Green shipping: a $1.9tn investment opportunity?
Shipping is the most carbon efficient means of transportation (on a CO2 per ton-km basis – see figure 1 below). However, global shipping still accounts for 1 billion tons of CO2 per year, which is ca.3 percent of annual global GHG emissions.
Unsurprisingly, the largest source of carbon emissions comes from fuel combustion for propulsion. Fossil fuels (HFO, MGO, VLSFO and LNG1) currently provide 99 percent of sector’s final energy demand and all have issues from contributing to CO2 emissions, black carbon and methane leakage. International shipping provides 80–90 percent of global trade and accounts for 70 percent of global shipping emissions – if it were a country, it would be the 6th largest emitting country2.
Demand for newbuildings increases, despite higher prices
Higher prices and lower earnings haven’t deterred ship owners from investing in the newbuilding market. In its latest weekly report, shipbroker said that “with dry bulk, tanker and gas markets remaining firm, and container operators continuing to invest in alternative-fuelled vessels despite waning earnings, last week saw a fair amount of deals across sectors coming to light. Orders placed at Wuhu Shipyard will allow future owners Union Maritime and EGPN to take advantage of growth in the green fuel market, with the shipyard stating that they are specifically designed to transport biofuels and chemicals including methanol.
Allege incompetence at your peril
In the charterparty dispute London Arbitration 2/23, (2023) 1129 LMLN 2, the arbitral tribunal rejected the owner’s claim for damages for breach of the safe port warranty in a time charterparty, after a laden bulk carrier grounded at the entrance to the port of Chaozhou, China, while under compulsory pilotage. It also held that the vessel was unseaworthy, in breach of Article III.1 of the Hague Rules, due to lack of proper charts, but found on the facts that this was not causative of the grounding. In this case, the owner chartered its panamax bulk carrier to the charterer for a time charter trip via safe ports from Indonesia to China with bulk coal. The charterer ordered the ship to load at Muara Satui and discharge at Chaozhou.
Ship recycling: tonnage supply scarce
The ship recycling has crawled down to a halt over the past week, as Easter Holidays had an impact in overall activity. In its latest weekly report, shipbroker said that “the supply of tonnage to the market has slowed considerably with only a handful of units being circulated into the market. The question is whether they will be sold for recycling or if some traders come out of the woodwork whilst charter rates improve. Clients of Evergreen this week circulated two sister container vessels, the ‘Ever Unific’ and the ‘Ever Uberty’, both built 1999 and of about 24,300 ldt. Offers are due to be registered by 7th April, 2023 and reports suggest that there are some potential trading buyers showing interest so time will tell whether they find have a final voyage to a recycling yard.
Economic sanctions in the shipping industry: 2022 highlights
Shipping companies should remain focused on sanctions compliance for 2023. The sanctions space has been bursting with activity as a result of the Russia-Ukraine war, which shows no signs of abating. Companies continue to seek advice with respect to international sanctions with respect to all aspects of Russian sanctions and other countries such as Iran, China and Venezuela. In 2022, the US continued to aggressively adopt, implement, and enforce US sanctions, including in the shipping and transportation sector. Because the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) may impose civil penalties for sanctions violations generally based on a strict liability legal standard, keeping up with developments in this dynamic area remains a priority and continues to be an active area of the Firm’s practice.
LNG shipping: more summer cargoes on the way?
The LNG shipping market could stand to benefit from a potential increase in demand over the coming summer months, as Europe prepares for another winter of energy supply challenges. In its latest weekly report, shipbroker said that “this year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourage higher consumption. More specifically, according to Refinitiv estimates, this summer, there may be a global surplus of about 4 billion cbm available for NW Europe, with the U.S. making up the majority of that excess.
Collaboration is key – ESG focussed joint ventures are on the rise in shipping
On 23 March 2023, we published part two of ‘The Sustainability Imperative’, our multi-layered investigation into the impact of environmental, social and governance (“ESG”) considerations on the shipping industry. One of the key findings in ‘The Sustainability Imperative – Part 2’ is that shipowners have become more collaborative. In 2021, two-thirds said they would like to form partnerships to pursue innovation. Now, 56 percent are already in an ESG-linked tie-up. Examining ESG issues through the lenses of finance, regulation and technology, and drawing on a weighty survey of industry participants, the first edition of the report found that emissions reduction had become shipping’s main priority – even if how to do so was still hotly contested.
FBX index April 2023: seeping markets and new moving parts
Essentially the container shipping markets continued the declining trend which has been defining the market since autumn 2022. From that perspective the past month was not surprising at all. Demand remains weak and carriers continue to cancel planned sailings. But despite the multitude of blank sailings, the actual capacity reduction remains insufficient. On the Asia-North Europe trade, capacity operated in March 2023 was 0.5 percent higher than in March 2022 and in the Asia-Med trade the capacity increased 28 percent in the same period.