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Shippers face soaring EU ETS costs from Red Sea diversions

The wide-ranging diversion of marine traffic around the Cape of Good Hope is increasing the costs of shipping companies because they now have significantly higher exposure to the EU Emissions Trading System (EU ETS), according to Hamburg-based maritime technology firm OceanScore.

The ETS imposes liability for 50% of emissions for voyages to and from the EU and 100% for port calls and transits within the bloc.

The non-Suez route to Europe from Asia adds some 9,000nm, approaching 80%. Clarksons Research reported that container ship transits via the Gulf of Aden to the Mediterranean had fallen by 91% from the first half of December, with about 620 vessels being diverted. Dry bulk and tanker transits, which initially held up well, are now also declining, down by 37% and 31% respectively.

The ETS cost is not the only problem for shippers. Clarksons said that spot freight rates were up by 100% to 200% when compared to levels immediately before the Houthi attacks began.

OceanScore meanwhile has estimated that the southern route had tripled bunker consumption, partly because of the longer distance travelled, and partly because the average sailing speed had been hiked from 16 knots to 20. That of course also increases the emissions per journey per mile travelled.

OceanScore’s co-managing director Albrecht Grell said that “we have observed increased speeds to compensate for at least some of the longer distance – to keep sailing times and the need for additional tonnage to be deployed at acceptable levels – and this has an inevitable impact on fuel consumption and emissions”.

The maritime tech firm said that in the case of a 14,000-teu container ship OceanScore’s modelling analysis indicated that the number of carbon credits necessary to cover emissions would rise from 1,800 per voyage to 5,200 per voyage. This would translate into the EUA costs rising from €98,000 to €285,000 per voyage this year, based on the current carbon price of around €55 per tonne of CO2. That would equal a rise of €18 per teu. according to OceanScore.

Grell said that “it goes without saying that changes in sailing speeds, different vessel sizes, utilizations and the overall energy efficiency of the vessel used will all have a significant impact on the above analysis – but the general trend will be the same”, while emphasizing that “ultimately, however, the issue of EUA and other costs is secondary to ensuring the safety of crews and ships, which of course is the primary consideration and must remain paramount”.