FT BLOG ON SHIPPING DECARBONISATION AND COSTS
On 24 August, the Financial Times issued an opinion on how the push from the shipping industry to decarbonise their fleets could slow freight rates’ downturn in the long term. The column referred to the announcement by Maersk of a $1.4 billion investment in carbon-neutral ships, run on “green” methanol, produced by anaerobic digestion and other means.
The opinion recalled that the surge of ocean freight rates has been caused by high demand, bottlenecks, and a shortage of spare capacity, which can be explained by the system of carrier alliances: “The alliances make it easier for carriers to capture benefits of scale without adding capacity. Competition authorities approved the tie-ups believing efficiency benefited consumers. Regulators are now scrutinising rising rates intensely. The Biden administration is also pushing for greater competition”.
The decarbonisation of shipping will have a direct impact on costs: alternatives to bunker fuel are still very expensive, as carbon-neutral methanol is estimated “about two times more expensive” than conventional fuel, which would mean “a 15% rate increase in freight rates”. Therefore, freight rates might maintain at this level in the coming years, although a resurgence of new ships orders have been observed. However, most of the vessels ordered will run on LNG, which could risk a lock-in effect of transitional fuels: “Ships have a lifespan of 25 years. There is a risk of being left with stranded assets as regulations tighten,” the opinion noted.
Source: Financial Times