean carriers to prove that detention and demurrage charges comply with federal regulations
- require ocean carriers to prove that detention and demurrage charges are reasonable (shifting burden of proof from the invoiced party to the carrier)
- prohibit ocean carriers to decline shipping opportunities without a good reason
- require ocean carriers to make quarterly reports to the Federal Maritime Commission

The FMC charge complaint process is promoting informal settlements and waivers of demurrage and detention billings, with more than $700,000 in charges refunded by carriers.

Hapag-Lloyd paid a $2 million civil penalty in June over detention fees it assessed to a drayage firm for containers the trucking company could not access. And now a Wisconsin-based non-vessel-operating common carrier (NVO) is accusing Hapag-Lloyd and its rail subcontractor CSX of improperly levying nearly $300,000 in fees against the NVO, after it exceeded container free time, attempting to retrieve containers, it says it could not access.

Despite deciding that current conditions do not necessitate the issuance of an emergency order for shipping lines to share data, the FMC has announced that it intends to issue a supplemental notice of proposed rule-making (SNPRM) to address issues related to the ‘Unreasonable Refusal to Deal or Negotiate with Respect to Vessel Space Accommodations’ proposed rule issued last September.

The commission received almost 30 comments in response to its notice of proposed rule-making (NPRM) on Unreasonable Refusal to Deal or Negotiate, which the FMC believe demand thorough consideration. The SNPRM will address those matters and provide the commission the opportunity to receive additional public comments.

This initiative by the FMC is gathering pace and it is likely that there will be many more claims, and possibly even class action, against carriers over coming months from disgruntled shippers and NVOCC organisations.

Any hope of the EU following the FMC’s lead has evaporated, as market supply and demand has moved in favour of the shippers, but the retained Container Shipping Consortia Block Exemption Regulation (CBER), expires on the 25th April 2024 and if the EU decide to revise or end the exemption regime, the UK may follow.

To learn how we can support your trade with the United States, or to learn more about our ocean solutions, please EMAIL our chief commercial officer, Andy Smith.

We have avoided huge detention and demurrage costs over the last few years for our customers, through slick entry to and from the USA markets and utilising our own facilities, or partner container yards, to limit the impact.

Chinese carmakers look to container shipping for a reliable logistics solution

Jan 18, 2023 | Automotive, Sea

The global shortage of RoRo (roll on – roll off if you have ever wondered) capacity for finished vehicle shipments has intensified over the last two quarters, encouraging an increasing number of car manufacturers to look for control of vessel assets, while many others look to container shipping solutions.

Global automotive exports have surged over the last two years, yet the number of RoRo car vessels owned by the five main global carriers has not increased, with shipping costs skyrocketing and any available capacity taken by a limited number of big volume customers including FMC, Toyota, Stellantis, VAG etc.

The lack of RoRo vessels is stretching an auto supply chain already worn thin by a scarcity of semiconductors, pandemic-related labour shortages and months of port congestion intensified by China’s COVID-19 lockdowns.

Daily charter rates for RoRo vessels that can carry up to 6,500 cars have risen to ten times the 2020 levels and are the highest on record since 2000, it has been reported in the global trade press.

Six months ago a flurry of RoRo vessel orders took the car carrier order book to 77 vessels (which equated to about 10% of the global car carrier fleet), but with these vessels due for delivery from 2024 onwards, they will do nothing to alleviate the current situation, which is fuelling a fresh round of RoRo construction orders, that are still unlikely to fill the vessel shortfall, which could be as much as 100 by 2024.  In short, demand is outstripping supply significantly in this sector.

Two of China’s biggest car manufacturers are so determined to ensure that their cars get to their customers that they have ordered their own ships.

BYD, which make electric and hybrid cars, is ordering at least six ships with the capacity to carry 7,700 cars, while state-owned SAIC Motor Corp is tendering for seven new carriers that can each hold 8,900 vehicles.

BYD and SAIC aren’t the first car brands to run their own shipping fleets. Toyota owns shipping company Toyofuji Shipping Co., while Hyundai has logistics group Hyundai Glovis Co., and Volkswagen charters its own vessels.

Rival Chinese carmakers Chery International and JAC hope to secure RoRo capacity in a joint venture with Anhui Provincial Port and Shipping Group, which will also be engaged in international container shipping.

China recently overtook Germany as the world’s second-largest auto exporter, sending almost 2.6 million vehicles abroad in the first 10 months of 2022, but the vessels ordered by BYD and SAIC will not be delivered for several years, so it’s a bold bet on lasting global consumer demand for Chinese cars.

Tesla CEO, Elon Musk, said. “Whether we like it or not, there just aren’t enough transportation objects to move cars around.”

Global RoRo vessel capacity was tight in 2022 and that tightness is expected to continue.

With only 11 vessels expected for delivery in 2023 and China planning to export 2.3m units to Europe this year, the RoRo capacity currently expected will only serve half of that number.

But with container shipping rates slumping, there is a massive opportunity for shippers of finished vehicles to move units on dependable and regular services - without volume constraints - at relatively low cost.

There is a similar situation occurring with overland transportation around the world for vehicles. Car transporters and low-loaders are in heavy demand. With the electrification of vehicles and still a very bullish demand on new vehicles, whether with a combustion engine, EV propulsion or any other ‘new’ fuel there will continue to be pressure on supply chains for finished vehicles from cars to tractors to lorries over coming years. We continually are designing, creating and introducing new platforms to ensure that we can assist our customers in the traditional RoRo sector with alternatives that can deliver. Quite literally.

Metro has specialised in the automotive, construction and agricultural vehicle sectors for over five decades. Working with many of the most respected and established global brands, our specialist teams coordinate the end to end movement of vehicles and machinery around the world, regardless of origin or destination. With lots of added value through transparency and other imaginative solutions that fit their needs.

Long-standing partnerships and volume agreements with the leading container shipping lines means we can offer the widest choice of services, routes and solutions for finished car and KDV movements.

To learn more, or to discuss our automotive capability, EMAIL Matt Weight. He has most of the answers – and should he not, he will design a solution that works in the current environment with his team.