Climate change has become an unassailable fact of life. This is certainly the case when it comes to global industries such as maritime shipping, with its complex routes that can be easily thrown off balance by local weather events.
Take the example of the Rhine in Germany, Europe’s most important trade waterway. In February 2021, extreme rainfall caused the riverbanks to burst and stopped shipping for several days. Then, in April 2022, a unprecedented drought Parts of Germany were hit and water levels dropped so low that ships had to halve their capacity to avoid running aground.
There are many other examples of extreme weather events impacting maritime supply chains around the world and the trend is set to continue. Rising sea levels and extreme drought pose a serious threat to coastal infrastructure such as ports and shipyards. The shipping industry must work together to overcome the crisis in order to ease the pressure on the market in the future.
Authorities in the maritime sector are responding to the threat of global warming. At the end of 2022 the International Maritime Organization (In my view) announced that from 1 January 2023 new rules will come into force, requiring all ships to measure their energy efficiency and start collecting data to report on their CO2 emissions. The impact of these rules has yet to be fully appreciated in the shipping industry, but it is safe to predict what impact they will have on the many older ships that are still in service.
One of the key metrics IMO will collect from ship operators is their CO2 Intensity Indicator (CII), with a rating between A and E, with A being the best. Any vessel rated D for three consecutive years or an E for one year must submit a corrective action plan to demonstrate how the required index of C or higher is achieved. The way to meet these requirements will require various changes and concessions from the operators, which will require significant investments. Options include reduced ship speed to reduce emissions, hull cleaning to reduce drag, installation of energy-saving light bulbs, and the use of solar or wind-assist power for onboard accommodation. In the short term, these regulations will certainly result in higher costs for older ships that are not designed for the modern era of CO2 compliance.
Expect more of these laws to be introduced in the coming decade. Supply chain professionals and the companies they represent must be willing to prioritize flexibility in their methods, actions that will pay off later. This shift towards a more sustainable future in shipping is already tangible, in the form of more dual-fuel ships on the water, a trend we can expect to gain momentum.
Another relevant issue is the question of the impact on the consumer. Businesses will seek to avoid major price increases for customers necessitated by expensive upgrades to their fleets. And while the use of alternative fuels should be encouraged, there is speculation that this will be the case in the short term strive for change in the industry could lead to delivery bottlenecks and subsequent delays.
Adaptation and adoption are two keywords that supply chain professionals need to keep in mind as we head into 2023. Stricter sustainability regulations in shipping have been a long time coming, and shippers will be watching closely which ships comply. and which older ships could be scrapped if costly compliance investments do not clearly pay off. Far-reaching measures like these will always bring a degree of uncertainty in an industry as historic and complex as shipping, and fears that these changes could reduce market capacity over the next few years are not unfounded. However, given the overcapacity that our current market already exhibits due to the recent protracted periods of disruption, the near-term transformation for airlines must be embraced or it will result in another headache in the future.
Anne-Sophie Friborg is Vice President, Global Ocean Freight at Zencargo.
