According to this consultant, many ships will need to be recycled as a result of the International Maritime Organization (IMO)’s new carbon intensity indicator (CII) rule.
And there isn’t enough recycling capacity to handle them all. Far East recyclers have the most capacity, as we know. But these yards are not certified to recycle EU ships, that must be recycled at a yard following the Waste Shipment Regulation of the EU. There are only six such yards in the EU; Turkey, an OECD state may also be used.
Recycling ships has been fraught with problems for years, mostly of the social kind; but now yards will be held accountable environmentally also.
It’s a good thing for the long run, but planning is essential if you are wanting to recycle a ship.
With all the talk of breaking up the alliances, this decision by Maersk and MSC is smart. Each line now has a ready answer for regulators, both in the EU and the US.
The decision is reminiscent of what happened with IBM and ATT. In those cases, the US regulators sued these two giant companies on antitrust grounds. At the time, IBM was dominant in computers, and ATT was dominant in telephones, and there were concerns of price fixing with both companies. In each of these cases, the government had to take legal action against the firms. But the lawsuits dragged on and on; giant companies can easily afford large legal entourages that can string out a proceeding forever.
One of my good friends and former bosses led the IBM antitrust management team.
Somewhere in the proceedings, while imagining life after the breakup, each of these firms came to the conclusion they would be better off broken up. So each of them proposed a split-up. The proposal itself was enough to defuse the lawsuit’s consequences, and reduce concerns the regulators had.
For a short while, I worked for Lucent, which was one of the spinoffs of ATT; it was the Western Electric manufacturing division, and included Bell Labs and other electronics manufacturers. Other ATT spinoffs were the ‘baby Bells’, the regional telephone companies. Now, 40 years later, they are all gone too. So is local phone service, replaced by cell phones, so a monopoly in local landline service is not a concern. Lucent is also gone, merged into Alcatel, a large European concern with partial Chinese ownership, and is called Alcatel-Lucent. It’s a private concern.
IBM spun off its printer and PC division into Lenovo, also a Chinese company, and while they still support mainframe computing today, are now more of a software company.
I think it’s a smart move to defuse regulatory concern about alliances. The political atmosphere right now would definitely support breaking them up. Huge profits in times just past, and terrible service for customers in the past and right now make the alliances an easy political target. But saying it’s going to end anyway should buy Maersk and MSC some negotiating room with the regulators. The only issues then will be how they preserve service; these are easily dealt with by making some kind of plans that man or may not ever be implemented.
I think the big question for Maersk and MSC will be the effect on their capital expenses and on their service guarantees. The rationale for alliances was that more regular service could be offered on an alliance route because the carriers covering it would share the job of providing regular ship sailings. That would reduce the need of each firm for more ships. That’s much lower capital expense.
Alliances are a great example of business collaboration to reduce costs, here capital costs (since the voyage operating costs are ‘covered’ by the cargo). Capital is expensive; no one can buy enough ships without borrowing, or using up cash on hand, or asking for more investment.
But in recent times, carriers are blanking sailings when they don’t have full ships. Service, even on alliance routes, has deteriorated to an awful level for container shipping.
It’s hard to see how Maersk, for instance, can cover a 2M alliance route adequately for a large customer, who may require weekly shipments. Some of the business will have to go to another carrier. And then the scheduling will not be straightforward. Throw blanked sailings into the mix, and customers will suffer.
But the regulators will be appeased; they can’t regulate as much when the alliance is gone.
I think the big problem of long-term success for ocean container carriers is customer service. They have to figure out how to set delivery expectations for customers and then deliver to them reliably. Hopefully at a profit.
Transport and Environment (T&E), “Europe’s leading clean transport campaign group”, has a plan. They believe Europe could be able to produce all the batteries it needs by 2027, without imports from China. It’s a laudable goal, and the idea is amazing since Europe is fast rushing to battery-powered electric vehicles, which consume lots of batteries.
The group imagines a European sovereignty fund to support domestic battery production, and streamlining of EU rules on state aid. Battery plants now take a long time to build, since there are considerable risks to their storage and manufacture.
According to the article, about half of Europe’s batteries are already sourced there. The EU is mandating electric vehicles by 2035, which sets up a big increase in demand for batteries.
The supply chains associated with electric vehicles are interesting and of crucial importance so that they will be accepted and effectively used. Batteries are a major element, and disruptions in the supply are not healthy for European manufacturers.