Tim Power, MD of Drewry Shipping Consultants, told delegates at the World Ports Conference in Hamburg that new regulations to decarbonize shipping could severely impact deep-sea shipping sectors. He cited a prediction by class society DNV that container shipping operating costs could double due to decarbonization costs. He suggested that in some cases, it could reshape long-distance supply chains.

“However, if shipping costs are sustained at higher levels, there is a chance that intercontinental shipping becomes too expensive for certain key commodities,” Power told delegates. He said the confluence of higher shipping costs and geopolitical tensions, like the Red Sea situation, could further disrupt global trade. He added that while there is currently a relatively open trading environment, the global economy would not function if a critical shipping route like the Strait of Hormuz, through which 30% of the world’s crude oil passes, were closed for an extended period.

Power said the biggest challenge with alternative fuels is their limited availability. While fuels like ammonia, methanol, and hydrogen are being considered, only LNG currently has enough supply to be feasible. However, LNG only helps the decarbonization effort if methane emissions are controlled.

Power also noted that regulations could have unexpected outcomes. “However well-intentioned regulations are, they have unintended consequences, such as the way the EU ETS has undermined transhipment services in EU Mediterranean ports.” He said developing green shipping corridors remains viable for shorter trade routes, such as for China’s coastal trade and intra-Europe routes, but not for deep-sea shipping.

Source: The Loadstar