Introduction
The shipping industry has seen significant growth in the last 50 years, now responsible for 80-90% of global cargo transport. However, it faces challenges from factors like climate change and geopolitical tensions, making it vulnerable to disruptions. Despite progress, inefficiencies persist due to complexity and stakeholder involvement, leading to coordination problems, revenue loss, and environmental harm.
Regulations to reduce environmental impact are expected to tighten as trade volume increases. Container trading volume is projected to grow steadily, leading to higher shipping emissions unless addressed. Even with a 70% fleet efficiency improvement by 2050, emissions may only decrease by 20%, falling short of the IMO’s net-zero emissions goal for 2050.
Therefore to achieve IMO goals, the industry must adopt efficiency measures such as Just-in-Time port arrivals. However, the reality is different as currently, ships spend around 50% of their time at berth, anchoring, or maneuvering, leading to a 15% increase in fuel consumption and emissions compared to their annual averages. Collaboration among port stakeholders to facilitate Just-in-Time sailing becomes an imperative to reduce emissions and fuel consumption.
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Current challenges that the container transport industry faces
Carriers see themselves surrounded by a myriad of challenges that among others include new regulations, an increase in fuel prices, and operational inefficiencies. As the volume of international trade grows so does the need for increased collaboration and efficiency measures. Some of the challenges facing the container transport industry are:
The adoption of the EU ETS Trading system
As part of the “Fit for 55” package, the EU seeks to expand the EU ETS trading scheme founded on a ‘cap and trade’ principle to the maritime sector, with the goal of achieving a 55% reduction in the EU’s GHG emissions by 2030. Under this framework, a cap is established for the overall volume of GHG emissions, allocated among regulated EU entities. This measure provides financial incentives for reducing the amount of emissions emitted and penalizes the excess of it.
The EU ETS will cover 100% of the emissions on voyages and port calls within the EU and 50% of the voyages into or out of the EU. From 2024 onwards, shipowners will need to gradually buy allowances covering 40% of their emissions in 2024, 70% in 2025, and 100% in 2026 from international voyages starting and ending in the EU/EEA. Therefore incorporating shipping into the EU ETS will impose substantial costs on the industry as CO2 costs continue to rise.
Read the article Why Understanding CO2, NOx, and SOx Emissions in Shipping and Ports is important
How the EU ETS affects ship owners
Ship owners will have to navigate the implications of the EU ETS scheme together with the associated requirements, costs, and new contractual obligations. This measure is expected to encourage shipping companies to reduce their emissions and fuel consumption but also repurpose the funds raised from the scheme towards decarbonization initiatives across the industry. In addition, it will provide a stand-off/trade-off between capturing operational opportunities by speeding up to get an earlier slot at the terminal, and the footprint of shipping operations. With container carrier profits declining rapidly, the commercial gain may trump the environmental impact, at least for the first few years of the system being applied to shipping when the costs for additional credits are still minimal.
The FuelEU Maritime initiative
This initiative is aimed at encouraging shipowners to adopt greener fuels. This initiative is a key component of the “Fit for 55” package as it will gradually introduce limits on the carbon intensity of the energy used by vessels from 2025 onwards. The aim is that by 2050 renewable and low-carbon fuels will represent 86 to 88% of the international transportation fuel mix to be able to contribute to the EU’s emission reduction targets.
How the FuelEU Maritime initiative affects ship owners
Ship owners will be more inclined towards adopting more renewable and low-carbon fuels to reduce the maritime sector’s carbon footprint. Shipping companies will need to monitor the type and fuel used during the voyage and at berth and submit a standardized plan to an authorized verification body. This will result in a compliance certificate when the GHG intensity of a ship, use of OPS, and performance against yearly targets are met or a penalty when vessels do not comply with the yearly limits approved.
Increased fuel cost and fuel transition to greener alternatives
whether is the use of fossil fuels or the change to an alternative fuel type both options come with an increase in associated costs. New regulatory changes are in discussion to remove the tax exemption for fossil fuels to encourage the use of more viable alternative fuels via a mechanism under discussion for the maritime industry (European Taxation Directive). As per the adoption of new and more sustainable fuel types, the industry is in an experimentation and exploration phase to understand what are the implications of adopting greener fuels. With more than 95% of the ships, today being powered by various petroleum products (HFO, MGO, and MDO), the transition to greener-fuel possibilities is going to be a lengthy process. Hence, transitioning to a greener fuel future demands years of effort that require the establishment of a new global fuel supply infrastructure.
How the fuel transition is affecting ship owners
Shipping companies are currently exploring their options in terms of decarbonization initiatives, specifically when it comes to the adoption of alternative fuel options these organizations are investing already efforts and resources in drafting a viable strategy. Recent research suggests the industry is moving towards adopting a broad mix of fuels to support and accelerate the transition to cleaner fuels.
The transition to low-carbon fuels involves considerable capital investment and operational expenses, resulting in significantly higher costs per fuel unit compared to fossil fuels. Studies realized on this topic underscore the need for a global investment of approximately $2 trillion for shipping decarbonization, with around 85% allocated to onshore infrastructure and fuel production facilities.
This will result in a more complex and extended process for establishing a global supply infrastructure. In the meantime, the industry is at a standstill as ports evaluate carriers’ fuel requirements, while carriers acquire different vessel types to prevent stranded assets – ships unable to operate fully due to mismatched bunkering options available in ports. This cautious approach hampers decisive action, despite the urgent need for clear decisions.
The implementation of EEXI and CII regulations
Starting from January 2023, it is now compulsory for all ships to calculate their Energy Efficiency Existing Ship Index (EEXI) in order to evaluate their energy efficiency. Additionally, ships are required to collect data for reporting their annual operational carbon intensity indicator (CII). Both EEXI and CII serve the purpose of minimizing carbon emissions and environmental impact in the marine sector.
How this will impact ship owners
Ship owners and managers were required to prepare for the EEXI and CII requirements ahead of time, dedicating resources to assess and enhance their vessels as necessary. Moving forward, ship owners must ensure compliance with these regulations and take the appropriate measures to improve their energy efficiency and carbon intensity index.
While shipping companies are adjusting to these regulatory changes, ways of operating, and the effects of fuel prices, there are measures that can be adopted to overcome part of the impact and become more resilient to changes. In the meantime, there are short-term operational measures that ship owners can implement such as Just-in-Time port arrivals. Such solutions have a low implementation cost and at the same time contribute to reducing the environmental impact and reduction in fuel consumption.
Obstacles to implementing Just-in-Time port arrivals
While the benefits of implementing JIT port arrivals are obvious and JIT is widely recognized as a way to reduce emissions, it’s still not widely implemented and adopted by the industry. There are multiple operational and contractual barriers to the uptake and implementation of Just-in-Time port arrivals. Some key challenges to the implementation of Just-in-Time port arrivals include data standardization, predictability, and collaboration.
- Low visibility of terminal planning: terminals are in the driver’s seat to determine a suitable berthing window for a vessel. While doing so, the terminal is also ensuring the utilization and productivity of assets such as a quay, handling equipment, and personnel remains high.
- Lack of transparency in communication between parties involved in a port call: while much effort has been dedicated to optimizing routes or speeds, these efforts are counterproductive if when the ship arrives at the port it has to wait at anchorage for several hours or needs to speed up again to use a last-minute available slot at berth. Therefore for all the actors in a port call to synchronize their efforts and be able to implement JIT at scale, collaborative planning is a must. While this synchronization contributes to increased operational efficiency, it also avoids situations where ships have to wait to get in or leave a port because other actors are not ready.
- Data standardization among multiple parties: The lack of standardized real-time digital communications between ships, ports, and between ports themselves means the ports face limitations in planning resources. As a result, ships often arrive earlier than expected and encounter unavailable berths, congested port entrances, and insufficient technical operators (e.g., mooring companies, tugs, pilots) to facilitate their delays or departure. This can lead to delays and waiting times during entrance and departure operations due to misalignment or delays among these operators.
- Different systems in every port to integrate with. In the context of the voyage, each stakeholder depends on diverse, intricate solutions that lack data sharing among themselves. These solutions often need substantial manual intervention, resulting in duplication of efforts. To address this issue, it is necessary to remove data silos and facilitate effective information utilization among port stakeholders, such as cargo owners, charterers, port authorities, and other participants in the global supply chain. The key to achieving this objective is investing in integrated, and interoperable solutions that span the entirety of the vessel and port ecosystem.
In conclusion, although the Just-in-Time (JIT) implementation offers clear benefits and is recognized as a means to reduce emissions in the shipping industry, it still faces challenges in widespread adoption.
Therefore addressing these challenges and implementing JIT port arrivals will require collaborative efforts, technological advancements, and industry-wide cooperation. By overcoming these barriers, the shipping industry can unlock the potential of JIT, leading to improved efficiency, reduced emissions, and a more sustainable future.
How PortXchange Synchronizer enables shipping companies to facilitate Just-in-Time port arrivals?
PortXchange provides shipping companies with solutions to implement Just-in-Time (JIT) port arrivals. Through the PortXchange Synchronizer platform, shipping companies can seamlessly coordinate and collaborate with other stakeholders involved in a port call, thereby facilitating JIT arrivals. More specifically, shipping companies can:
- Get visibility into terminal planning, enabling alignment of vessel schedules with optimal berthing windows. This optimization maximizes the efficiency of assets such as quays, handling equipment, and personnel, resulting in increased productivity. Just-in-Time port arrivals further enhance the planning of port and terminal operations. With awareness of terminal planning changes, container vessels can proactively adjust their speed to arrive on schedule or choose to reroute to another port, preserving operational efficiency.
- Get access to real-time data sharing from all parties involved in a port call. This includes cargo owners, charterers, port authorities, and other stakeholders. This collaborative approach allows seamless coordination, minimizing disruptions, and enhancing operational effectiveness. The integration of data-sharing technologies reduces inefficiencies during the approach to a port by offering immediate updates on terminal availability, nautical services, and waterway conditions. As a result, time spent at anchorage is decreased, leading to reduced fuel consumption and CO2 emissions.
- Obtain accurate and reliable ETA data. Shipping companies can better plan their routes, speeds, and arrival times by enhancing predictability and avoiding unnecessary waiting or speed adjustments. To achieve this, essential timestamps and locations must be defined for JIT arrivals to be implemented. This requires a commitment between shipping companies, ports, and related parties by which ships must adhere to estimated arrival times (ETA), and ports must ensure berth resources are ready.
- Integrate with existing digital solutions enabling effective information utilization across different systems in each port. Standardized data exchanges enhance efficiency, minimize manual interventions, and eliminate redundancy. Establishing a unified information exchange and interoperable communication layer allows ships and ports to share port call data in standardized formats, promoting environmentally friendly and sustainable operations.
With PortXchange, shipping companies can overcome the barriers to JIT implementation and unlock the benefits of efficient, optimized port operations.
