However, the one industry that suffered the most from the crisis has been global merchant shipping. Both the Suez Canal and the Red Sea have become collaterals here. Egypt lost around $7 billion in revenues from the Suez Canal in 2024. The loss has been more than 60% of the canal’s revenues in 2024 compared with 2023.

Yemen-based Houthi fighters have carried out nearly 100 attacks on ships crossing the Red Sea in what they describe as solidarity actions with Palestinians. In response, shipping firms have diverted vessels from the Suez Canal to longer routes around Africa, disrupting global trade by delaying deliveries and sending costs higher.

The attacks by the Houthis have caused a significant shift in global trade. Ships using the Asia-Europe and Asia-Atlantic trade routes have been forced to avoid the Suez Canal and the Bab El-Mandeb strait, leading them to divert their shipping routes around Africa’s Cape of Good Hope. This change has had a devastating impact on Egypt, which relies heavily on the Suez Canal as a key source of foreign currency.

Is Africa missing the bus?

Diversions of the global shipping through the Cape of Good Hope route was what African ports needed to play a bigger role in the transportation industry. The rerouting has seen ships travel longer distances, adding an average of 14 days for a vessel to sail from China to Europe. These additional 11,000 nautical miles have disrupted global trade and added operational costs for merchant vessel liners.

Estimates show that each diversion adds approximately $1 million in fuel costs, with more going towards insurance premiums and security measures.

“The risks in the Red Sea are not short-term; they are now ingrained in shipping logistics forcing long-term adjustments,” told Bilal Bassiouni, Head of Risk Forecasting at South Africa-based Pangea-Risk, while interacting with the World Finance.

“For African ports, especially those that are strategically located on the maritime route around the Cape of Good Hope, the Red Sea diversions should have presented an opportunity for a boom from offering restocking and bunkering services. Durban, Cape Town and Gqeberha in South Africa, Toamasina in Madagascar, Port Louis in Mauritius, Maputo in Mozambique and Walvis Bay in Namibia are among ports that have the potential to seize the moment,” he added.

Data reveals that over the six-month period to May 2024, maritime trade through the Cape of Good Hope route surged by a staggering 125%. The number of container ships and LNG tankers using the route went up by 260% and 180% respectively. Other major African ports also witnessed increased traffic, including Mombasa in Kenya, Dar es Salaam in Tanzania and Beira in Mozambique.

George VanDyck, Lecturer at the Plymouth Business School, University of Plymouth, however, added that African ports were caught off guard by the sudden traffic surge. Blame poor infrastructure and operational bottlenecks, which have made it impossible for the continent to capitalise on the opportunities presented by the crisis, particularly restocking and bunkering.

Many ports are struggling with outdated equipment, insufficient storage facilities and a shortage of skilled workers. Moreover, inadequate investment in expansions and development has resulted in inefficiencies that are slowing down operations, contributing to long wait times and congestion.

The ports which are facing problems in Africa are exacerbated by corruption, bureaucratic delays, and inconsistent regulatory frameworks. Additionally, high logistics costs and limited connectivity between ports and inland transport networks contribute to inefficiencies. To make matters worse, the lack of deep-water facilities means that most ports on the continent cannot accommodate larger vessels.

Massive shipping congestion

The ports of Durban and Cape Town have become the poster boys of Africa’s deeply rooted infrastructural and operational inadequacies. A sharp increase in traffic by 328% from December 2023 to March 2024 ignited unprecedented congestion at the two facilities, literally bringing operations to a standstill.

Durban, South Africa’s biggest container seaport that handles approximately 60% of traffic, was the worst impacted. At one point, about 80 vessels were reportedly forced to wait offshore for weeks as the logjam crisis paralysed operations.

“South African ports seemingly lost their credibility in extending support services to vessels diverting through the Cape of Good Hope,” says Francois Vrey, Professor Emeritus in the Faculty of Military Science at Stellenbosch University, South Africa, while identifying that one critical area in which African ports have failed to rise to the occasion is on bunkering services.

The increased sailing distances have led to a surge in demand for bunkering services. Ports such as Port Louis, Walvis Bay, and Maputo have attempted to position themselves as refuelling hubs. However, they have encountered challenges in managing larger volumes, which have been exacerbated by fuel supply shortages and inadequate refuelling facilities.

Durban, the largest bunkering hub in South Africa, was expected to reap maximum benefits from the bunkering boom. Despite making progress in expanding capacity, limited investments in advanced infrastructure and services have denied the port a competitive edge. Elements like storms, severe winds and high waves have further worsened the situation.

Another big setback arrived for the African shipping industry in 2024 when a deal between South Africa’s state-owned logistics company, Transnet, and a company owned by Filipino billionaire Enrique Razon to expand and run Durban container port was put on hold. The decision in the Durban High Court was taken in October in response to an application after AP Moller-Maersk (APM Terminals) challenged the awarding of the deal to ICTSI, the Filipino port operator.

The likelihood of an all-out war in the Middle East may force the global merchant shipping industry to be dependent on African ports for an indefinite period. The continent has the chance to tap future windfalls.

However, the continent needs to prioritise investment in expanding port infrastructures, improving logistics networks and upgrading equipment to handle larger volumes of traffic. Besides, governments must improve the regulatory frameworks, strengthen regional cooperation and provide incentives for private sector involvement. A fiasco like the one involving Transnet must not be repeated.

Infrastructure: Another mess

Africa also needs to focus on enhancing the integration of ports with railways and road networks, which is critical in guaranteeing better connectivity between ports and inland markets. However, budgetary constraints and competing national interests force most governments to decide against mobilising the required resources.

South Africa alone requires a mind-boggling $9.2 billion to address the infrastructure woes plaguing its ports and rail network. Namibia, which has made significant offshore oil discoveries, needs $2 billion to expand port infrastructures.

Even though the continent has seen the capacity of its ports grow significantly over the years, a 2024 report from the Africa Finance Corporation said that these expansions, upgrades and investments have not led to better inland logistics and supply chains.

Since 2005, African ports have received an estimated $15 billion in investments, allowing them to accommodate larger ships and offload more cargo for transportation across the continent.

According to the African Development Bank, port development led to increased traffic. Between 2011 and 2021, containers passing through African ports increased by nearly 50%, from 24.5 million to 35.8 million.

However, Africa Finance Corporation’s 2024 report claims that the “state of Africa’s Infrastructure,” the increased capacity has yet to lead to an efficient logistical supply chain across the continent. As per the analysts, African governments have neglected road and railway networks, which are unevenly distributed, of poor quality and underused, which limits their usefulness.

In the words of Gabriel Sounouvou, a specialist in logistics and supply chain management based in Guinea, “bad roads make it hard to do business in Africa, especially outside coastal areas.” The road corridors are not suitable for truck movements.

Jonas Aryee, head of Maritime Economics and International Trade Modules at Plymouth University in England, said human factors also make it difficult to transport goods across Africa.

“Some countries are still not opening up, and they’re protecting their local industries from those of their fellow African countries. You will find several roadblocks — from police, from customs, from gendarmes — in many countries when goods are going through. And it’s made the cost of doing business in Africa so high,” Aryee said.

The Africa Finance Corporation further showed that the continent has 680,000 kilometres of paved roads, just 10% of the total found in India, which has a similar population but one-tenth the land area.

The experts noted that the roads connecting African countries have remained in bad shape because the governments have not formed a joint team to invest in, build and manage highways that could improve the free flow of goods and people.

Floating loans

African governments are also failing to raise massive resources, thereby being forced to bring on board global operators not only to invest but also to take over the running and management of ports with the sole objective of improving efficiency.

Francois Vrey, Professor Emeritus in the Faculty of Military Science at Stellenbosch University, South Africa, contends that while port infrastructure investments are critical, Africa must be conscious of the risk of overinvestments to avoid creating white elephants in the pursuit of short-term gains.

Kenya’s Lamu port offers a classic example of such irrational investments. While the government committed $367 million to build the first three berths that were commissioned in 2021, the port that was expected to become a transhipment hub is today largely a white elephant. Since its commissioning, less than 70 vessels have called at the facility.

Investments in port infrastructure are essential for Africa to compete effectively on a global scale. This is particularly important, as the World Bank’s Container Port Performance Index (CPPI) for 2023 shows that none of Africa’s ports are ranked among the top 100 in the world.

The Port of Berbera in Somaliland is the highest-ranked African port, coming in at position 103 globally. While improving infrastructure is crucial, Africa must also enhance maritime security to make its ports more appealing. There is still much work to be done for the continent’s ports, but addressing these issues could position them at the forefront of global maritime trade.

The post Are African ports ready for global trade boom? appeared first on International Finance.

Professor Reed teaches FIN 40640 Applied Investment Management (AIM) and FIN 40610 Security Analysis. He has recently been awarded the Rev. Edmund P. Joyce, C.S.C., Award for Excellence in Undergraduate Teaching (2023), the James Dincolo Outstanding Undergraduate Professor Award (2023), and the James Dincolo Outstanding Undergraduate Finance Professor (2018).

Reed’s research focuses on the integration of behavioural economics into the fields of macroeconomics and finance. His papers have been published in the Journal of Macroeconomics, and his comments have been cited in the Wall Street Journal, Fox News Business, and The Guardian.

In an exclusive interview with International Finance, Professor Jason Reed discusses a range of topics, including the US economy, the job market, proposed tariffs on Canada and Mexico, the Fed’s recent policies, and more.

Recent reports indicate that the US economy could face new inflationary pressures if the administration fully implements tariffs on Chinese imports. How do you assess the potential impact of these tariffs on consumer prices and overall inflation?

President Donald Trump’s economic agenda recently included another 10% tariff on Chinese imports, set to go into effect on March 4th. For products that can’t be easily reshored, American consumers will bear the burden of higher prices. We must remember that tariffs are simply taxes on imported goods, and like a sales tax, the cost falls to consumers, not businesses. The Tax Foundation recently estimated the long-term impact would be a decline in GDP of 0.1% per year, or $374 billion over 10 years. American families are expected to see reductions in their income of 2.2% through 2026, compounding the impact.

Despite low unemployment rates, securing jobs has become increasingly difficult, especially for young college graduates. What factors do you believe are contributing to this “Big Freeze” in the job market, and what measures can be taken to address it?

American firms have resorted to eliminating open positions, reducing hiring, and shrinking labour hours before laying off workers. New entrants into the labour market are considered frictionally employed, adding to what economists view as the natural unemployment rate. Young college graduates and MBA alums alike are finding it harder to gain employment. Typically, there is an ebb and flow to employment, where new workers slot into jobs that were left voluntarily; however, workers aren’t confident in the labour market and are staying at their jobs longer than in recent history. This has been a trend since the middle of 2022 when the labour market saw a record high of over 12 million job openings. The unemployment rate has remained relatively low and constant because of the excess supply of openings. Recent data shows that we’re almost back to pre-COVID levels, suggesting that if current trends continue, the unemployment rate may begin to tick upward. Another fiscal layer putting upward pressure on the unemployment rate is the efforts of D.O.G.E. and their reduction of the federal workforce. It’s not clear what the full ramifications of austerity will be, but I believe it will profoundly impact the growth and health of the economy.

The administration is considering imposing fees on Chinese-built or Chinese-flagged ships visiting US ports to counter China’s dominance in global shipbuilding. What are the potential economic implications of such fees on US retailers and manufacturers?

In the best-case scenario, imposing fees on Chinese-built or Chinese-flagged ships will immediately increase shipping costs, adding another price increase, borne by consumers. The most likely scenario, however, is that not only will we see prices increase, but we will also see short-term congestion in ports and shifts in global trade patterns, likely compounding the price increases. Estimates suggest that this import tariff will impact about 80% of cargo ships calling at US ports, which may lead to containerships porting in Mexico and Canada, further impacting consumers. This proposal seems to be driving more imports through Mexico and Canada, which runs against President Trump’s goal of reducing imports from these nations.

Some market analysts have become more cautious about US stocks, citing weak economic data and policy uncertainty. How do you interpret the current stock market trends, and what advice would you offer to investors?

Throughout the second half of 2024 and into 2025, economic data has mostly come in better than expected, according to Citigroup’s economic surprise index, with the S&P 500 trending up over this time until reaching all-time highs in December 2024. Since then, President Trump’s inauguration and the flurry of executive orders that followed, US and global equity markets have reflected the volatility in fiscal policy and are in a holding pattern right now, trading sideways year-to-date. Markets are waiting to see if the Canadian, Mexican, and Chinese tariffs go into effect on March 4th or if there will be another round of delays and negotiations. Long-term investors can take advantage of this situation to invest capital back into this asset class, as long-term average returns have outpaced most other available asset classes. Short-term investors will continue to find attractive risk-adjusted returns in US Treasury bonds, taking advantage of short-term mispricings in UK and EU equity markets.

Recent surveys indicate that inflation fears, partly due to tariffs, are affecting consumer confidence. How do you perceive the current state of consumer confidence, and what steps can be taken to restore it?

Consumers are acutely aware of grocery store and gasoline prices and use those price changes as their inflation gauge. Since last year, consumers have seen a 53% increase in the price of eggs versus an overall 2.5% increase in food prices. The avian flu continues to contribute to pricing pressure, with the Trump administration outlining fiscal relief for farmers. Over the same time, consumers are struggling to unwind long-term inflation expectations, with expectations reaching roughly 3.5%, a 30-year high, which significantly outpaces the Federal Reserve’s target inflation rate of 2%. With new tariffs thrown into the mix, consumers are likely bracing for the worst. For consumers to regain confidence in the economy, the White House would have to peel back inflationary efforts, especially the stimulus refund that D.O.G.E. is planning.

Proposed tariffs on Canada and Mexico are expected to impose significant costs on the US economy, potentially driving up prices for essential goods. What is your stance on these tariffs, and how do you anticipate they will affect the broader economy?

I think these tariffs will be inflationary in the short run. There’s almost no economic theory that suggests otherwise. In the long run, however, the broader impacts are yet to be seen. If businesses believe that tariffs will be repealed after President Trump’s term, they may choose to weather some revenue declines rather than reinvest into lower-returning reshored production. Another likely outcome will be that businesses will use countries’ production capabilities that bypass the import taxes. The Trump administration is already planning for these changes by proposing taxes on Chinese-owned and operated cargo ships. I think customers will be worse off overall. We’ve already heard from some tech CEOs, and businesses, indicating consumers should expect price increases in the coming months. As these price increases begin to compound, voters will begin to question the choices of the current administration.

Despite recent challenges, the US economy has shown resilience with a 2.3% growth in the October-December quarter. What is your outlook for the US economy in the coming months, and what factors will be most influential?

Businesses almost surely will have expected President Trump’s tariff message, as it was a key campaign goal for his term. Firms that are dependent on imported inventories will likely get ahead of the March 4th deadline, while those that cannot will just have to price in the expected taxes. Current estimates for Q1 2025 suggest steep declines in real GDP, a sharp departure from the growth the US economy has seen in recent years. Part of this may be due to an import imbalance, as firms pull forward inventories ahead of the tariffs, but the larger factor will be consumers feeling the pinch and deciding to forgo purchases.

The Federal Reserve has been actively involved in managing inflation and economic stability. How do you evaluate the Fed’s recent policies, and what role do you see it playing in addressing current economic challenges?

The Federal Reserve, our nation’s central bank, is committed to stable prices, targeting a flexible average inflation rate of 2% and maximum employment. In response to recent inflationary pressures, Jerome Powell and the Federal Open Market Committee (FOMC) have decided on a series of hikes to the federal funds rate, which helps to determine mortgage and credit card rates, among others. Hiking from March 2022 to August 2023, until rates reached the target range of 5.25 to 5.5%, it wasn’t until a year later that rates began to decline by 100 basis points. The Federal Reserve still sees inflation as its primary concern and believes the labour market can withstand persistently higher rates. The Federal Reserve aims to act independently from the White House. Jerome Powell and the Fed are committed to being reactionary to changes in fiscal policy rather than proactive in their approach to managing rates and will take a wait-and-see approach. If inflation materialises, as I and many economists predict, the Fed will likely delay rate cuts. The market is still pricing in about three rate cuts in 2025, even with inflation looming. If the Fed cuts rates, it won’t be until the second half of 2025 when more inflation data has landed. Treasury yields falling by 50 basis points from January 2025 should provide some slack for the Fed having to make immediate policy decisions. The market expects rates to remain steady at the March FOMC meeting. The Fed will continue to be data-dependent but is certainly cautious of the inflationary fiscal policy measures taken by President Trump.

The post Consumers will bear the burden of new tariffs: Professor Jason Reed appeared first on International Finance.

War and climate change have emerged as two formidable foes challenging the movement of commodities through critical waterways. From missile attacks in strategic straits to record-breaking droughts in crucial canals, the global shipping industry stands at a crossroads, needing urgent solutions to navigate these turbulent times.

Choke points under fire

Known as “choke points,” certain narrow passages like canals and straits are essential for global maritime trade. These include the Strait of Bab-el-Mandeb in the Red Sea and the Strait of Hormuz near the Persian Gulf. Recently, these areas have become hotspots of geopolitical tension and conflict.

Missile attacks originating from Yemen have severely disrupted traffic through the Bab-el-Mandeb Strait, affecting access to the Suez Canal. This narrow passage connects the Indian Ocean to the Red Sea and ultimately to the Mediterranean Sea via the Suez Canal, serving as a historical conduit for trade between East and West.

The escalating security risks have made maritime companies hesitant to send ships through this route. It may take years before confidence is restored enough for regular passage to resume.

Simultaneously, long-standing tensions between Iran and neighbouring countries have put the Strait of Hormuz in a precarious position. As the only sea passage from the Persian Gulf to the open ocean, Hormuz is a critical artery for the world’s energy supply.

More than half of the world’s shipped crude oil passes through the Strait of Hormuz, Bab-el-Mandeb, and the Suez Canal. Any disruption in these areas does not only affect oil prices, but also causes ripples throughout economies that depend on these energy supplies.

Drought-stricken Panama Canal

While geopolitical tensions threaten some waterways, others face a different peril: climate change. The Panama Canal, a marvel of engineering drastically reducing shipping times between the Atlantic and Pacific Oceans, is grappling with an existential threat: drought.

In typical conditions, about 1,000 ships traverse the Panama Canal each month, carrying approximately 40 million tonnes of goods. The canal reduces sailing distances by 8,000 nautical miles, making it indispensable for the shipping industry. An estimated six per cent of global trade passes through this canal, according to the International Monetary Fund.

However, prolonged droughts, exacerbated by climate change and phenomena like El Niño, have led to significant water shortages in Central America. The Panama Canal relies on vast amounts of freshwater to operate its lock systems. When water levels drop, the canal authority imposes restrictions on ship drafts and the number of daily transits.

At the height of the drought in early 2024, the Panama Canal Authority had to halve the number of daily transits. Ships with deeper drafts were unable to pass, forcing them to find alternative routes or wait indefinitely. The impact on global supply chains was immediate and profound. According to maritime consultancy Clarksons Research, tonnage passing through the canal collapsed by a third due to these restrictions.

Alternative routes and their costs

With the usual passages either unsafe or impassable, shipping companies have had to chart new courses, often at great expense. The most viable alternative for many has been to reroute ships around Africa’s Cape of Good Hope. While this route is free from geopolitical tensions and droughts, it adds up to two weeks to the voyage and exposes vessels to the notoriously rough seas of the Southern Atlantic.

The financial implications are significant. Consulting firm LSEG Shipping Research notes that diverting a tanker from Asia to northwest Europe via the Cape of Good Hope doubles the transit time to 32 days and adds nearly $1 million in additional costs per voyage. Container ships, while incurring less extra cost, still face substantial increases in fuel and operating expenses. These added costs ultimately trickle down to consumers through higher prices for goods.

Asia’s longest river, the Yangtze, often referred to as China’s “golden waterway,” is another critical artery feeling the strain of climate change. In a typical year, the Yangtze ferries around three billion tonnes of diverse products to about 100 countries. However, a severe drought in late 2022 brought water levels to their lowest since records began in 1865.

The river’s width was effectively halved, and its many tributaries dried up, severely limiting navigability. The drought raised alarming questions about the future of shipping on the Yangtze. If such climatic events become more frequent, the reliability of this essential trade route could be in jeopardy, affecting global supply chains dependent on Chinese exports.

Other major waterways in peril

The threats are not confined to Asia. The Rhine in Europe and the Mississippi in the United States are also experiencing the adverse effects of climate change. The Mississippi River, which ranks second globally in inland waterways freight with 600 million tonnes transported annually, faced drought-induced bottlenecks in 2022. Similarly, the Rhine, carrying 300 million tonnes of goods each year, has seen water levels drop to points where shipping becomes challenging, if not impossible.

In Southeast Asia, the Mekong River, home to around 60 million people who rely on it for their livelihoods, has been suffering increasingly severe droughts over the past two decades. While floods often grab headlines due to their immediate and visible destruction, droughts inflict long-term socio-economic hardships, destroying crops, causing freshwater shortages, and decimating fish populations.

The combined pressures of war and climate change are impacting global shipping lanes, prompting experts to advocate for a fundamental rethinking of how goods are transported across the world. A 2024 report from the Atlantic Council, a respected US think tank, underscored the urgency of this issue.

“Climate change is now threatening the shipping lanes that underpin global commerce,” the report stated.

The disruption of the Earth’s hydrological cycle, how water moves between the land and atmosphere, is affecting the volume of water in rivers and canals worldwide. As extreme weather events become more frequent due to climate change, the reliability of traditional shipping routes is decreasing. The report calls for innovative solutions and alternative logistics strategies to mitigate these risks.

Potential solutions and alternatives

Addressing these complex challenges requires a multifaceted approach. Some have proposed designing ships with shallower drafts to navigate lower water levels. While feasible, this would necessitate a massive overhaul of the existing fleet and could reduce cargo capacity, making shipping less efficient.

Deep dredging of rivers and canals is another option to increase depth, but this is a temporary fix. Dredging is costly, environmentally disruptive, and cannot keep pace with the rapid changes in water levels caused by severe droughts.

Overland transport methods, such as rail and trucking, offer supplementary options. These “road bridges” can bypass impassable waterways but come with limitations, including capacity constraints and higher per-unit transport costs.

One of the most ambitious proposals is the construction of a new canal through Nicaragua to connect the Atlantic and Pacific Oceans. A Chinese company has claimed a 100-year concession for a 173-mile route that could accommodate ships larger than those Panama Canal can handle.

However, the project faces significant hurdles, including a $40 billion price tag, environmental concerns over pristine ecosystems, and the region’s susceptibility to hurricanes and seismic activity.

In addition to infrastructural changes, technological advancements in shipping could offer some respite. Developing more efficient ship designs, incorporating advanced materials and engineering, could allow vessels to operate effectively in challenging conditions. For instance, ships equipped with adjustable ballast systems can modify their draft to navigate varying water depths.

Moreover, adopting alternative fuels and propulsion methods, such as liquefied natural gas (LNG) or hydrogen fuel cells, can reduce the environmental impact of shipping and improve operational efficiency. These innovations not only help mitigate climate change by reducing greenhouse gas emissions but also comply with stricter environmental regulations being implemented globally.

Digital technologies like advanced navigation systems and real-time monitoring can optimise routes, allowing ships to avoid areas affected by geopolitical tensions or adverse weather conditions. The use of big data analytics and artificial intelligence can provide predictive insights into potential disruptions, enabling more proactive decision-making.

International cooperation and policy reform

Securing global shipping lanes also requires robust international cooperation. Multilateral agreements focused on maritime security can help mitigate the risks posed by geopolitical tensions. Organisations like the International Maritime Organisation (IMO) play a crucial role in facilitating dialogue and establishing regulations that enhance the safety and security of international shipping.

Additionally, investment in climate resilience is imperative. Governments and industry stakeholders must collaborate to fund infrastructure projects that strengthen the adaptability of ports and canals to extreme weather events. This includes building higher sea walls, improving water management systems, and developing early warning mechanisms for natural disasters.

Economic policies that incentivise sustainable practices can also make a significant difference. Subsidies for research and development in green technologies, tax breaks for companies that reduce their carbon footprint, and penalties for excessive emissions can drive the industry toward more sustainable operations.

In response to these challenges, new supply chains are beginning to emerge. Abu Dhabi has signed a preliminary agreement with Iraq to develop the Al-Faw Grand Port near Basra on the northern tip of the Persian Gulf. Expected to open by the end of 2025, the port aims to link Eastern and Western trade routes and will be equipped to handle containers, dry bulk, and tankers.

Similarly, Turkey and Iraq have unveiled a $17 billion road and rail project that will connect Iraq’s main port to the Turkish border and further into Europe. This 1,200-kilometre “land bridge” offers an alternative to maritime routes and could significantly alter trade patterns in the region. Notably, it bypasses the Suez Canal entirely, which could have economic implications for Egypt.

China’s Belt and Road Initiative is another example of an emerging supply chain designed to circumvent traditional maritime routes. By investing in overland routes through Central Asia and into Europe, China aims to reduce its reliance on vulnerable sea lanes. This massive infrastructure project includes the development of railways, highways, and ports, reshaping global trade dynamics.

There is a need for global cooperation, innovative thinking, and significant investment in alternative routes and technologies. The solutions are not simple, nor are they without cost. However, the stakes are high. The seamless movement of goods around the world involves not only economics but also the interconnectedness of societies and the collective prosperity of nations.

The post Global shipping faces unprecedented challenges appeared first on International Finance.

These boats are offering zero emissions, thereby helping the maritime sector to realise its vision of having clean and sustainable mobility and logistics on the water.

“Unleash Future Boats” is rewriting the rulebook of maritime transportation by developing retrofitting kits for conventional boats with low-voltage electrical propulsion systems and fuel cells as range extenders.

Knowing The Company In Detail

“Unleash Future Boats” is a “DeepTech Start-up”, which provides solutions for the biggest problems in shipping in the form of environmental pollution and low water.

Describing its products as autonomous and environmentally friendly ships, the venture said, “They (the boats) have electric propulsion with fuel cells and green hydrogen. This means that they are completely zero emission – for the air, the water and in terms of noise pollution. The individual mobility for every day is shifted from the street on the water, intermodal and connected. A team of 20 people is working on the mobility of tomorrow, continuously growing.”

The start-up has also launched another company under its banner, titled “Green Boats Engineering,” to provide retrofit kits for zero emission propulsions, which are battery-electric drives with a large range, powered by fuel cells and hydrogen range extenders.

Digital Test Field Schlei, the 42-kilometre estuary in Schleswig-Holstein is known as the official research area for the start-up’s semi-autonomous and autonomous maritime mobility concepts. Through “Project HANNAH,” “Unleash Future Boats” successfully launched Germany’s largest digital test field for fully autonomous maritime systems.

The German Federal Ministry of Digital and Transport (BMDV) also funded the project in 2021.

In addition to the success of HANNAH, the start-up’s digital test field is also developing into a “Regulatory Sandbox” that invites the public, politics, industry, and policy-makers to jointly claim Germany’s technological advancements.

The German Federal Ministry of Economic Affairs and Climate Action awarded it with the “Innovation Prize for European Regulatory Sandboxes,” thereby recognising The Schlei as Europe’s test and validation centre for autonomous maritime systems.

“With the launch of Zero One in 2021, the team became one of the leading global disruptors developing fully autonomous boats and ships. This includes decision-making on the boat with all required functional safety and security implications,” the business noted.

Here Is The Product Line-Up

Talking about “Unleash Future Boats” and innovation, we have “Future One” and “Cargo One”.

“Future One” has been tailor-made for water transportation for both metropolitan and rural areas. These are autonomous boats, fully electric and powered by green hydrogen that will transport up to 12 people along with e-bikes, strollers and wheelchairs (basically small ferries, boats and ships equipped with futuristic and climate-friendly tech).

“Cargo One,” which is the world’s “first truck on the water,” as claimed by the start-up, is a fully electric, autonomous watercraft, powered by green hydrogen, aiming to ensure emission-free and economically attractive logistics service, while closing the digital gap in the transport chain through the start-up’s digital communication mechanism between the boats and ports.

In swarm mode, a “Cargo One” fleet “drives like a train on the waterways,” resulting in extremely large quantities of goods being transported in a climate-friendly manner.

“Cargo One” also uses a “Digital Port Protocol,” where these autonomous boats communicate with the “fully digital port of the future.” Concepts like secure communication between boats (Vessel-to-Vessel, V2V for short), and between the infrastructure on land and on the water (Vessel-to-infrastructure, or V2X) are getting tested by the German start-up through “Cargo One.”

An Innovative Sensor And Connectivity Network

“Unleash Future Boats” defines autonomous products as “the gateway to a new world,” where intermodal transport will be part and parcel of our socio-economic set-up. To fulfil the vision, the venture is heavily investing its efforts in the field of sensor technology and sensor fusion.

“Unleash Future Boats” is an interdisciplinary company, as its staffers have over 25 years of experience in fields like automotive and aerospace sectors, where sensor technology rules the roost. The new type of sensor architecture, developed by the venture, has been installed on a prototype boat named “Zero One”.

“Zero One,” apart from being capable of carrying multiple sensors, is easy to change and adapt. The product, as a test bed for the start-up’s sensor fusion concept, has proven the idea in real-world operational scenarios, thereby generating valuable data to permanently train and advance the sensor model and algorithms.

“Zero One” is internationally licensed fully autonomous and can be operated without any remote connection.

Next, we have the venture’s “Digital Connected Services,” which envisions a holistic concept for intermodal transport, under which autonomous boats and ships will promote the “intelligent use of waterways” in the smart cities of the future. The company believes that the potential around intelligent, intermodal and zero-emission waterways has remained untapped.

“Unleash Future Boats” wants to ensure that its boats eliminate up to 1000 vehicle movements per day, through a clever integration in which alternative transport solutions like bicycles, eBikes and scooters will be intelligently integrated.

“Thanks to the fuel cell on board, these can even be recharged while driving, which significantly increases the range of intermodal trips. We are already talking to more than six regions and three cities that are applying as pilot and early adopters,” the venture remarked further.

The Road Ahead

“Unleash Future Boats” has a simple goal: to build an entire ecosystem for future maritime solutions, where unmanned ships will become the mainstay, while ensuring zero emission and helping Europe to meet its climate commitments on a priority basis, while enabling a new era of maritime transportation, ocean research, digital logistics and mobility.

As of March 2024, the company is building its technology prototypes, apart from registering the longest digital test field on German federal waterways. The venture, which has also received grants and subsidies from the German government, state and European Union, reportedly invented a completely new sensor type, along with building a complete supply chain to scale fully automated production.

“Unleash Future Boats” has already prepared four international patent applications (including the one for its digital protocol between Vessels and Infrastructure), apart from activating and operating the biggest test field for product research, development and validation.

The innovative deep tech company has internationally been recognised with honours such as “Top Five out of 916 Analysed Sustainable Solutions Impacting Mobility” and “Top 10 out of 5424 Transportation Trends & Innovations in 2022″.

The venture is on full throttle, in terms of testing autonomous traffic on the water under realistic conditions. Its multi-industry expert team has a proven track record of building autonomous cars. From 2017 onwards, these professionals started designing zero-emission autonomous boats and ships. By 2020, the venture aced the challenge of developing new sensor technology and design architecture to address the much more advanced challenges of fully autonomous cruising on the water.

Now, it is planning intermodal mobility hubs for megacities and rural areas, along with a fully digital port. To create a “Logistics of Future,” the venture is also onboarding national and international disruptive logistics start-up players.

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Assistive navigation and data-sharing technologies are making the shipping industry more competitive, safer and sustainable. Smart shipping’s operating principle revolves around the autonomous movement of inland vessels/seagoing ships.

The holistic concept covers the on-board vessel technologies and the design of ports and waterways, in order to ensure that the data collected by sensors (installed in an operational smart shipping environment), can help the vessel to either manoeuvre autonomously or prompt the crew to take action.

Understanding the concept further

Smart shipping is all about allowing the vessels to sail more efficiently, and in the long run, making the commercial maritime sector more competitive and investment-worthy. Devices like alarm monitoring, power management, dynamic positioning, integrated navigation suite and electronic engines ensure that the crew members are deployed and performing their tasks as effectively as possible.

While the concept of ‘Smart Shipping’ may give us hints about ‘Futuristic Vessels’, it isn’t the case all the time.

“First of all, a smart ship doesn’t refer to a specific type of ship but rather to the capacities of the vessel. Definitions of smart shipping vary and cover a range of smart concepts and technologies. Autonomous vessels are considered smartships, but not all smartships are autonomous,” said Marine & Offshore.

Smartships optimise onboard and onshore operational processes through digitisation. Crucial subsystems of the vessel are becoming digital, backed by data harnessing and analysing capabilities to assist the crew in conducting informed decision-making.

Whether to increase/decrease the ship’s speed on a particular waterway or to generate more data on the travel route, smart shipping helps maritime professionals to undertake quick decision-making, decisions which affect things like transport costs.

For smart shipping to be successful, the ability of data to be processed, contextualised and transformed into useful information for the right person at the right time is very crucial here. Customised dashboards, insight-generating solutions, notifications and alerts come together and give the smart shipping ecosystem its desired shape. These solutions predict and simulate optimised scenarios to gain a better profile and analysis of the ship’s performance and support operational decisions.

“So if a ship uses connected tech and churns out data, it’s a smart ship, right? Not necessarily. It’s true that each shipping company, from vessels to onshore operations, is a potential goldmine of data. But, several more factors are vital in turning data points into useful information, including data quality, real-time integration, contextualisation and sharing. A mountain of data points does not make a smart ship – but timely valuable information for the right person does,” Marine & Offshore explained the fluidity of the concept further.

An ocean of opportunities

While it will be a natural tendency to term anything denoted with ‘smart’ with entities like autonomy, artificial intelligence and the Internet of Things, ‘Smart Shipping’ is much more than that.

“By transforming a mass of data into action, ships become smart and can reap the benefits. Only with an accurate profile of the ship’s performance, can owners and operators optimise their operations. Through enhanced monitoring, they can measure the improvements, analyse and compare scenarios and define efficient strategies. This gives owners greater visibility and results in time and cost savings,” Bureau Veritas said.

Smartships partly automate data entry and reporting processes, apart from ensuring greater accuracy. Ship owners can then analyse the data and evaluate measures to improve their vessels’ efficiency and sustainability, from voyage planning and weather routing to optimising onboard machinery controls and maintenance planning. Also, the commercial shipping sector can use the above solution to meet emission reduction targets as well.

Discussing smart shipping’s role in the maritime industry’s future can give the impression of a homogenous digital solution for all vessels. But that is not the case.

In fact, ‘Smart Shipping’ doesn’t come with a ‘one size fits all’ approach as the degree of digitalisation and data quality management, in most cases, vary as per factors like vessel type, operations to location and business models.

“Classification plays an important role in facilitating the shift toward smart shipping and supporting maritime stakeholders’ effective adoption of data-driven processes,” says Bureau Veritas, which itself has developed and deployed Smart Shipping solutions to its clients.

The Netherlands, for example, has been proactive in embracing smart shipping solutions. The country, which reportedly encounters 140 accidents every year on its waterways, is now enhancing the maritime safety game with ‘Smart Warning and Navigation Systems’, where technology is now assisting the ship skippers to perform the necessary tasks during their journey and in that process, bringing down the threat called ‘Human Errors’.

Smart Shipping technologies can coordinate a ship’s navigation plan with the opening and closing times of locks and bridges, and take account of the available mooring space in harbours and port terminals while using the environmental data to help a vessel adapt to its speed as per the weather conditions and save fuel.

The Dutch Ministry of Infrastructure and Water Management has now allowed the trials of Smart Shipping methods on its inland and territorial waterways. These trials will help the country to determine its policy direction on the overall shipping industry.

Practical examples

In September 2023, news emerged about maritime industry player Ascenz Marorka being awarded a contract from LNG shipping services provider GasLog, under which the latter’s fleet of over 35 LNG carriers will be upgraded with Ascenz Marorka’s ‘Smart Shipping2 Solution’. The contract revolves around the integration of high-frequency sensor data and manually reported data, along with a comprehensive set of online applications for managing, monitoring and optimising the energy and environmental performance of GasLog’s ships.

In August 2023, South Korea saw the arrival of an LNG-powered bulk carrier, fitted with artificial intelligence (AI)-based machinery monitoring and safety systems. HL Nambu 2, built by Hyundai Samho Heavy Industries, is claimed to be the first ship in the world to reportedly sport AI engineers, in the form of HiCBM, an integrated ship status monitoring solution, and HiCAMS, an integrated safety control solution. These two systems diagnose the ship equipment in real-time and automatically recognise emergencies like onboard fire.

In July 2023, a new partnership to incorporate blockchain technology into marine energy trading was launched by British multinational professional services network Deloitte, marine solution provider KPI OceanConnect and payment services provider ZTLment. These three parties entered into a collaboration on the creation of a digital platform for trading carbon credits in the shipping industry.

Two months after that, a government-level £1.5 million fund was initiated to enable feasibility studies for planned green shipping corridors between the United Kingdom, Norway, Denmark, and the Netherlands. These green shipping corridors will see the operation of low/zero emission vessels.

Introducing ‘SmartShipping’

Let’s discuss ‘SmartShipping by Komorebi’, an AI-powered tool that optimises maritime transport operations while reducing its environmental impact through weather routing and performance optimisation.

Maritime traffic, as of October 2023, is producing 2.5% of the planet’s total CO2 emissions. While the International Maritime Organisation aims to reduce the stat by 40% before 2030, the industry also faces the situation where fuel is occupying some 60% of the total operational cost of sea transport, thereby pushing the bill in this area to €120 Billion per year. The sector is looking for ‘Route Optimisation’ to save 3-10% of the current fuel expenditure figures. And last but not least sailing under adverse weather conditions is causing 48% of total maritime casualties. ‘SmartShipping by Komorebi’ has emerged as an answer for the above industry challenges through its ‘Data Driven Optimisation Model’.

The innovation uses advanced mathematical models to accurately simulate the interaction of waves, currents and wind on a specific vessel while combining the evolutionary optimisation algorithms and gradient descent variation methods to find the optimal route according to the user-defined criteria.

“Oceanographic and weather conditions are constantly changing, so optimal routes will change every day. Also on a given day, the optimal route will be different for each vessel. All our data are daily updated from main weather and ocean data providers,” commented ‘SmartShipping by Komorebi’, while explaining the product.

In conclusion, ‘Smart Shipping’ heralds a transformative era for the maritime industry. Beyond mere autonomy, it’s a nuanced blend of digitalisation and data management tailored to each vessel’s unique needs. From enhancing safety in Dutch waterways to AI-equipped LNG carriers, real-world applications are diverse. The ‘SmartShipping by Komorebi’ initiative exemplifies how AI, weather routing, and performance optimisation can drive efficiency, sustainability, and cost savings—a crucial course for an industry navigating the seas of innovation.

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MSC has established itself as a global leader in container shipping and has an extensive service network and fleet of modern ships.

MSC operates an extensive fleet of container ships and provides global cargo transportation services. Its ships are among the largest in the industry and can transport a wide range of goods, including consumer goods, industrial equipment and perishable goods.

With this massive fleet, MSC can serve over 200 trade routes, connecting major ports on every continent and providing its customers with efficient and reliable shipping solutions.

The company’s commitment to sustainability is reflected in the implementation of various environmentally friendly initiatives. MSC is at the forefront of efforts to reduce emissions and improve energy efficiency in the shipping industry.

Their commitment to environmental responsibility includes investing in innovative technologies and alternative fuels to reduce their carbon footprint.

MSC’s global presence is strengthened by its extensive network of container terminals, domestic transportation and logistics services.

This end-to-end approach ensures that the company can offer comprehensive solutions to meet the diverse needs of its customers, from booking cargo space to final delivery.

Additionally, MSCs that focus on customer satisfaction, reliability and a commitment to safety have contributed to its excellent reputation in the shipping industry. With a commitment to delivering outstanding global transportation services, Mediterranean Shipping Company continues to be a key player in the world of international trade and commerce.

The brain behind this successful shipping company is 83-year-old Gianluigi Aponte. He is the founder, owner, executive chairman of the company.

Who is Gianluigi Aponte?
• Gianluigi Aponte was born and brought up in Sant’Agnello, Italy on 27 June 1940
• He completed his education in Maritime Engineering from Istituto Tecnico Nautico Statale Nino Bixio, Italy
• At the beginning of his career, Gianluigi Aponte worked as a Neapolitan captain before buying his own ship
• In 1970, he started his own shipping business with his wife Rafaela Diamant Pinas and founded the Mediterranean Shipping Company
• The company began its shipping line between the Mediterranean and Somalia, and in 1977 it operated shipping services to Northern Europe, Africa, and the Indian Ocean
• Gianluigi Aponte made a move into the cruise industry in 1988, after purchasing the liner Monterey, a luxury ocean liner launched in 1931
• He received a prize for ‘Neapolitan Excellence in the World’ from Italian Prime Minister Silvio Berlusconi in 2009
• Gianluigi Aponte won the Cruise International Lifetime Achievement Award in recognition of his long-term activity in the industry in 2012
• In 2013, he received Containerisation International’s Lifetime Achievement Award, as well as a knighthood, the Order of Merit for Labour, from Italian President Giorgio Napolitano
• As of April 2023, according to Forbes, Gianluigi Aponte has a net worth of USD 31.2 Billion

MSC China delivered in Shanghai

The world’s largest container ship, the Mediterranean Shipping Company (MSC) China, was handed over to its owner in Shanghai, China, with records for capacity and new technology.

With a capacity of 24,116 20-foot equivalent units (TEUs), a measure of volume in units of 20-foot-long containers, MSC China overtook Ever Alot with a capacity of 24,004 TEUs as the largest container ship delivered.

The ship was developed by Hudong Zhonghua Shipyard (HZS). under China’s largest shipbuilder, China State Shipbuilding Corporation (CSSC), and was registered with Det Norske Veritas (DNV), China Media Group reported.

According to Gu Lijun, senior engineer at HZS, the world’s largest container ship series consists of four ships, and the MSC China is the last to be delivered. The first ship, the MSC Tessa, was delivered in March.

With an overall length of 399.99 metres, MSC China has a width of 61.5 metres and a depth of 33.2 metres, as well as a deck the size of about four standard football fields.

The maximum number of stacked boxes can reach 25, which is the height of a 22-storey building. The ship can carry more than 240,000 tons of cargo.

Equipped with a hybrid desulphurisation tower, the vessel also features a unique small bulbous bow, large-diameter propellers and energy-saving ducts.

In addition, the ship features, for the first time, the use of a drag reduction system and a shaft generator engine system, allowing the ship to carry more goods while consuming less fuel and emitting less carbon dioxide.

With optimised fuel consumption and design index for the ship’s energy efficiency, the ship can reduce emissions by approximately 6,000 tons per year.

To date, Jiangnan Shipyard and HZS, affiliated with CSSC, have developed and delivered thirteen of the world’s largest ultra-large container ships, making Shanghai the world’s research and development and construction centre for ultra-large container ships.

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“Many climate-related issues are wreaking havoc on the industry, with recent examples including severe water level drops in the Mississippi River and supply chain interruptions in the Panama Canal,” the North Carolina-based non-profit organisation noted in its study.

“The change in climate impacts the overall productivity of a vessel; the routes are affected, resulting in changes in plans and cargo losses,” it stated further, as it predicted another loss figure of up to USD 25 billion a year by 2100 due to the damage and disruption caused by ports alone.

The shipping sector has reportedly been sluggish of late, when it comes to cutting carbon emissions. Although Danish shipping and logistics company Maersk has been using Green methanol to power its container ships, the fuel’s high price and restricted supply have hampered the transformation process.

Worldwide Greenhouse gas emissions from the shipping sector, as of November 2023, are around 3%. The RTI International’s findings come at a time when the sector has committed to acquiring net-zero emissions by 2050, with experts asking for the implementation of vigorous measures to meet the targets set forth in the Paris Agreement.

The agreement was adopted at the 80th meeting of the International Maritime Organization’s Marine Environmental Protection Committee (MEPC), conducted in the earlier half of 2023. The pact united all 175 member states in a common objective, which was to ensure “a just and equitable transition to a 20-30% reduction in shipping emissions by 2030, progressing to a 70-80% reduction by 2040.”

The roadmap involves setting robust interim emission reduction targets for 2030 and 2040, apart from committing to a lifecycle approach for assessing emissions to avoid shifting emissions from sea to land, specifying a clear and rapid timeline for adopting and applying binding regulatory measures and last but not the least, making a commitment that shipping industry’s green transition will be just and equitable, and leave no one behind.

“Over the next seven years, the 2030 target will be met by transitioning 5-10% of marine fuels to zero-emission alternatives, in alignment with the Climate Champions 2030 Shipping Breakthrough. Additionally, all ships being ordered from now on must be capable of running on zero-emission fuels by 2040 if they are to be useful for their full lifespan. Global mandatory measures and regulations will enter into force in 2027, consisting of a global GHG fuel standard and an economic measure that sets a price on GHG emissions based on the full lifecycle emissions,” the pact read.

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Russian oil producers have found ways to sell their product, while using fewer Western ships and insurance services, thus making it difficult for the West to enforce the existing price cap because the companies facilitating the trade were outside of their remit.

The G7 countries along with the European Union and Australia imposed the price cap mechanism on Russian oil in December 2022, followed by a cap on fuel from February 2023, to punish Moscow financially for its Ukraine adventure.

Initially, European Union countries agreed to review the price cap every two months and to adjust it if necessary while the G7 would review the measure “as appropriate” including “implementation and adherence.”

The G7 has not reviewed the cap since March 2023, as per the reports and four people familiar with the intergovernmental political forum’s policies, told Reuters that the group had no immediate plans to look into adjusting the scheme.

“There were some talks in June or July to do a review, or at least talk about it, but it never formally happened,” one diplomatic source said, while adding that some European countries were keen for a review of the price cap. Also, on the other hand, there is “little appetite” from the United States and G7 members to make changes in the particular policy.

The mechanism currently allows third countries to buy Russian fuel using Western ship insurance if there is proof that the purchase does not exceed price limits of USD 60 per barrel for crude, USD 45 per barrel of heavy fuel and USD 100 per barrel of light fuel.

Benchmark Brent oil futures have been trading at their highest in 2023 at above USD 90 a barrel, raising the value of global crude, including Russian Urals. Russia’s finance ministry has already said that the average price of its flagship crude grade Urals recovered to USD 74 a barrel on average in August 2023, well above the USD 60 a barrel cap, and up from an average of USD 56 in the first six months of the year.

Russia was forced to cut exports of oil (one of its revenue generation sources) immediately after the price cap was imposed as Moscow struggled to find enough ships to transport all of its output. However, the country eventually channelled most of its exports into the hands of domestic or non-Western foreign shippers, which do not require Western insurance coverage.

“At least 40 middlemen, including companies with no prior record of involvement in the business, handled at least half of Russia’s overall crude and refined products exports between March and June. While mostly ‘dark fleet’ of tankers with murky ownership was being now used to transport Russian crude, Western ships were still involved in moving products since those were harder to police, an industry source said,” commented the Reuters report.

According to the London Stock Exchange Group’s data, Russian crude has been trading above the cap since mid-July and is being traded at around USD 67 a barrel at Russian crude terminals. Russian refined products like fuel oil and diesel also surpassed their price caps.

Meanwhile, the crude oil price scaled to new heights during the first week of September as traders and hedgers weighed production cuts and a continuing run down of existing stockpiles.

Saudi Arabia and Russia have already committed to maintain their production cuts through to the 2023 end, thereby giving way to a potential supply squeeze which is pushing the prices higher.

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Caro shipping takes care of around 90% of global trade through different vessels including container and Ro-Ro ships.

Leading carriers Evergreen Line of Taiwan, South Korea’s HMM, Denmark’s Maersk, Germany’s Offen Group, Singapore’s ONE (Ocean Network Express), Hong Kong’s Seaspan as well and British ship certifier Lloyd’s Register are now looking into feasibility studies to understand how cargo is loaded and monitored at sea, apart from finding solutions to improve detection and faster prevention of fires onboard these container ships.

The Safetytech Accelerator ‘Cargo Fire & Loss Innovation Initiative’ (CFLII) is a collaborative technology acceleration program which is aimed to address the issue by shaping joint requirements, identifying technology solutions, undertaking carefully designed trials, and developing best industrial practices and recommendations.

The Initiative has three significant topics of concern. The first one is related to onboard cargo control, including whether cargo has been properly loaded, secured, and monitored during transit. The second aspect covers the ability to detect fire onboard and stop its spread through effective onboard responses, particularly on large container ships and car carriers. The third one deals with the challenges created by the increasing scale of vessels.

“The priority for the first challenge area is to provide earliest indication of a fire incident, thus allowing the appropriate onboard responses to prevent the occurrence of large fires and loss,” Rich McLoughlin, programme director for the cargo fire and loss innovation initiative, told Reuters.

“The initiative seeks to provide proof-points that emerging tech may be used to improve response times over the existing regulatory requirements, leading to enhanced vessel safety,” the official remarked.

In its 2022 safety and shipping review, analysis by major insurer Allianz Global Corporate & Specialty showed that there had been over 70 reported fires on board container ships alone since 2018, and the risks are growing as the car carriers are now transporting electric vehicles with lithium-ion batteries as well.

“The main root cause for cargo fires on container ships is the integrity of dangerous goods throughout the supply chain. Therefore it is a problem that can only be improved through industry-wide solutions,” Maersk’s Aslak Ross said.

Data from marine insurer Allianz shows that during 2021, 54 total losses of vessels were reported globally, compared with 65 a year earlier. This represents a 57% decline over 10 years (127 in 2012), while during the early 1990s, the global fleet was losing over 200 ships yearly.

As of 2023, there are around 130,000 ships in the global fleet, compared with some 80,000, 30 years ago.

South China, Indochina, Indonesia, and the Philippines maritime region is the main global ship loss hotspot, accounting for one-in-five losses in 2021 (12) and one in four losses over the past decade (225), driven by factors including high levels of trade, congested ports, older fleets, and extreme weather.

Globally, cargo ships (27) account for half of the vessels lost in 2022 and 40% over the last ten years. Foundered (sunk/submerged) was the main cause of total losses over the past year, accounting for 60% (32), reported ‘Offshore Energy’.

While the total number of ship losses declined in 2022, the number of reported shipping casualties or incidents rose. The British Isles saw the highest number (668 out of 3,000). Machinery damage accounted for over one-in-three incidents globally (1,311), followed by collision (222) and fires (178), with the number of fires increasing by almost 10%.

In 2021, fires on board the roll-on roll-off (ro-ro) car carrier ‘Felicity Ace’ and the container ship ‘X-Press Pearl’ both resulted in total losses.

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Daniel Colover

June 23, 2016: Iran’s new approach to building energy allies is being revealed as the former powerhouse staggers back onto the global stage. The lifting of Western-imposed sanctions on January 17 has given the country a new lease of life. Tehran’s ability to adapt will prove vital as today’s market is more competitive than the one it reluctantly stepped back from more than a decade ago.

Tehran remains confident that the country can boost its current 3.7 million barrels a day (b/d) of oil production further, enabling it to be able to export 2.2 million b/d, by the end of the summer. The country’s strategy to regain superiority has started well, but some of this spike in volume may be a case of Iran emptying its full storage capacity.

Iran is planning to introduce new oil contracts, widely known as Iran’s Petroleum Contracts (IPCs), and abandon the generally unpopular buyback contracts that were first introduced in the 1990s. The buybacks were introduced as an attempt to bridge the gap between the country’s need to attract foreign oil and gas companies and a ban on private foreign ownership of natural resources under the Islamic republic’s constitution.

The market remains to be convinced. The new IPCs are essentially risk service contracts where the contractor is paid back by being allocated a portion of the hydrocarbons produced.  However, more clarity is required after a key presentation was cancelled in February.

Blending opportunity

Tehran has adopted a fresh approach to blending in an effort to shrug off its lone-ranger profile and seek collaborative partnerships with energy allies.  Crude oil blending can raise the sale price of a lower grade of crude by blending it with a more valuable grade. This means producers can have a particular variety at the lowest possible cost, which has proved to be a useful trade-off.

In April, Iran joined fellow OPEC members Nigeria, Angola and Algeria with plans to blend its light oil with Venezuela’s heavy crude to get a better crude price. Iran’s Research Institute of Petroleum Industry (RIPI) signed an agreement with South Africa’s state-run PetroSA to jointly pursue research and development (R&D) in crude blending technologies. Iran also signed a long-term cooperation agreement with South Korea at the start of May. It covers a number of areas, including gas and telecommunications, and serves as a springboard for raising Iranian crude supplies to the East Asian country.

Investment culture

Sanctions did not completely derail Iran’s energy infrastructure, with Tehran funnelling cash into the country’s major oil and gas sites – refineries, pipelines, drilling sites, roads and so on – to prepare for the lifting of sanctions. The first phase of the Persian Gulf Star refinery with capacity to produce 360,000 barrels a day (b/d) will be completed by next March, with the remaining two units scheduled to go online in 2017.

When finished, Persian Gulf Star will add 16 million liters/day of gasoline production, the ongoing upgrade at the Bandar Abbas refinery will add 4 million liters/day. Officials say gasoline imports of around 50,000 b/d will not be necessary once the plant is completed. Furthermore, officials have recently said that Iran could even be exporting as much as 10 million liters/day of gasoline after the full start-up of the Persian Gulf Star refinery.

Iran’s ability to reduce inflation from 45% in 2013 to below 10% in late-2015 and introduce subsidy cuts illustrates Tehran’s financial acumen, which will bolster the country’s ability to cope with today’s lower oil prices. The International Monetary Fund (IMF) expects Iran to deliver 4% growth at a time when others in the Middle East grapple with credit rating cuts and urgently slash energy subsidies in a bid to cushion their strained coffers.

Challenges remain

Still, Iran is not free of economic and logistical hurdles. A limited number of ships are curbing Iran’s oil exports. In Mid-April the International Group of P&I raised the reinsurance level to a maximum of $830 million per tanker for shipping Iranian crude, from $580 million previously. Although this does not fully make up for the missing US reinsurance cover as a result of the US’ ongoing sanctions against Iran, it could be seen as sufficient for Asian buyers, such as India and South Korea, or some European importers, for their shipping of Iranian oil, according to industry sources. However, the increased reinsurance is still below a full P&I insurance cover of $7.8 billion.

The movement of Iranian oil to potential consumers is not helped by the remaining US sanctions that prevent business with Tehran in dollars, or with US companies – oil and tanker trade is priced in dollars. The freight shortage will likely ease later this year as ships being used for storage are emptied and Iran repairs unused ships to enlarge its fleet, but the delay will inevitably hamper the speed of Iran’s re-launch into European and Asian markets.

Iran’s seemingly more flexible approach is helping accelerate the country’s return to the global energy market and the international appetite to deal in Iranian business will deepen every time the country reaches its goals, such as the 4mn b/d oil production target. While there is no way to set an exact date, one development is clear – the new Iran has a high chance of regaining its glory of yesteryear.

Daniel Colover is Strategic Oil Market Development Director, S&P Global Platts

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