Red Sea Rerouting Leads to Spike in Emissions
Although apparel companies have largely navigated the Red Sea diversions smoothly in spite of some product delays, the impacts of the mass rerouting of container ships and increasing vessel capacity may set back prior progress made in emissions reductions.
Container ship emissions could rise by as much as 11 percent to 257 million tons in 2024 if disruptions including in the Red Sea and Panama Canal continue, according to consultancy firm AlixPartners.
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With container shipping companies tacking on 10-to-14 days of extra time on their voyages out of Asia to both Europe and the U.S. East Coast, the longer route has necessitated an 8 to 10 percent increase in container ship usage compared to the year prior, according to Niels Rasmussen, chief shipping analyst at shipowner association BIMCO. The added usage inevitably has led to an equivalent rise in emissions, Rasmussen told Reuters.
Emissions from container ships hit 231 million tons in 2023, touching pre-pandemic levels, AlixPartners said.
The rerouting of container vessels around Africa, which is leading to higher fuel consumption, is projected to result in a 42 percent rise in emissions per ship for a standard Asia-to-North Europe weekly liner service, according to Greece-based shipbroker Intermodal.
“The extended travel times necessitate adding at least two more ships to maintain weekly Asia-Europe services per operator, further increasing the total emissions from the fleet for the same amount of cargo,” said Yiannis Parganas, head of Intermodal’s research department.
The Red Sea situation is also impacting average sailing speeds, which in turn contribute to a higher rate of emissions. It mainly impacts main liner ships and the capacity weighted average speed has so far increased 4 percent in March 2024 as compared to last year, according to BIMCO data.
“We assume that the situation will be resolved and that ships will slow down in the second half of the year to end with similar average sailing speed as in 2023,” Rasmussen said in the recent BIMCO report. “We therefore also estimate that average sailing speed will be lower in 2025, however, should the resolution of the Red Sea crisis be delayed, the slowing down of ships will also be delayed.”
With the disruptions still carrying on throughout both the Red Sea and the Panama Canal, there are more doubts about the sector’s ability to stay on track to meet the International Maritime Organization’s (IMO) mandate for a 20 percent carbon emissions reduction by 2030.
“The worst-case projection has industry emissions approaching 350 million tons by 2050, barring concerted intervention by governments, shippers, consumers and industry groups,” according to the AlixPartners 2024 Container Shipping Outlook. “Even targeted investment and conversion to alternative-fuel propulsion systems will not be sufficient to achieve the mandated 20 percent reduction by 2030.”
The report noted that the 2050 net-zero goal from the IMO remains within reach, but barely. According to AlixPartners, the goal can be met if 5 percent to 17 percent of the industry’s fleet is converted to zero-emission fuels (such as ammonia, methane or hydrogen) by 2030 and 84 percent to 93 percent is converted by 2050.
Reaching that goal will require up to $1.4 trillion in investment, the consultancy estimates.
As part of that investment, total container ship capacity will continue to expand. Container vessels are forecast to grow 9.5 percent during 2024 and 4.9 percent during 2025, equal to 14.9 percent growth over the two years combined, according to Bimco.
The largest ships with capacities of 12,000 20-foot equivalent units (TEUs) or more, of which there are around 800, will contribute 75 percent of the total capacity growth, Bimco said.
Of course, the new orders represent a double-edged sword. While more ships out on the sea are likely to replace older ships—instead running on more environmentally friendly fuel alternatives like green methanol—an increase in total tonnage is still going to add up to more miles on the ocean and added fuel consumption.
The concerns about emissions come as freight rates on the ocean are subsiding from their recent January peak. Ocean spot rates measured by Drewry’s World Container Index (WCI) decreased by 1 percent week-over-week to $2,795 per 40-foot container as of April 1.
Since Jan. 25, when the WCI reached $3,964 per container amid rampant uncertainty of the Red Sea skirmish’s wider impact, rates across all trade lanes have sank 29.4 percent.
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