Shippers will have to foot the final bill for ‘greener’ shipping

Source: The Loadstar
Date: 11th April 2024

Carriers will rely on cargo-owners’ willingness to pay a healthy surcharge for greener shipping to recover the cost of ‘significantly more expensive’ green methanol fuel.

Carriers could sell ‘green slots’ on conventionally fuelled vessels, on condition they do not sell more ‘green teu miles’ than those created on carbon-neutral ships.

In other words, if a carrier had just one ship of ten powered by green fuel, assuming all the ships were the same size, that would mean 10% of all teu miles travelled by the ten were ‘green’. The shipping company could sell 10% of all its teu miles as ‘green’, including cargo transported on conventionally fuelled ships.

And the cost of the green slots, as expected, will be hugely inflated compared with the price of a regular teu mile.

The cost difference will be significant, so it’s less about optimising cost, per see but about the shipper’s approach to sustainability.

Do you view it as sufficient to ‘compensate’ for emissions via the EUAs that have to be provided, or do you want zero-footprint transport? A strategic decision that comes at a price, not a commercial decision.

Environmentally conscious customers recognise the urgency when it comes to decarbonising global supply chains. Using biofuel is a strategic decision for this customer.

So, despite the obvious benefit to the planet, this raises a cost-to-benefit ratio question for shippers paying a premium for carbon neutrality.

Whether ‘green transport’ will be important for them – whether that adds value to the shipment – will most certainly depend on their business model and stakeholder situation.

Notably, shippers opting to buy ‘green miles’ have thus far mostly been large companies with deep pockets and an important brand identity. Such names include Nestlé, Amazon, Ikea, Inditex and Flying Tiger.

But with less available capacity for green teu miles in the market than for traditional teu miles, supply versus demand could tighten in the coming year, causing prices to rise further.

In the end, how much they can choose will also be determined by the overall supply of teu miles. The less supply the more they will be forced to pay for either green, or not-green, shipping.

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