Here we see another bet on ammonia power. One partner is the Swiss firm WinGD, which has a long history of providing power for merchant shipping. Their website gives no indication that they have a hydrogen or ammonia-powered engine yet. But they do offer dual-fuel engines that will utilize gas for fuel. Perhaps they are not so far away.
Another development partner, CMB.TECH, a clean technology private firm based in Antwerp, already has some design expertise for ammonia engines. A look at their site shows some hydrogen-powered vessels operating, and some ammonia-powered vessels on order. They also have some hydrogen-powered fixed engines and other machines such as an excavator that they say can be ordered today.
Handling of hydrogen or ammonia on board and at ports is a major concern with this technology. Watch for the designs to see how difficult this will be.
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.
Another take from Drewry is posted below.\, via Nick Savvides and Loadstar.
Update 1/27/2023: another thoughtful article from Greg Miller·Wednesday, January 25, 2023 in American Shipper.
Shifting to greener fuels sounds easier than it is. The supply chains for common maritime fuels such as HSFO and marine gasoil are highly developed and complex. But for new fuels such as cooking oil, hydrogen, and ammonia, there aren’t any supply chains.
Even if we had excellent marine engines using these fuels, there would be no place to ‘gas up’. In many ways, it’s like the problem auto drivers have with electric cars; you need to know where you can fill up. The highly developed automotive fuel supply chain is one reason why electric cars are taking so long to catch on with the buying public.
Another issue, which plagues the electricity supply chain as well as the marine fuel one, is the ‘greenness’ of fuels. Some fuels burn green, producing less emissions, when they are propelling vehicles; but their means of production is not green at all.
For instance, hydrogen production takes a lot of electricity when it’s made by the usual method, by electrolyzing water. But how green is the energy source for the electricity? Did it come from a coal-fired plant, or from a solar or wind generation facility?
For maritime, we call this well-to-wake analysis of the greenness of fuels and their supply chains. Can we do effective well-to-wake analysis of marine fuel supply chains?
The article by Paul Bartlett below refers to a new report from Lloyd’s Register addressing this problem. The report is well worth getting for maritime pros. It’s going to be crucial to have a full understanding of the overall emissions benefits of all the possible marine fuels, if we are to build new greener ships and develop green trade lanes. A lot of work and money will be needed to set up effective maritime fuel supply chains and supplies.
Supply Chain and Logistics 