- Geopolitics puts industry at an inflection point, redefines trade routes.
- New ships must be ready for 2030s-2040s.
- Aging fleet is an environmental time bomb.
Shifting regulations on trade and environment are causing a confluence of uncertainty and this is set to choke investment in shipping, as the industry looks to decarbonize, reports Platts.
Energy transition is happening at the same time that the global rule book on trade, dictated by the US, is being tossed out the window and a new set of trade patterns is evolving, Lasse Krisoffersen, CEO of car carrier Wallneius Wilhelmsen said June 2 at a Capital Link forum during Nor-Shipping in Oslo.
“What’s happening right now when we meet with our customers? We see for ourselves uncertainty and uncertainty causes inaction and lack of investment,” Krisoffersen said.
Unpredictability is the new norm and the industry must adapt to this, he said.
This was echoed by Ibrahim Al Nadhairi, CEO of cross-sector carrier Asyad Shipping Company. “The way we see it at Asyad Shipping is mainly that the threat is the unpredictable uncertainties, as well as the changes in day-to-day decisions when it comes to the regulatory volatility,” he said during the same panel as Kristoffersen. “We wake up every morning, there’s a new regulation,” Asyad added.
Commodity markets and by extension shipping have been rocked by a wave of tariffs announced by US President Donald Trump since he came to office, and by counter-tariffs in response by other countries.
Among the latest of these, Trump announced on social media May 31 that he will raise the tariffs on steel and aluminum from 25% to 50%, effective Wednesday, June 4th.
Preparing ships for the future
This happens as the shipping industry faces a significant bill to decarbonize. In April, International Maritime Organization member states voted for the first sector-wide GHG costs on marine energy use globally, 63-16, with all 27 EU member states backing the proposal.
Separately, the European Union has been charging ships of 5,000 gross tons or more in EU-related trades for their GHG, with its Emissions Trading System extended to cover maritime transportation since 2024 and FuelEU Maritime rules in force since January.
With the ETS due to be reviewed in 2026 and FuelEU Maritime due in 2027, the EU could theoretically modify its regulations in time so shipping firms would not need to pay for the emissions twice when IMO rules become effective in 2028.
A shipowner needs to consider alternative means of propulsion and would be unwise to order a ship running only on conventional fuel oil, Ernest Meyer, President and CEO of Torvald Klaveness said during the panel.
Ordering a ship today means getting it no sooner than 2028-2029. By the mid-2030s, a vessel running on fuel oil would need a midlife investment of $10-20 million to burn alternative fuels. If it is a tanker then it runs the risk of losing access to cargoes of refined products, as demand for them declines, Meyer said.
The EU has increased the price of energy and over the course of the coming years, this will be reflected in vessel earnings, as greener vessels are able to charge more, Kristoffersen said.
Alternative fuels currently command a significant premium over conventional fuel. Platts, part of S&P Global Commodity Insights, assessed 0.5% sulfur fuel oil at Rotterdam at an average of $456.80/mt through April. By contrast, Platts assessed green ammonia in Northwest Europe at $1,848.31/mtVLSFO equivalent, according to the Platts Global Bunker Cost Calculator.
Environmental risk of an aging fleet
The average age of the tanker fleet, both compliant and shadow, is increasing.
The “shadow fleet” transporting sanctioned oil has grown rapidly over the past year on tightening Western sanctions enforcement and continued vintage tanker sales by Greek owners, according to a joint study by S&P Global Commodity Insights and Market Intelligence released May 28.
The researchers also found that the Tier 1 and 2 vessels’ average age is 20 years, and they often lack proper classification and insurance, underscoring growing industry worries over their safety standards and associated environmental risks.
The aging fleet is going to cause “graveyards of floating environmental bombs out there,” Lars Barstad, CEO of tanker firm Frontline, said during the panel.
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Source: Platts
