“Normal” Isn’t Coming Back
“Supply chain ‘normal’ appears on the horizon,” Bloomberg’s Brendan Murray reports. Murray presents lots of evidence that fewer vessels are queuing at container ports, fewer sailings are being cancelled, and most measures of supply-chain stress are less alarming. But the discussion at the Global Maritime Forum’s annual summit, which convened last month in the Brooklyn Navy Yard, only reinforced my conviction that slow growth of international goods trade lies ahead. In that sense, “normal” isn’t coming back.
The hot topic at the Brooklyn meeting was decarbonization. The International Maritime Organization, a United Nations agency that attempts to oversee the unruly business of international shipping, has decreed major reductions in greenhouse-gas emissions from ships by 2050. A revised strategy, likely with more ambitious goals, is due from the IMO next year. In addition, vessel owners, especially owners of container ships that carry consumer goods, are facing pressure from their customers to curb emissions more quickly.
Reducing greenhouse-gas emissions means finding a substitute for the petroleum-based fuels that now power almost all ocean-going ships. At the moment, though, there is no consensus about the best alternative. Some shipowners are building ships that can burn ammonia. Others are embracing liquefied natural gas. A much-touted option is e-methanol, which combines hydrogen with carbon dioxide captured from industrial sources. A few hydrogen-powered ships are already at sea. Battery power may work for short sea crossings.
These approaches have several problems in common. They are very expensive: by one estimate presented at the Global Maritime Forum, the cost of moving a ton of freight with low-emissions fuels will be five or six times as high as with petroleum-based fuels. Ships will sail very slowly to minimize consumption of precious fuel, increasing cargo owners’ inventory costs. Ports and terminals, facing the need to provide a variety of fuels at each berth, may face large investments in fueling infrastructure so long as ship owners can’t agree on which alternative fuel to use. Port users will have to foot the bill.
All of this will affect choices about shipping goods across the oceans. Although the sky-high freight rates of the pandemic years are behind us, the long-run cost of decarbonizing shipping will reshape supply chains. The days when international shipping costs barely mattered in making sourcing decisions are over.Tags: climate change, ports