Impact of environmental rules like the Emission Trade System (ETS).
Get ready for a tidal wave of new ships flooding the container shipping scene in 2024, like a wave crashing onto the shore. This wave follows a period of big profits for shipping companies, who spent some of their extra cash on ordering brand-new ships. The scale of this wave is huge, as the capacity of the new vessels ordered is equivalent to 27% of the global fleet, which stood at 8% in October 2020. But here’s the catch: this big increase is happening just when there’s a drop expected in how much stuff needs to be shipped around the world, estimated to be around 3% to 4% for both 2024 and 2025.
And there’s more. Notably, a lot of these new ships are mega-ships, the giants of the sea. But here’s the problem: they’re not very flexible at ports, which makes it harder for shipping companies to choose where to send them. While companies can try moving ships around or getting rid of older ones, the shadow of this big increase in capacity still hangs over their profits and plans for the future.
Impact of environmental rules like the Emission Trade System (ETS)
Regulations for controlling emissions and the costs of compliance are playing a big role in shaping the container shipping scene of 2024. The shipping world is facing some challenges due to the sky-high emission levels caused by using fossil fuels. To shrink the carbon footprint, governments and big global clubs have rolled out some pretty hefty regulations, and one of the stars of the show is the European Union’s Emission Trading System (ETS).
So, from January 1, 2024, ships that want to dock at EU ports will need to pick up some carbon credits. And get this, the share of emissions they’ll need to cover is gonna rise each year, starting at 40% in 2024. And if that wasn’t enough, the EU’s throwing in another trick called the Carbon Border Adjustment Mechanism (CBAM) to cut down emissions on stuff coming into the EU. But here’s the kicker: all these rules are gonna cost carriers big time, and they’re already working with pretty tight margins. So, you can bet your bottom dollar that this is gonna mean steeper freight rates and overall costs for customers.
Now, picture this: carriers and shippers are gonna be scrambling to figure out how to deal with all these rules. They might start avoiding EU ports like the plague and rejigging their whole game plan, which could mean some serious changes to sailing schedules and port stops. And here’s another twist: if they don’t play by the rules, they might end up losing some of their ships, although it probably won’t be too many.
