Market Update – 24th March 2023

Shipping accounts for more than 3% of global carbon emissions, but it is considered one of the hardest sectors to decarbonise as most ships run on high-carbon fuel oil. 

One solution is to fit existing ships with wind propulsion technology, as there at least 20 commercial cargo ships using a variation of this tech today. But mass-adoption isn’t going to happen overnight. And the current wind propulsion tools available arguably can’t facilitate today’s global supply chains. 

However, there is growing pressure on the international shipping industry to accept a carbon levy on ships that would then be used to fund climate action in the developing world. Groups such as the World Bank believe this levy will encourage companies to invest in cleaner fuels and run their fleets more efficiently.

Should it be accepted, shipping companies would pay into a fund based on the amount of carbon their fleets emit. The money raised would then directly fund projects that could help reduce emissions in poorer countries.

Whether or not the International Maritime Organisation (IMO), which is made up of 175 governments, will approve of this initiative remains to be seen. A large majority of member states believe they could do more, but the challenge will be getting them to agree on how the fund should be disbursed. 

In other news:   

Transportation trends           

Land:          

• Rail companies in Russia have expanded their search for new markets to counteract debilitating penalties put in place by the west after the invasion of Ukraine. 

• Shenyang to become new rail hub for trade with Russia and Europe. The city has deployed its first freight train to Europe in the context of the Regional Comprehensive Economic Partnership Agreement (RCEP). The plan is to turn Shenyang into a new transhipment hub for RCEP countries using the rail to ship to Europe. 

• The RCEP initiative will also offer a link between the China-Laos railway and the China-Europe network. 

• All domestic rail freight services are cancelled in Finland as the strike of train drivers reaches its third day. At the same time, international traffic seems to be unaffected. The strike will continue until further notice as negotiations between Rail Union Finland (RAU) and Service Sector Employers Palta (Palta) have not produced the desired outcomes. 

Air: 

• The global Air Freight Market is estimated to reach over USD 483.28 billion by 2031, exhibiting a CAGR of 6.17% during the forecast period.  

• As a result of the government’s move to lift the restriction on the transhipment of e-cigarettes and vapes, air shipments from Hong Kong will increase.  

Sea:        

• The world’s commercial fleet is aging quickly, and an increasing number of experts believe shipping may experience a bottleneck in the years to come as the number of ships reaching their demolition age exceeds the number of spaces available for newbuilding.     

• The Black Sea Grain Initiative has been extended, according to the United Nations, permitting grain shipments from three Ukrainian ports. It is still unknown how long the extend will last.    

• On whether container spot rates have bottomed out, the verdict is still out, but on the important transpacific and Asia to Europe trade lanes, the indices are unmistakably demonstrating that the decline in rates from the stellar highs of a year ago is starting to slow.   

• A cargo ship prang at the harbour of Kaohsiung in Taiwan this week, and the cause has been attributed to a drunken pilot.      

Industry news 

• Small package delivery services have grown in popularity over the past few years as the likes of FedEx, UPS, and USPS have been forced to turn down some business due to traffic overload.    

• As predicted, US container shipments fell precipitously in February compared to the highs of the previous year, with US west coast terminals specifically experiencing a staggering 37% decline.    

• The European Commission’s Net-Zero Industry Act is a response to the US law from the previous year that encouraged investment in renewable technology.    

• To turn the developing Asian economy into a centre for textile production and exports, the Indian government has authorized the construction of seven sizable textile parks throughout the nation.  

Looking forward       

That’s it for this week’s report, if you have any questions about the stories raised today or need support with your current supply chain, please get in touch.