It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
The Biden administration has approved the Willow project in Alaska, a $8 billion oil and gas development by ConocoPhillips.
The project is expected to generate revenue for the federal government, create jobs, and provide money for Alaskan Native communities.
Climate activists, Alaskan natives, and international organisations have raised concerns about Willow leading to more decades of oil production and increased carbon emissions in the region.
After years of uncertainty, ConocoPhillips’ Willow project has finally got the green light in Alaska. Stakeholders were unsure whether Willow would go ahead after several delayed oil and gas leases and cancelled oil pipelines in the U.S. However, following repeated bids from ConocoPhillips and Alaskan politicians for the project to go ahead, to support Alaska’s economy, which still relies heavily on oil and gas, Biden approved Willow.
Willow was previously approved under the Trump administration but was halted by a decision by a federal judge in Alaska in 2021. The judge cited “serious errors” in ConocoPhillips’ environmental review of the project, with little analysis of the climate impact the project would have. President Biden has also faced significant pressure over the project, with climate activists and international organisations suggesting that his approval of the project would go against U.S. climate aims and recent policies, such as the Inflation Reduction Act (IRA). They pointed out that if the project went ahead it would lead to many more decades of oil production in an area that is volatile to climate change, as well as increasing carbon emissions in the region significantly.
Despite concerns about whether it would go against U.S. climate aims, Biden approved the $8-billion Willow Project this week. While there were many reasons to cancel Willow, there are also several positives being seen by the state and federal governments. The project is expected to bring in $17 billion in revenue for the federal government, and generate huge revenues for Alaska, as well as create 2,500 new jobs. There is an estimated 600 million barrels of oil reserves in Willow and the project is expected to bring between 160,000 bpd and 180,000 bpd of crude oil online, supporting U.S. aims to boost national production and enhance its energy security. Related: Blackrock CEO Fink: Oil & Gas Is Vital In Meeting Energy Needs
ConocoPhillips will be permitted to drill three well pads in Alaska’s National Petroleum Reserve, which covers 23 million acres of public land. This will prolong the life of Alaska’s oil industry. The CEO of ConocoPhillips, Ryan Lance, stated that the approval “was the right decision for Alaska and our nation.” Lance added, “Willow fits within the Biden administration’s priorities on environmental and social justice, facilitating the energy transition and enhancing our energy security, all while creating good union jobs and providing benefits to Alaska Native communities.”
Regional opinions on the project have been split. State lawmakers are enthusiastic about Willow bringing jobs and greater revenue to the region, helping to reduce Alaska’s reliance on federal funds. A coalition of Alaska Native groups on the North Slope is also hopeful that money from the project will be pumped into education and healthcare in overlooked communities. However, Alaskan natives living close to Willow are concerned about the health and environmental threats the project will bring.
Climate activists are also outraged by the decision, having spent years warning policymakers of the potential risks involved with the project and lobbying against it. Over one million letters were written to the White House opposing Willow, as well as almost three million signatures collected on a Change.org petition. Environmental organisations are now expected to seek an injunction to try to block the project, likely resulting in delays. The project’s construction can only be carried out in the winter season as Conoco requires ice roads to build the project’s infrastructure, so delays could have a major impact on the project’s timeframe.
In a bid to reduce the project’s impact on the environment, the U.S. Department of the Interior insisted on lowering the number of drilling sites from five to three. In addition, ConocoPhillips was asked to relinquish rights to about 68,000 acres of existing leases in the region to the government, to establish a buffer between exploration and development in the region outside of Willow. These changes to the original plan are expected to help reduce the negative effect of the project on climate change and wildlife in the region, although many suggest that the approval of any form of Willow will exacerbate climate change in the region. Willow could be operational for as long as 30 years, releasing as much as 278 million metric tonnes of carbon emissions, according to U.S. Department of the Interior estimates. Jeremy Lieb, an Alaska-based senior attorney for environmental organisation Earthjustice, stated “We and our clients don’t see any acceptable version of this project, we think the [environmental impact] analysis is unlawful.”
However, the Biden Administration said its hands were tied when it came to approval as ConocoPhillips already had valid leases in the region, meaning that legally, courts would not have permitted the government to reject or drastically reduce the project. The rejection of the project could have left the government with high fines and facing legal action from Conoco.
Just because the Alaskan Willow Project has been approved it doesn’t make it any less controversial. Following several advances in U.S. climate policy, Biden’s approval of the ConocoPhillips project came as a shock to many, a turnaround on his ambitious climate pledges. While the government promised a scaled-down version of the project, there will inevitably be significant pushback from climate activists and groups hoping to stop Willow altogether.
By Felicity Bradstock for Oilprice.com
Four Out Of Six French Refineries To Stop Operations As Strikes Escalate
Four out of France’s six refineries will shut down by Monday, March 20, as strikes escalate after French President Emmanuel Macron pushed through with a controversial pension reform without a vote in Parliament, refinery workers told Argus on Friday.
Earlier this week, Macron pushed to pass the reform without a vote in Parliament under a parliamentary clause known as 49:3. The pension reform proposes to raise the retirement age in France by two years to 64.
Macron’s move without a parliamentary vote sparked even more protests and street blockades in Paris and other cities in the country.
The strikes in France against the reform began in February and escalated this month, with workers in many sectors, including refinery workers, joining the industrial action.
The strikes have disrupted power supply, refining operations, and fuel deliveries for nearly two weeks.
Now most of France’s refineries are expected be closed down by March 20, also because of a lack of crude deliveries due to strikes among port workers which prevent the discharging of crude cargoes.
Two refineries run by supermajor TotalEnergies, the 219,000 bpd Donges and the 246,900 bpd Gonfreville refineries, as well as ExxonMobil’s 207,100 bpd Port Jerome facility and the 210,000 bpd Lavera refinery of Petroineos are all expected to be shut down by Monday, workers tell Argus. ExxonMobil’s refinery is stopping operations because it lacks the crude needed to keep the facility running.
Apart from refining operations, the strikes have disrupted LNG imports into France as LNG import terminals have been shut down.
France has four LNG receiving terminals, Dunkirk, Montoir, Fos Cavaou, and Fos Tonkin.
As the strikes entered their second week, at least seven LNG cargoes heading to France have changed course and are now headed to import terminals in the Netherlands, the UK, and Spain since the strikes started.
AUKUS Nuclear Sub Deal Opens Door to Advanced Undersea Operations
Manned submarines are just one aspect of the program's potential
Anduril Australia's Ghost Shark unmanned sub prototype, one potential contender for next-gen subsea warfare platforms (Anduril Industries)
The announcement of the agreed pathway for Australia to acquire nuclear-powered submarines (SSNs) under the AUKUS deal provides clarity about how and when Australia will have this important capability.
The process begins with an increased tempo of visits to Australia by the US Navy this year and by the Royal Navy from 2026. From 2027, HMAS Stirling in Western Australia will receive rotations of SSNs from the US and UK. The next step will occur in the early 2030s, when Australia will buy the first of three, and potentially up to five, US Virginia-class SSNs. These purchases will allow the Royal Australian Navy to avoid a capability gap as its Collins-class conventional submarines approach obsolescence before the first ‘SSN AUKUS’ boats appear in the early 2040s.
The new SSNs will be built in the UK and Australia in the 2030s and 2040s and form the long-term basis for both nations’ submarine capability, eventually replacing the Virginia-class SSNs as they retire in the 2060s. A fleet of at least eight SSNs will be acquired under the plan.
It’s a long-term program stretching for decades into the future. And that future will inevitably involve more advanced undersea warfare capabilities—which the AUKUS pact recognises as a priority technology under its second pillar.
A key will be enhancing networked command and control in undersea warfare. The oceans are largely opaque to traditional radio transmissions, and submarines have historically been reliant on very low-frequency (VLF) radio for communications. But the nature of VLF means that transmission rates are extremely slow, making it impossible to do anything more than send simple text messages.
Two possibilities that could open up the undersea environment for high-speed data networks are quantum communications and high-bandwidth laser-optical communications that can reach submarines several hundred metres below the surface. Fixed sonar arrays and the uncrewed undersea vehicles now emerging as a new type of undersea warfare capability could also allow easier underwater communications.
In particular, the role of advanced uncrewed underwater vehicles (UUVs) encompasses the artificial intelligence, robotics and advanced undersea warfare priorities in pillar 2 of AUKUS. UUVs are a natural partner to advanced crewed submarines such as the Virginia-class SSNs and the future SSN AUKUS boats. It’s important that UUVs can be deployed, employed and recovered directly from the RAN’s future SSNs, and that should influence the design of SSN AUKUS.
A larger class of UUV—extra-large UUVs, or XLUUVs, such as the US Navy’s Orca—have the potential to operate independently or as a crewed–autonomous team underwater. The Virginia-class SSNs and SSN AUKUS must be able to work with the US Navy’s Orca-type XLUUVs. Australia’s efforts in this area include Anduril Corporation’s Ghost Shark, which is expected to be developed into an XLUUV.
Although the focus has understandably been on the pathway to acquiring SSNs, this capability should be seen as a component of a system of systems in 21st-century undersea operations. Crewed submarines such as the Virginia or SSN AUKUS boats will operate alongside XLUUVs and smaller UUVs deployed from the submarine. They’ll be connected by information networks using quantum or laser-optical communications.
Submarines have long been reliant on the ubiquitous sonar but, by the 2050s, Australia’s SSNs are likely to have a far greater understanding of the undersea environment by being able to ‘plug and play’ with a variety of sensors and platforms. In acquiring Virginias and SSN AUKUS, this more complex undersea environment is a priority in considering how the SSNs will be employed.
Australia’s defense planners must respond to the reality that our adversaries are developing similar capabilities. China, for example, has invested heavily in developing AI-controlled UUVs that could be used for anti-submarine missions. It is making steady progress on quantum communications technologies, as well as laser-optical systems that could open up new paths for high-speed underwater communications.
It may become easier to detect submarines using new ways of peering beneath the waves. A 2020 report published by the Australian National University’s National Security College identified potential disruptive advances in technologies to detect nuclear-powered submarines. In asking whether the oceans might ever become transparent as a result of technological innovation, the report suggested that systems such as satellite-mounted remote-sensing systems, and other types of sensor meshes integrated with AI, could pinpoint submarines at depths of up to 500 meters.
Does this mean that Australia’s investment in SSNs is wasted? Not at all, but it may become much more important in a less opaque ocean for crewed submarines to work with UUVs and operate in a networked undersea environment in new ways. In the same way that crewed military aircraft such as the F-35A joint strike fighter will employ ‘loyal wingmen’ such as the MQ-28 Ghost Bat to penetrate ahead of them in a contested air environment, Australia’s SSNs must be able to network with and employ a range of advanced UUVs that can operate independently and are armed to deal with an adversary’s UUVs or submarines.
Investment in AUKUS’s pillar 2 with a focus on advanced technologies is just as vital as acquiring the SSNs. Simply operating nuclear submarines without their having the ability to network with other capabilities still being developed would make them more vulnerable to swarms of intelligent and autonomous UUVs operating off the loop. To avoid sending crewed submarines into waters where they’ll be more exposed, it makes sense to dispatch sophisticated UUVs into harm’s way. The undersea regions will become less opaque, making crewed submarines more vulnerable to detection. It’s vital that Australia’s SSNs be seen as part of a broader networked undersea system and that we make rapid progress on developing and employing sophisticated XLUUVs and new approaches to undersea communications.
Malcolm Davis is a senior analyst at ASPI. This article appears courtesy of The Strategist and may be found in its original form here.
Uncrewed Ocean Mapping Vehicle Closing Gaps in Remote Waters
Saildrone Surveyor SD 1200 sails out of Dutch Harbor on Amaknak Island in Unalaska, AK.
The Saildrone Surveyor, the world’s largest uncrewed ocean mapping vehicle, has mapped more than 45,000 square kilometers (17,375 square miles) of previously unexplored ocean floor during a months-long survey around Alaska’s Aleutian Islands and off the coast of California.
The Saildrone Surveyor, the world’s largest uncrewed ocean mapping vehicle, has completed a months-long survey around Alaska’s Aleutian Islands and off the coast of California as part of a multi-agency public-private partnership funded by the National Oceanic and Atmospheric Administration (NOAA) and the Bureau of Ocean Energy Management (BOEM) to address ocean exploration gaps in remote areas with uncrewed surface vehicles (USVs).
The United States Exclusive Economic Zone (EEZ), stretching from the coast to 200 nautical miles from shore, is one of the largest in the world, but it is largely still unmapped, unobserved, and unexplored. Alaska’s coastline is approximately one-third of the entire US coastline, far longer than that of any other US state or territory. And yet, Alaska is by far the least mapped region of the US EEZ.
In 2022, the White House released the Strategic Priorities Report for Ocean Exploration and Characterization report, which specifically calls out the Aleutian chain as one of the highest priority regions in the US EEZ for collecting additional data and information in multidisciplinary interests across the Federal space. Exploration and seafloor mapping of this region has the potential to unlock new opportunities for conservation, climate science, and the Blue Economy.
“Every American, in one way or another, depends on the ocean—from protein from fish to feed animals or humans, to deep-sea cables that make the internet possible. The only way the US can maximize our ocean resources is to understand what’s there. This mission is the first step to mapping the seafloor of key regions in Aleutian waters in high resolution. The beauty of the Surveyor is getting that initial exploration step done faster, cheaper, and without as much staff,” said Dr. Aurora Elmore, Cooperative Institute Manager at NOAA Ocean Exploration.
To the unknown and back
Saildrone Surveyor SD 1200 departed Saildrone HQ in Alameda, CA, to sail across the North Pacific to the survey area around the Aleutian Islands in July 2022.
For 52 days between August and October, the Surveyor mapped 16,254 square kilometers (6,276 square mile) of unknown seafloor around the Aleutian Islands. Mission collaborators were able to follow the data collection in real time. Preliminary data revealed unprecedented detail of the Aleutian arc seafloor, including previously unknown structures, some of which indicate potential hydrothermal vents.
Amukta Canyon in the Bering Sea, as mapped by the Saildrone Surveyor during the Aleutians Uncrewed Ocean Exploration expedition.
Severe weather is the norm in the Aleutian region, with violent storms and persistent fog. During the mission, the Surveyor was diverted south to a secondary priority area to avoid the remnants of Typhoon Merbok that pounded Alaska with gale-force winds. “Part of the premise of the mission was to test the Surveyor to its limits,” said Rachel Medley, chief of the Expeditions and Exploration Division at NOAA Ocean Exploration and NOAA co-chair for the Interagency Working Group on Ocean Exploration and Characterization (IWG-OEC).
Despite 35-knot winds and wave swells over 5 meters (16 feet)—conditions that would have proved too challenging for most crewed survey vessels—the Surveyor continued to collect high-quality data without risk to human life and with a reduced carbon footprint.
In addition to high-resolution mapping sonars, the Surveyor carried technology from the Monterey Bay Aquarium Research Institute (MBARI) to sample environmental DNA (eDNA). Outfitted with the Environmental Sample Processor (ESP)—a groundbreaking “lab in a can”—the Surveyor was able to collect important clues about marine biodiversity and ocean health from the genetic “fingerprints” left behind by marine life that can inform our knowledge about marine biodiversity and ocean health.
Top and side views of the 1,000 m seamount mapped by Surveyor SD 1200 using its Kongberg 304 echo sounder during the second part of the Aleutians Uncrewed Ocean Exploration expedition.
New discoveries—right off the coast of California
After transiting 2,000 nautical miles back to San Francisco and a brief pit stop at Saildrone HQ, the Surveyor was tasked to map additional priority areas a few hundred miles off the coast of California.
The Surveyor mapped an additional 29,720 square kilometers (8,665 square nautical miles) of the US EEZ and discovered a previously unknown seamount standing approximately 1,000 meters (3,200 feet) high from the seabed. Discoveries like this improve our understanding of the physical processes of the ocean and help scientists identify unique habitats that need further exploration.
The future of ocean mapping
Accurate and up-to-date topography of the ocean floor is essential for understanding how ocean currents move heat and carbon around the planet, sustainably managing resources, tsunami and storm surge forecasting, safety of navigation, telecommunications, developing and maintaining coastal infrastructure, and establishing new offshore energy sites. Oceans cover more than 70% of Earth’s surface, but as of June 2022, less than 24% of the global ocean has been mapped using modern technology, leaving most of the planet unmapped and unexplored.
This is because the traditional method of exploring and mapping the ocean with large survey ships is difficult, time-consuming, and expensive. The global Seabed 2030 initiative and the National Strategy for Mapping, Exploration, and Characterization (NOMEC) of the US EEZ have set ambitious seafloor mapping goals, which cannot be achieved with the current global survey fleet alone.
Rigorous sea trials showed that the data quality the Surveyor collects rivals that of the most advanced ocean survey ships in use today—meeting or exceeding International Hydrographic Organization standards.
The Saildrone Surveyor represents a paradigm shift in how we explore our oceans, carrying the same cutting-edge sonar equipment as survey ships to deliver high-resolution data to the global community—at a fraction of the cost and carbon footprint.
“Surveyor brings a new and exciting capability for ocean exploration and mapping. Mapping in the Aleutians is not trivial, and the conditions there can be austere any time of year. The Surveyor weathered the storms, collected high-resolution bathymetry, and put no humans at risk. This mission proves that long-endurance USVs provide a viable option to achieve the goals of NOMEC. This is the future of ocean mapping,” said Brian Connon, Saildrone VP of Ocean Mapping.
The Aleutians Uncrewed Ocean Exploration expedition served as an excellent example of how public-private partnerships and uncrewed surface vessels (USVs) like the Surveyor can increase the pace and efficiency of seafloor mapping and help us reach national and international goals. Whether used on their own or paired with traditional ship-based operations, USVs can act as force multipliers, expanding capabilities in a way that is cheaper, more environmentally friendly, and safer.
The total area mapped by Saildrone off around the Aleutian Islands and off the coast of California.
What happens to the data?
NOAA Ocean Exploration is already using some of the preliminary data collected by the Surveyor to inform its exploration of Alaskan waters with NOAA Ship Okeanos Explorer during its 2023 field season.
These expeditions, the first for the ship in the region, will fill gaps in the understanding of Alaskan deep waters through mapping and remotely operated vehicle operations. The ROV operations will establish baselines to help sustainably manage and protect Alaska’s deep waters and the resources they provide and contribute to safer navigation and community access, hazard mitigation, and a deeper comprehension of and appreciation for the region’s marine environment.
“NOAA Ocean Exploration is excited to see the results of this remarkable multi-partner expedition come to fruition,” said Jeremy Weirich, director of NOAA Ocean Exploration. “By joining forces with other federal agencies, academia, and industry, we were able to leverage a variety of expertise and multiple technologies to investigate areas off of Alaska and California that were otherwise unexplored. In order to map and characterize vast and remote expanses of the ocean, we need new technologies like the Saildrone Surveyor to augment ship-based exploration.”
Saildrone Surveyor SD 1200 is escorted out of Dutch Harbor in August 2022.
Once post-processing has been completed by the Center for Coastal and Ocean Mapping at the University of New Hampshire, the high-resolution data collected during the Aleutians Uncrewed Ocean Exploration expedition will be made publicly available through NOAA’s National Centers for Environmental Information to further exploration and characterization efforts and in support of US and international mapping initiatives, including the Seascape Alaska regional mapping campaign.
“This mission is an exciting partnership opportunity with industry, academia, and government to accelerate and advance new US-based technologies that will not only benefit the scientific community but also have the potential to answer some of our largest global challenges by providing a better understanding of ocean dynamics and climate science,” said Medley.
Scaling up the fleet
SD 1200 is the first of Saildrone’s Surveyor class vehicles. An additional four Surveyor-class ocean mapping vehicles will be built by Austal USA in Mobile, AL, this year to meet increasing global demand for uncrewed survey vehicles.
This article is courtesy of Saildrone. It can be found in its original format with additional links here.
NOAA Builds on Unmanned Surveys by Teaming USV With Research Vessel
NOAA Fisheries is evaluating the use of cutting-edge technology that has the potential to improve acoustic-trawl surveys of walleye pollock, the largest U.S. fishery. The goal is to explore the use of uncrewed surface vehicles (USVs) to work in tandem with NOAA ships to improve the efficiency of collecting acoustic and biological data to estimate pollock abundance.
We are undertaking this work with the help of federal, academic and industry partners. In January, the Alaska Fisheries Science Center survey team, NOAA Office of Marine and Aviation Operations, Exail, and the University of New Hampshire, conducted initial ship integration tests off Seattle. They successfully demonstrated that a DriX USV could be an effective tool for supporting ship-based surveys.
DriX is a seagoing uncrewed boat that is able to conduct both remote-controlled and supervised autonomous operations (within visual range or Over The Horizon).
Scientists and crew were able to make modifications allowing the DriX to be deployed and recovered from the NOAA Ship Oscar Dyson. They installed the USV’s communication and control systems. During a 3-day cruise in Puget Sound off the coast of Washington, they focused on practicing deploying and recovering the drone and collecting acoustic data. Given the initial success, we will further evaluate DriX during a walleye pollock survey planned for this summer.
The DriX is protected by a floating cradle, which is lowered and retrieved by the NOAA ship Oscar Dyson. Scientists practiced deploying and recovering the DriX in Puget Sound in January. Credit: NOAA Fisheries.
“Our work this year builds on previous NOAA Fisheries USV experience,” said Alex De Robertis, fisheries biologist, Alaska Fisheries Science Center. “When ship surveys were canceled during the COVID pandemic in 2020, we deployed wind-powered USVs to collect data for pollock abundance estimates while keeping human crews safe.”
USVs have proved to be effective and cost-efficient tools for making acoustic measurements of fish. However, USVs cannot collect key biological data such as species, size, weight, length, and sex. This limits their use in fisheries stock assessments.
To improve acoustic survey efficiency while providing this essential biological data, scientists are now deploying a fast, new generation USV in tandem with a NOAA ship to collect acoustic data. The vessels will operate side by side, on alternate survey transects.
“We hope to determine if the USV can be routinely deployed, recovered, and refueled from the ship quickly enough so that it can make some of the acoustic measurements while keeping up with the survey ship. If it can, then the ship will be able to collect biological samples with a trawl at the locations where fish aggregations are detected by either the ship or the USV,” said De Robertis.
The tandem approach provides multiple benefits. Alternating USV and ship transects has the potential to increase survey efficiency: the same area can potentially be surveyed in 40 percent less time than by a ship working alone without degrading data quality. The use of a USV during a tandem survey has the potential to free up in-demand NOAA ships for additional missions .
This summer will be the big test to see how things go with the DriX in the field, and there will be further updates when NOAA Fisheries staff return from the pollock survey in August.
This story appears courtesy of NOAA Fisheries and may be found in its original form here.
Royal Australian Navy Divers Assist Vanuatu in Cyclone Recovery
Royal Australian Navy divers assisting with the cyclone cleanup efforts (ADF photos)
A team of Royal Australian Navy clearance divers is coming to the aid of neighboring Vanuatu to help clear navigational hazards and in the process helped the island nation recover one of its own vessels. The team is in the area conducting underwater surveys and clearance of major wharves to ensure maritime safety for all vessels using the area and will soon commence a survey of navigational markers at Port Vila Harbour, the country’s main port.
The Vanuatu Fisheries Department lost one of its small boats, which sunk in the aftermath of Tropical Cyclones Judy and Kevin which had recently hit the islands. The divers there to assist in the island’s recovery were informed that the FV Scabra, a timber boat built locally in Vanuatu, for the Fisheries Department was partially submerged near the police maritime wing’s RVS Mala Base wharf in Port Vila Harbour.
Dive team was sent to assist to restore navigational safety after the storms (ADF photos)
Australian Clearance Diving Team One Operations Officer Lieutenant Matt Bailey said it was important to remove the boat as it had presented a navigational hazard to other vessels.
“We were able to work with the VFD to lift the boat, pump the water out and then get it on a boat trailer so that it no longer posed a risk to other users around the wharf,” Lieutenant Bailey said. “The divers put lift bags underneath the boat and then used a submersible pump to get the water out so that it could be moved onshore.”
The VFD will look to repair the boat, which was first built in the fisheries' boat yard on the island of Espiritu Santo before sailing to Port Vila.
Eleven members of the Sydney-based diving team are embarked on HMAS Canberra to support Operation Vanuatu Assist. Through taskings from Vanuatu’s National Disaster Management Office (NDMO), the divers have been undertaking damage inspections on vessels in the harbor.
Southern California Ports See Steep Monthly Volume Declines
Empty berths as containership volume was off by a third in February but is moving closer to normal in March (Port of Los Angeles)
Executives at the ports of Long Beach and Los Angeles this week again confirmed that trade has slowed dramatically highlighting steep declines in container volumes and holding out little hope for an immediate recovery. Each of the ports reported sharply lower volumes versus the records reported a year ago.
Some of the declines in February are typical as it is a shorter month and frequently strongly impacted by the timing of the Asian Lunar New Year holidays, but much of it comes from the broader slowing in demand. Port of Los Angeles Executive Director Gene Seroka in today’s monthly briefing highlighted that the slowdown is a global phenomenon while saying, “Demand is just not there now.”
Seroka highlighted several factors saying that economic uncertainty is playing a big part while consumers continue to feel the impact of inflation. The primary issue though that he points to and say has to change before things get better is the high inventory levels in U.S. warehouses. He said “old inventories are just not moving fast enough,” noting that retailers especially need to clear levels before the next wave of imports can begin.
As a result, the Port of Los Angeles reported a 43 percent decline in volumes for February to its lowest volumes since March 2020. The port handled just under 489,000 TEU, which was also off by a third compared to the port’s five-year average. The declines came in across the board in imports (off 41 percent), exports (14 percent decline), and handling empty boxes (less than half).
Equally telling was the number of vessels arriving at the port. The month saw 61 containerships versus 93 a year ago. Carriers blanked 30 sailings from the port’s schedule, reminiscent of levels seen when the pandemic began three years ago. Seroka points out that there are more boxships idled now than at any time in the past few years.
The dragging on of the labor negotiations for West Coast longshore workers he also believes continues to impact volumes. Shippers have directed volumes away from the ports and according to Seroka need to see the contract agreement to be assured of avoiding possible disruptions in their shipments. He believes both sides continue to work in good faith on the agreements but points out the turnover in U.S. Labor Secretary coming this month. Seroka is calling for a “spring agreement,” to help the outlook.
The neighboring Port of Long Beach reported slightly better performance handling 543,675 TEU down just about a third from last year’s levels. Imports were down 35 percent in Long Beach while exports were off nearly 6 percent in February.
“Trade continues to normalize following the record-breaking cargo numbers we saw at the start of last year,” said Port of Long Beach Executive Director Mario Cordero. “We are investing in infrastructure projects that will keep us competitive as we collaborate with industry stakeholders to focus on trade volume.”
Seroka predicts that the next few months will see “lighter volumes” particularly versus last year’s record levels. However, he notes that vessel traffic is moving closer to normal a point confirmed by the Marine Exchange of Southern California which says there are now 7 to 18 container vessels on berth each day compared to 10 to 20 a day before the pandemic. Seroka notes that many of the idled vessels are positioned near China meaning they are ready to quickly resume sailing when there is demand.
Because many shippers have also been holding back on long-term contracts with the carriers waiting to see if rates will fall lower, the Southern California ports see any opportunity once the labor settlement is reached. Shippers will be able to switch back to normal patterns as they are not locked into rate contracts.
Seroka concludes his presentation by pointing to economists and analysts that expect a rebound in trade in the second half of 2023. He predicted March volumes would be up 20 percent from February’s lows and that mid-year would see a sustained pickup in volume. The National Retail Federation in its forecast echoed a similar outlook saying they expected volumes to start to build back in March with more positive outlooks for the second half of the year.
When Maersk and MSC announced that they were winding up the 2M Alliance and going their separate ways, the two shipping industry titans claimed that a change in their individual business strategies had rendered their alliance unworkable. In the ensuing weeks, multiple editorials attempted to dissect the news, especially what it portends for the future of container shipping. Some argued that the 2M Alliance divorce presaged a breakdown of other shipping alliances in the next couple of years.
However, these analyses have left one question lingering. What drives the formation, stability and dissolution of Global Shipping Alliances (GSAs)? In a new research paper published in the Maritime Policy and Management Journal, leading maritime economists Hercules Haralambides, Huizhu Ju, Qingcheng Zeng and Yimeng Li, investigate the forces shaping the evolution of GSAs.
Shipping alliances remain one of the novel inventions of the container shipping sector,, intended to achieve higher efficiency and lower costs. Despite GSAs’ success in helping container shipping to navigate periods of low profit margins, their model came under severe pressure during the Covid-19 pandemic. Lawmakers in some parts of the world charged that GSAs were not quite aligned with antitrust laws. The claim was that alliances helped shipping lines amass considerable market power to the detriment of consumers.
Indeed, for over the last one hundred years, most governments have exempted shipping industry from reach of competition laws. With shipping being a low marginal cost industry, just like agriculture and aviation, unfettered price competition could be destructive. Thus, carriers have been afforded “self-regulatory” privileges such as capacity management (alliances). Partly, this explains why GSAs have continued to become stronger since their emergence in the 1990s.
Nevertheless, GSAs have also proven to be unstable coalitions. They are in a constant state of reshuffling, and in some extreme cases, termination becomes inevitable.
In their study, Prof. Haralambides and the other economists show that the evolution of shipping alliances is the result of interaction between various factors.
Specifically, mega-ship developments have a significant impact on formation of alliances, resulting in shipping industry concentration over time. Before 2006, containerships were mainly of the 6,000-12,000 TEU size group. From that year on, ships of 15,000 TEU increased rapidly, especially in the period 2009 to 2013, when ships in the 12,000-15,000 TEU range surged. The creation of shipping alliances since 2013 was mainly driven by the development of ship sizes of 15,000+ TEU.
“It seems that the often deified economies of scale of mega-ships are not but a chimera unless their capacity can be fully utilized, and there are only two ways this could be achieved. This includes formation of alliances and selling of slot capacity, wholesale, to NVOCCs and global logistics companies,” notes the study.
In addition, the paper concludes that shipping alliances are contemplated and pursued in periods of excess capacity and low freight rates. In prosperous markets, carriers tend to show more individualistic behavior.
Equally interesting is the finding that newbuilding prices have an impact on alliances. That is, lower shipbuilding prices entice carriers to overinvest, thus causing overcapacity. This forces carriers to consolidate by means of alliances.
