Photo by Ian Simmonds on Unsplash

Navigating the Future: Maritime Shipping at a Crossroads

The maritime shipping industry, a vital foundation of global trade, faces a sea of challenges and opportunities as it steers toward a more sustainable future.

Carrying over 90% of the world’s trade, this industry is not only a backbone of the global economy but also a significant contributor to the planet’s carbon footprint, accounting for 3% of annual greenhouse gas (GHG) emissions. With the European Union’s recent implementation of the Emissions Trading System (ETS) for vessels and the International Maritime Organization’s (IMO) ambitious 40% emissions reduction target by 2030, the industry stands at the cusp of a critical transformation.

Below is our overview — or ‘vista’ — of the industry’s situation — and a peek into some of the solutions to help on the journey.

The Problem:

For the Industry:

• Pressure is on the shipping industry now that, in the EU, vessels are subject to the ETS (Jan 2024). This is estimated to cost $20B for the industry in the first 3 years alone.
• Additionally, the FuelEU maritime regulation requires 55% of all ships calling at European ports to reduce the greenhouse gas intensity of fuels used by the shipping sector, starting with a 2% decrease in 2025 and ramping up to and 80% decrease by 2050.
• The International Maritime Organization’s 40% emissions reduction target by 2030, with only 5–10% from low emissions fuels, further increases demand for efficiency solutions.
• Ships in the EU are now also required to be retrofitted to use on-shore power while at port by 2030.

For the Climate:

• Maritime shipping contributes 3% of annual GHG emissions (1 GT), about the same amount as Germany.
• 90% of world trade is transported via sea, deeply integrated into the world economy (Reuters).
• It is one of the most difficult areas to decarbonize. The amount of power required for these vessels and space constraints onboard make them very difficult to power via batteries or low-energy density fuels. A cargo ship can use an average of 20 to 70 tons of fuel per day, depending on size, route, and speed — and at the extremes can go up to 400 tons of fuel per day. At the lower end, this is more than 1,000 cars’ usage from a full day’s worth of driving.

Who has the problem? Some of the major players:

Container Shipping: carry cargo in standardized containers

• Maersk Line (Maersk Group): One of the largest and most well-known container shipping companies globally.
• MSC (Mediterranean Shipping Company): A major player in container shipping, often competing with Maersk for the top spot.
• CMA CGM Group: A French container transportation and shipping company, one of the largest in the world.
• China COSCO Shipping Corporation: A Chinese state-owned shipping giant with significant operations in container shipping.

Bulk Shipping: carry large quantities of liquid or solid cargo like coal, grain, and oil — large open-air rooms

• DryShips Inc.: Involved in dry bulk shipping, oil tankers, and offshore drilling.
• Golden Ocean Group Limited: A major dry bulk shipping company with a large fleet of vessels.
• Diana Shipping Inc.: Specializes in the transportation of dry bulk cargoes, primarily including coal, iron ore, and grain.

Tanker Shipping: technically subset of bulk shipping focused on crude oil, but the industry often speaks of them distinctly

• Euronav NV: A leading independent tanker company engaged in the ocean transportation and storage of crude oil.
• Frontline Ltd.: Operates one of the largest fleets of crude oil tankers.
• Teekay Corporation: Involved in various segments, including crude oil and gas tankers, as well as offshore energy services.

Additionally, there are many players including the owners of cargo, freight forwarders (who act as intermediaries between cargo owners and the ‘carriers’ or shipping companies), port authorities and terminals operators (many ports have more than one terminal and terminal operator), amongst others.

What’s the status quo?

· Shippers often push costs onto hinterland / inland cargo owners and transporters but this pattern is being disrupted in the midst of new regulatory forces.

· In Europe, the industry will be forced to pay $20B in just the next 2 years to meet ETS requirements.

Potential solutions

Efficiency measures, which are more immediately impactful and often venture-backable within typical exit expectations. Because green fuels are likely to be more expensive for the foreseeable future, and less energy dense than fossil fuel options, also key to enabling the switch to more green fuel capacity in the industry.

• Route optimization
• Vessel efficiency (wind-assist tech, hull designs, streamlined ship shapes, advanced lightweight materials)
• Enabling software, including marketplaces, evaluation tools, route optimization, port ops optimization, supply chain optimization

Green fuels, ultimately, pose the possibility of fully decarbonising this industry, but often not available in large enough quantities and are still significantly more expensive than fossil fuel alternatives, and so remain impractical at large scale — so far.

• Fuels like methanol and ammonia, rather than hydrogen due to its low energy density, are preferred for maritime shipping’s large energy needs and space constraints.
• Methanol can integrate at low levels into existing ship engines without retrofits, while ammonia, forecasted to fulfil 45% of shipping fuel demand by 2050, also has a broader market in agriculture (fertilizers).
• Although both are widely used in industry today, making them without GHG emission still remains a challenge. To make green methanol and ammonia, processes usually require green hydrogen.
• Some ventures are building technologies that create these ‘hydrogen derivatives’ directly, without first producing green hydrogen, often from waste sources.
• Both methanol and ammonia have their challenges, however –
• Methanol does emit some CO2 — though if this CO2 is taken from the air, it is part of a closed carbon cycle and considered net zero.
• Ammonia does produce nitrogen oxides, another greenhouse gas, and is highly toxic, flammable, and corrosive — leading to storage and handling complexity.

On-board carbon capture

• Has a lot of promise to aid, particularly given capture can happen at point-source. But may currently be more costly than regulatory penalties, and logistically challenging, unclear how quickly this will change.

Market size & Growth projections

Retrofits:

• 100,000+ ships exist today, each requiring several multi-million-dollar retrofits to meet GHG goals: so the retrofit market is conservatively $1T TAM
• UMAS and ETC study into costs estimated that cumulative investment of $1Tn — $1.4Tn, or c.$50Bn — $70Bn annually for 20 years, is required to decarbonise the shipping industry and up to $1.9B total (Reuters)
• There will be an ongoing need for retrofits as new fuel options mature and engines are updated.

Fuel:

• Sustainable marine fuel market projected to be $325B by the end of 2036, CAGR of 51% (Research Nester) Market in 2023 was $46B
• Petroleum based marine fuel market is ~$200B in 2024, CAGR 2.7%, reaching $227B in 2029 (Mordor Intelligence)
• Today, fuel = 50–60% of a ship’s operating costs
• Will likely increase in the future as green fuels are still projected to be more expensive

How will maritime shipping’s market size be affected as petroleum phases out?

• Oil accounts for 30% of global maritime trade. As the economy transitions, materials and fuels are still likely to be traded at these or higher levels — experts still expect shipping market overall to increase, despite a steep descent of gas, oil, and coal post 2035.

Thanks for reading and engaging with us on this vista of the maritime shipping sector!

What do you see on the horizon for this industry?

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