This month we are celebrating the 125th anniversary of the world’s most frequented artificial waterway. Read about the engineering feat, the historical background of construction, and its commercial significance.
It all began with a trick. The Kiel Canal would never have been built if Bismarck hadn’t exploited the first German Kaiser’s love of the navy to obtain permission to build a canal between the North Sea and the Baltic. 125 years after its completion and official opening on June 21, 1895, the Kiel Canal is still a vital transport link for international shipping and an important factor in North Germany’s economy.
In recent years, international shipping has increasingly been subjected to criticism for its environmental record. It was in this context that the regulation issued by the International Maritime Organisation (IMO) prohibiting vessels from burning fuel with more than 0.5% sulphur content from 1 January 2020 onwards met with a generally favourable reception. As most ocean-going vessels had previously been burning fuel oil with a sulphur content of 3.5%, it was generally assumed that the very low sulphur fuel oil (VLSFO) would have a positive environmental impact, especially when ships are in port. So how about an initial fact check?
Read about how the COVID19 pandemic induced the biggest oil price crash in history. And what is the impact on maritime shipping?
Economists are already referring to the global slump brought about by the coronavirus as the world’s worst-ever economic downturn – a “Greater Depression” that’s even worse than the Great Depression in 1929-32. With lockdowns, closed frontiers and stay-home restrictions reducing road, rail and air traffic to an absolute minimum and economic activity having slowed down to an almost standstill the world over, the global demand for oil has fallen through the floor. On April 20 the price of the May futures contract for West Texas Intermediate (WTI) plunged to never-experienced negative territory of minus $40. In other words, US oil producers actually had to pay people to buy or store their oil. Since that historic low, the price of WTI and Brent crude has recovered somewhat but still remains at levels not seen for decades. It’s a simple equation, basic supply-and-demand economics. With supply significantly outpacing demand in the global oil market, the price of “black gold” has slumped.
Three vessel types were responsible for around three-quarters of worldwide CO2 emissions in 2012. There is little reason to doubt that the Big Three are still responsible for a similar share in 2020. FleetMon provides a global overview of CO2 emissions per vessel type.
Greenhouse gas (GHG) emissions from commercial shipping are increasingly grabbing the headlines. Like aviation, shipping had been excluded from climate negotiations because it is an international activity, while both the 1997 Kyoto Protocol and the 2015 Paris Agreement involved national pledges to reduce greenhouse gases. But as ships move around 80% of global trade in volume terms, there is a growing consensus about the need to tackle shipping’s CO2 emissions.
As transport-related information is increasingly digitalised and standardised, ports have the chance to take on a key role as digital hubs. As reported in our blog entry on April 19, the process of digitising trade documents is finally moving forward as key players launch blockchain-based initiatives. Now experts predict that before long, digitised information flows within the shipping sector will be integrated into other parts of the overall logistics chain. The experts in question are heading Port CDM (Port Collaborative Decision Making), a concept being developed under the auspices of the EU-funded Sea Traffic Management Validation project. A recent announcement from this project team indicated that a common messaging standard for port activity time stamps is being finalised with the help of the International Association of Marine Aids to Navigation and Lighthouse Authorities (IALA). Moreover, several ports are already testing Port CDM.
The naming ceremony for the latest TUI Cruises vessel, MEIN SCHIFF 1, took place during Hamburg’s annual port anniversary festivities on May 11. Built at the Meyer Turku Shipyard in Finland, the latest addition to the TUI Cruises fleet is 316 metres long, 20 metres longer and with one deck higher than the four previous TUI cruise ships, and can accommodate up to 2,894 passengers. Pollutants from the ship’s emissions are being reduced by a hybrid scrubber and catalytic converters. With particulate emissions an increasingly controversial subject in the shipping industry, TUI Cruises has been criticised for its decision not to commission an LNG-powered cruise liner.
The global shipping industry has had a rough ride over the past decade. The shockwaves from the global financial crisis that broke out in 2008 are still rippling through an industry that is existentially dependent on the volume of world trade, and in particular trade in containerised cargoes and commodities. In the past ten years more than half the world’s top 20 shipping lines have disappeared – either through mergers or bankruptcy. Hardly any other global industry has experienced such a dramatic concentration process.
In April of last year the remaining shipping companies consolidated to form three major alliances, 2M, Ocean Alliance and THE Alliance, including all the world’s top ten container lines: 2M – MSC, Maersk and HMM – has 223 ships with a total capacity of around 2.4 million TEUs operating 25 weekly services covering 1,327 port pairs. The Ocean Alliance – CMA-CGM, Cosco Group, OOCL and Evergreen – has 323 ships with a total capacity of some 3.5 million TEUs operating 40 weekly services covering 1,571 port pairs. THE Alliance – Hapag Lloyd, NYK, Yang Ming, MOL and K-Line – has 241 ships with a total capacity of around 3.3 million TEUs operating 32 weekly services covering 1,152 port pairs.
A trading transaction for seaborne cargo can leave behind a trail of documents at least as long as the ship itself. Bills of lading, packing lists, letters of credit, insurance policies, orders, invoices, sanitary certificates, certificates of origin: the huge ships sailing in and out of the world’s ports are not only carrying lots of cargo. A shipment of avocadoes transported from Mombasa to Rotterdam by a Maersk vessel in 2014 involved more than 200 communications involving 30 parties, the company calculated. A container giant may well be associated with hundreds of thousands of documents. For many years, there had been talk of digitising shipping documents but little was achieved to walk the talk. But now at last there are signs of progress – and not before time.
According to the World Economic Forum, the costs of processing trade documents can be as much as a fifth of those to shift the actual goods. So removing administrative blockages in supply chains could possibly bring more of a boost to international trade than eliminating tariffs. The United Nations has calculated that full digitisation of trade papers could increase the exports of, for example, Asia-Pacific countries by as much as $257 billion a year.
There was a lot at stake at the International Maritime Organisation (IMO) talks held in London in the week after Easter. With global shipping collectively producing more CO2 emissions than Germany, for example, the IMO was discussing proposals to limit and reduce emissions by ships. Their share of global CO2 emissions has been around 2-3% in recent years.
Shipping was excluded from the 2015 Paris Climate Agreement because as a global cross-border industry, it is almost impossible to break down individual countries’ contributions. The main driver for the growth of global shipping emissions is the rise of international trade, which is projected to almost double by 2035 and continue growing at around 3% per year until 2050.