Friday, February 23, 2024

New green rules to hit shipping services

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Changes could have implications for rotations into and out of NZ ports.
Under rules that will start to be phased in from next January, shipping lines are required to address fuel use and carbon intensity, which could lead to them limiting the NZ ports they serve.
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New Zealand exporters and importers could be facing yet more booking headaches when greenhouse gas emission rules on shipping lines kick in next year.

The measures, instituted on a global basis by the International Maritime Organisation (IMO), mandate a 40% reduction in carbon emissions for existing and new build vessels by 2030, on 2008 levels. The IMO target is for a 70% reduction by 2050. 

The emissions rules will be phased in from next January.

Major shipping lines suggest the changes could have implications for their rotations into and out of NZ ports as they attempt to comply with the new rules.

For example, French-owned CMA CGM Group, which operates 11 services in NZ, is adapting its trans-Tasman rotation to hit only the major ports of Auckland, Tauranga and Lyttelton. Port Nelson and Wellington are serviced via coastal feeders.

CMA CGM (NZ) general manager Gary Carter said by not doing the “north-south-north” rotation, the line saves 750 nautical miles per trip, making it “compliant” under the pending 2023 regulations.

“There are two key measurements. That’s energy efficiency of the ships from 2023 on, with compliance down to either limiting power or using alternative fuels; and carbon intensity, which garners a rating of between ‘A to E’ – with the latter being non-compliant.”

Carter told delegates at a recent Customs Brokers and Freight Forwarders Federation (CBAFF) forum that, as it stands, more than half of all global container vessels wouldn’t comply with the IMO standards.

That means self-imposed limitations on both speed and engine power limitations, leading to changed routes and potentially higher costs.

According to IMO data, international shipping accounts for more than one million tonnes of carbon dioxide emissions annually, or about 2.9% of global CO2 emissions. 

Carter said his shipping line accounts for about 3% of those emissions. He said more than half of all orders coming in for new ships are now for liquified natural gas-powered vessels.

He said while he couldn’t comment on every route that operates into NZ, there will need to be a “different view” of how things operate under the rules.

Because the regulations are on a ship-by-ship basis, rather than by cargo, Carter said routes are the obvious change. 

“NZ remains important for the lines, but I wouldn’t discount further changes and would think there will be a serious look at the shape of routes and services into the future.”

The rotations come as the industry continues to face up to a third year of “unrivalled challenges” across the industry.

As a measure, that has led to the round-trip cost to pick up a unit in north Asia rising 89% since 2019. 

Carter said restricted move counts have a significant impact not only on the full containers but also on empties, so while the shipping provider intends to operate weekly services, it’s “far from that” at present.

He said that has led to the shipper losing about a quarter of all sailings into NZ, at 39 versus 52 in 2019.

Carter said weather events and the omicron pandemic development in late 2021 also had major impacts on both ports and depots where there was no “work from home” capability for staff. 

“Mixed with all of this is the supply of empty and repositioning requirements, which has been turned on its head in NZ.”

Carter said the “fractured supply chain”, particularly into the upper North Island, had a major impact on exporters, particularly given the level of congestion out of Auckland and its land ports.

That has helped push up charter rates four- to five-fold over the two years, to unheard-of levels for additional capacity, while bunker costs jumped 230% over the same period.

Mark Scott, GM of Chinese-owned shipping line Cosco, said the two-year window suspension at NZ ports led to a reduction in ship moves from 60 pre-pandemic to about 40 moves per hour. 

Scott said the line struggled to get its ships through any ports for 20-40 days.  

Cosco is the third largest line in the world with a container fleet capacity of 2.9 million twenty-foot equivalent units (TEUs) across a fleet of 780 vessels. Scott said in a normal environment, its ships wouldn’t be in NZ for longer than eight or nine days. 

Now, he said the line expects to see export and import peak flows overlap each other, given the flat import season and “much longer” export season.

Globally, Cosco will expand its fleet by 15% and Scott said he is hoping that will trickle down into NZ services, although that depends on ports reinstating their berth windows and avoiding “bunched services”.

Carter said globally, the number of containers either waiting to get into a berth or at a terminal is about 560,000 TEU more at present than the 2019 average, while on the East Coast of the United States it is 440,000 TEU higher.

In response, CGM added 800,000 containers over the past 15 months to 5.2 million TEU, he said, at a time when the cost of 40-foot container new builds has risen by 36%. 

And to help address its emission challenges, the line has announced a US$1.5 billion (about $2.3b) fund to seek and secure supply of renewable energy. “Quite clearly the fuel we use today is not going to be the fuel for tomorrow, and that fund is stretched over five years to try and secure supply lines.”

David Knowles, GM of Singaporean-owned Pacific International Lines (PIL), said sustainability and reduction of greenhouse emissions has become a “key issue”. That is reinforced by an initiative between NZ and Singapore to make the Singapore-New Zealand trade lane green. The NZ-Singapore Sustainable Aviation Arrangement, signed by both countries in April, applies to both Singapore Airlines and PIL. 

Knowles said the line has also now joined Silk Alliance green corridor project, an initiative run by Lloyd’s Register, a group of Asian ship owners, builders and finance companies aiming to measure consumption and performance across about 220 ships, and options for alternative fuels.

He said PIL, which has two ships servicing NZ, has eight container vessels on order with “significant investment” planned into LNG-powered ships.

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