What do the latest jobs figures mean for the

Bank of Canada?

Jordan Fleguel, BNN Bloomberg

The Canadian economy added a meager 100 jobs in December and economists say weakening in the labour market increases the chance of a Bank of Canada interest rate cut in the second quarter of this year.

“The softening employment numbers and the rise in unemployment that we've seen over the past six or 12 months is moving things in the way of a cut,” Brendon Bernard, senior economist with jobs site Indeed, said in a Friday interview.

He made the comment after Statistics Canada released what he called “weak” employment numbers for the previous month.

Statistics Canada’s Labour Force Survey found that the country’s unemployment rate held steady at 5.8 per cent, slightly below the expected 5.9 per cent, according to the median estimate in a Bloomberg survey of economists. 

Meanwhile, the 100 jobs added were well off an expected gain of 15,000, following the addition of 25,000 new jobs in November.

Bernard said the numbers reinforce the expectation that the Bank of Canada will cut rates at their April 10 decision.

Employment numbers are among the many economic data sources the central bank is watching for signs that its rate tightening cycle, aimed at bringing down inflation, is successfully slowing the economy.

Bernard noted that Canada would need monthly job growth in the tens of thousands to keep up with population growth.

“To come in basically flat, it’s not a great sign,” Bernard said. “It didn't show up in the unemployment rate, which held steady, but that just reflects the fact that the labour force participation declined, so taking that all into account, the share of the population with a job declined.”

WAGE GROWTH STILL HOT

Tu Nguyen, economist with accounting and consultancy firm RSM Canada, said last month’s job figures make a rate cut in the second quarter of this year “imminent to avoid a downturn.”

Nguyen and Bernard pointed to strong wage growth of 5.4 per cent as a factor that may complicate the Bank of Canada’s decision, as the central bank may interpret that number as a sign of sticky inflation.

“That wage growth is maybe the fly in the ointment there,” Bernard said.

“But I think we're getting a sense that these wage growth metrics are really lagging developments elsewhere in the economy that probably follow the inflation numbers rather than lead them.”

Debt levels mean Canada’s recovery could lag other advanced economies: report

Ben Cousins, BNN Bloomberg

Jan 3, 2024

Canada’s economy is largely expected to rebound this year, but a recent report suggests Canada could fare worse than similar countries in 2024 due to high levels of household debt.

An Oxford Economics report projects interest rates will come down in late 2024 as Canada experiences a “modest recovery.” But the researchers cautioned that the bounce-back will fall below consensus projections and “worse than other advanced economies.”

“One of the reasons we think Canada is going to have a recession and the U.S. might avoid one is because we have highly indebted households that are very dependant on the housing market and the economy and those impacts are flowing through now,” Tony Stillo, Oxford Economics’ director of economics for Canada, told BNN Bloomberg in Wednesday interview.

Overall, the December report suggested that Canadians will remain reluctant to spend even as interest rates come down.

It also predicted immigration will help the labour market, but hurt the country’s housing supply.

“(Immigration) will benefit the economy,” Stillo said in the interview. “What we’re seeing is that it adds to the labour supply, but it takes a while for newcomers to fully settle into the economy, so that benefit for the economy in terms of higher actual GDP will be a few years away,”

Stillo doesn’t expect elevated immigration figures will impact home prices, as newcomers typically rent for a few years when they first arrive in the country. That means rental prices will be squeezed, but home prices shouldn’t feel the effects, he explained.

GOVERNMENT POLICY

Stillo said he expects governments will come up with smaller measures to fight economic slowdown in order to avoid stoking inflation.

“What we’re expecting to see is modest targeted measures like you’ve seen to date, whether it’s the exemption from the carbon tax for home heating fuel, the GST exemption for purpose-built rentals, the grocery rebate, things of that nature,” he said.

BUSINESS INVESTMENT

If Canada wants to get back on the right track, it needs a boost from businesses, Stillo said.

“We’ve had lacklustre business investment for some time, what we need to see is higher investment by businesses (and) government as well in terms of the infrastructure that supports growth, and then you’ll see that benefit in terms of higher productivity,” he said.

“We have to improve our capital investment per worker, per person, and then we will hopefully get that benefit in productivity and higher living standards.” 

 

Florida plan to import cheaper prescription drugs from Canada gets FDA approval

Ian Lopez, Bloomberg News

FDA headquarters in White Oak, Md. Photographer: Sarah Silbiger/Getty Images North America , Photographer: Sarah Silbiger/Getty Images

The Biden administration will allow Florida to import cheaper prescription drugs from Canada, giving the green light to a plan put in motion by the state several years ago.

The Food and Drug Administration made the decision on Florida’s plan Friday, saying that the state’s health department must likewise provide quarterly reports to the agency, including information on cost savings and potential safety and quality issues.

FDA Commissioner Robert Califf said in a statement that the agency was “committed to working with states and Indian tribes” trying to develop importation proposals.

“These proposals must demonstrate the programs would result in significant cost savings to consumers without adding risk of exposure to unsafe or ineffective drugs,” Califf said.

The FDA decision marks the latest turn in a back and forth between states and the federal government over importing cheaper drugs.

The pharmaceutical industry is already pushing back on the FDA’s announcement.

Stephen Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), called the FDA’s approval of Florida’s plan “reckless.”

“Ensuring patients have access to needed medicines is critical, but the importation of unapproved medicines, whether from Canada or elsewhere in the world, poses a serious danger to public health,” Ubl said in a statement. “Politicians need to stop getting between Americans and their health care.”

Ubl also noted that PhRMA “is considering all options for preventing this policy from harming patients.” The group had sued the FDA in 2020 over a Trump administration plan for importing Canadian drugs. The lawsuit was later dismissed.

President Joe Biden issued an executive order in July 2021 that included a call for the FDA to work with states on importing drugs from Canada.

In August 2022, however, Florida sued the FDA, claiming the agency was standing in the way of its drug importation plan.

In addition to Florida, states like Colorado, North Dakota and Vermont have laws that allow importation of drugs, according to the National Conference of State Legislatures. Over five of those states have asked the FDA for approval, the conference said.

U.S. allowing Florida to import drugs from

Canada, reviving fears of shortages

CBC
Fri, January 5, 2024 

Florida is one of a handful of states that have applied to import wholesale prescription drugs from Canada. (David Donnelly/CBC - image credit)

The U.S. Food and Drug Administration is allowing Florida to import what could amount to millions of dollars worth of prescription drugs from Canada — a move that could reignite worries about the drug supply north of the border.

Florida has estimated that purchasing prescription drugs from Canadian wholesalers to treat such conditions as HIV/AIDS, diabetes and hepatitis C could save the southern state $150 million US annually.

Marking a shift in U.S pharmaceutical policy, the FDA approved Florida's request. In a letter to the state government dated Friday, the director of the administration signed off on the proposal and said that importing medications from Canada could "significantly reduce the cost of covered products to the American consumer without posing additional risk to the public's health and safety."

The sunshine state is one of a handful that have applied for permission to import wholesale prescription drugs from Canada, meaning Friday's approval could be just the first of several.

Canada — which set up a federal regulatory agency decades ago to ensure patent drug prices are not excessive — has resisted such import plans for years.

In a media statement, federal Health Minister Mark Holland said Canada has regulations in place to protect its supply.

"I want to assure Canadians that they will continue to have access to medications they need when they need them," he said.

"Canadians can be confident that our government will continue to take all necessary measures to protect the drug supply in Canada."

Five provinces, including Quebec, allow pharmacists to prescribe Paxlovid directly to people who get sick with COVID-19. avoiding the need to see a doctor. 'It's really about getting the drug to the person as quickly as possible so they can start it and have the best possible outcome,' said Montreal pharmacist Daron Basmadjian.

The Canadian Pharmacists Association is urging Canadians not to rush out to stock up on their prescriptions in wake of the U.S. FDA's decision. (CBC/Radio-Canada)

Joel Lexchin, a retired emergency physician who studies pharmaceutical policy, said it's still not clear if Florida's plan will actually pan out.

"But if it goes ahead, then we should be worried," he said.

"Canada has 40 million people. Florida has more than half of that, so 22 million people. We can't supply Florida with the drugs that they may need without doing damage in Canada."

Lexchin said the U.S. is "attempting to use Canada to solve a relatively unique American problem.

"The U.S. government, amongst all the other OECD countries, doesn't allow price negotiations with manufacturers. So drug companies are free to set whatever prices they want. Here in Canada, we control prices so our prices for brand name drugs tend to be two and a half to three times lower than the U.S. prices."

Pharmacists' group calls for calm

Joelle Walker, vice president of public affairs for the Canadian Pharmacists Association, said the FDA's decision is "certainly not good news for Canadians" but she shares Lexchin's doubts about Florida starting bulk imports any time soon.

"Historically, we've had some pretty devastating drug shortages in Canada. And so the idea that they could import them from us is not really feasible," she said.

"I'm skeptical that it will actually come to fruition in its current form, but we want to make sure that we're diligent about reviewing it and making sure that we're not missing something."

Walker urged Canadians not to rush out to stock up on their prescriptions, which could trigger shortages.

"Don't be alarmed today. This certainly isn't happening tomorrow. This may never happen. So don't rush to your pharmacy, don't be concerned about it right now," she said.

"Hopefully, the measures that we have in place will help sort of restrict that flow from Canada to the United States."

This debate is not new. In 2019, then-U.S. president Donald Trump proposed a rule to allow wholesale bulk imports of prescription drugs, promising it would be a "game changer for American seniors."

Within months, the Canadian government blocked bulk exports of some prescription drugs to stave off the risk of shortages at home.

Health Canada issued a statement at the time saying approximately 10 to 15 per cent of drugs have been in short supply in Canada "at any given time" since 2017.

Lexchin said that while the Canadian government has brought in regulations to avoid mass exports, drug shortages — like the shortage of children's Tylenol in 2022 — can be hard to predict.

"If drugs are being made in a single plant, and there's a fire in the plant, or they discover there's contamination, that creates a shortage without any real warning," he said.

"So if we are committed to exporting large amounts of drugs, when a shortage comes up, then we may be on the short end of the stick."

Americans have been buying drugs from Canada for some time.

Pharmacists along the border have reported U.S. citizens making the trek to stock up on cheaper medicine, including insulin and Ozempic, a prescription diabetes treatment that has skyrocketed in popularity recently as an off-label drug for weight loss.

"People driving over the the border and coming and getting a little bit at a time, that wasn't really jeopardizing our supply," said Walker.

"But we've had recent examples in B.C., for example, where the importation of Ozempic was actually leading to a potential shortage because the numbers were so high."

Decision could harm Canadians, warns trade group

Innovative Medicines Canada, a trade group that represents about 50 pharma companies, said allowing Florida to import drugs meant for Canadians could "disrupt" Canada's health-care system.

"Canada simply can't supply drugs to Florida, or any other U.S. states, without significantly increasing the risk and severity of drug shortages nationwide," David Renwick, interim president of Innovative Medicines Canada, said in a statement.

"The U.S. market is nearly 10 times bigger than Canada's, and allowing drugs that were intended for Canadians to be exported to the U.S. would harm Canadian patients and disrupt our health-care system."

The head of Pharmaceutical Research and Manufacturers of America (PhRMA), one of the largest pharmaceutical industry lobby groups in the U.S., called the FDA's decision "reckless."

"Ensuring patients have access to needed medicines is critical, but the importation of unapproved medicines, whether from Canada or elsewhere in the world, poses a serious danger to public health," said PhRMA president Stephen Ubl in a media statement.

"PhRMA is considering all options for preventing this policy from harming patients."

 

Red Sea attacks to have ripple effect on shippers — and consumers — in Canada

The Canadian Press

Canadian shippers and consumers could soon be feeling the ripple effect of attacks on cargo vessels in the Red Sea.

Shipping companies across the globe are turning away from the key trade corridor after Houthi militants in Yemen stepped up attacks on commercial boats in the region in protest against Israel's military campaign in the Gaza Strip.

Shipping giant Maersk said Friday it plans to continue rerouting all vessels bound for the Suez Canal around Africa's Cape of Good Hope "for the foreseeable future," following an earlier pause through the waterway that links Asia and Europe.

The route change adds 10 days and hundreds of thousands of dollars in extra fuel and crew costs per trip, resulting in potential price increases for wholesale and retail products.

Université Laval business professor Yan Cimon says Europe will feel the impact most directly, but that consumer goods and some manufacturing parts destined for Canada also come via the canal, which carries roughly a third of global container traffic.

Data from Drewry, a maritime industry research firm, shows that global container shipping rates surged 61 per cent in the past week alone, with hikes on routes between Asia and North America as well.

This report by The Canadian Press was first published Jan. 5, 2024.

Repercussions of Red Sea Turmoil Mount as Box Rates Jump 60% in One Week

Spot freight rates are skyrocketing due to the impact of the situation in the Red Sea (file photo)

PUBLISHED JAN 4, 2024 3:03 PM BY THE MARITIME EXECUTIVE

 

 

Spot freight rates are the leading indicator of the mounting repercussions from the ongoing disruptions to the shipping industry due to the security problems in the Red Sea. With the attacks continuing, nearly 20 major carriers have reported that they are rerouting vessels adding to the travel time and expense which is quickly being reflected in the spot price for shipping as well as the growing concerns of impacts to supply chains and a renewal of port congestion.

Analytics firm Drewry provided its first report of 2024 on its closely watched World Container Index and to no surprise rates have skyrocketed. In one week, Drewey calculates the composite index is up by two-thirds (61 percent) per 40-foot container and stands 25 percent above the end of 2022/start of 2023. The latest Drewry World Container Index composite is 88 percent higher than the 2019 average.

Predictability, the highest increases are on the routes most directly impacted, i.e. those using the Suez Canal. Freight rates from Shanghai to Rotterdam, for example, are up by 115 percent. The increases for shipping containers to the Mediterranean are also up more than 100 percent, while rates from Asia to North America are up a more modest 26 to 30 percent.

Last week’s rate jump was fueled in part by Maersk’s decision to reverse course and again divert all shipments scheduled to transit the Red Sea. There had been an emerging hope that the international coalition might stabilize the security situation with Maersk previously reporting it was planning to send some ships back through the Red Sea while CMA CGM also said it was increasing the number of transits.

Freightos, a global freight booking and payment platform, highlights the longer-term impact on rates which began to jump after the first diversion programs were announced in mid-December. They are reporting that rates from Asia to Northern Europe are up 173 percent to more than $4,000 per FEU since just before the first diversions, while rates to the Mediterranean have doubled to over $5,000 per FEU.

Judah Levine, Head of Research for Freightos Group however believes that additional repercussions are likely in the near term, especially with the container carriers. Freightos reports that some carriers are already shortening up return times for empty boxes in North America as fears mount of equipment shortages.

“The longer voyages for diverted services mean longer lead times for importers and some threat of port congestion if updated schedules can’t be maintained and multiple vessels arrive at once, though so far there have not been reports of backlogs,” writes Levine in his weekly market analysis. “The excess capacity that carriers were contending with before the Red Sea disruptions will now be activated to use more ships than usual per service to try and keep up with departure schedules and keep containers moving.”

Commenting on the longer-term outlook, however, Christian Roeloffs, co-founder and CEO of Container xChange, a platform for container leasing, notes that trade will not stop as the diversions provide ways to circumvent the challenges in the Red Sea. “The Red Sea situation is acute, but not chronic in the long term for the shipping industry,” comments Roeloffs.

Container xChange interviewed leading industry players and surveyed customers as it prepared its 2024 Market Forecast. In the analysis, they report, that in response to these geopolitical risks, the majority of shipping professionals surveyed in December 2023, reported they are “gearing up to enhance resilience through strategic initiatives like - ‘risk assessment and scenario planning’, ‘diversification of routes’ and ‘suppliers and regulatory compliance’,” reports Container xChange. “The biggest ‘headache’ resulting from geopolitical upheaval is the ‘associated costs’ that they will have to bear on top of the rising operating costs that they have to already face.”

Analysts have begun to warn that consumers could experience some supply disruptions especially near-term as the shipping companies adjust schedules. However, the bigger concern is that increased shipping costs will be passed on to consumers. There are fears that the pass-along in shipping costs could fuel a resurgence in global inflation rates after much of the world had been able to reign in the rates created as a result of the supply problems from the pandemic.

 

ECSA Appoints its First Female President

DEI; ANOTHER GLASS CEILING BROKEN

Karin Orsel (ECSA)

PUBLISHED JAN 4, 2024 8:58 PM BY THE MARITIME EXECUTIVE

 

The European Community Shipowners' Associations (ECSA), the representative voice for EU shipping, has appointed Karin Orsel as its first-ever female president. Orsel takes the helm at a pivotal moment for European shipowners, as the EU begins to implement its carbon emissions trading system for merchant vessels for the first time. 

“Our commitment is clear: to promote the energy transition of shipping, meet our climate targets, and foster the sector’s competitiveness amidst rapidly evolving geopolitical and security challenges," Orstel said. 

She also emphasized seafarer training - particularly for digitalization and green technology - as a major area of focus for her two-year term as ECSA president. 

Orstel has been CEO of her own ship management company, MF Shipping Group, since 2001. She is a past president of the Royal Association of Netherlands Shipowners (KVNR) and holds an honorary doctorate in public administration from Massachusetts Maritime. 

Orstel takes over from Philippos Philis, CEO of dry bulk shipping firm Lemissoler Navigation and past president of the Cyprus Shipping Chamber. 

The European Union is moving faster towards maritime decarbonization than any other jurisdiction, and ECSA has an advocacy role as that process unfolds. The organization calls for EU support for decarbonization R&D; "vast" improvements in port-side infrastructure for clean fuels; and global rules for low-carbon shipping to level the playing field. 

ECSA has also advocated for EU protection for European shipping abroad, including recent contributions to the defense of Red Sea traffic from attacks by Yemen's Houthi rebels. 

 

The Third Revolution

From sail to steam to diesel, the maritime industry has pioneered advances in propulsion technology. Now it faces its biggest challenge.

The methanol-fueled boxship Laura Maersk (Maersk Line)

PUBLISHED JAN 4, 2024 11:24 PM BY SEAN HOGUE

 

(Article originally published in Nov/Dec 2023 edition.)

 

In the beginning, there was sail.

Giant wooden ships plied their trade along the trade winds. This began around 3,000 BC and continued happily through the mid-1700s when the Industrial Revolution ushered in the era of steam.

Huge coal-fed furnaces heat water to boiling, creating high-pressure steam inside the boiler, which is then directed through pipes or conduits to the main cylinder of the steam engine. The steam expands and drives a piston or turns a turbine. The expanding steam is what drives the machinery connected to the engine, such as a ship's propeller. With most of its energy spent, the now low-pressure steam returns to the boiler via a condenser and the process begins again. 

This entire process is known as the “Rankine cycle” after Scottish engineer William John Macquorn Rankine, whose work helped lay the foundation for the development and optimization of steam power plants, which were critical to the Industrial Revolution and the growth of modern industry.

But then everything changed again.

The Engine That Changed the Game

While steam power drove the industrial revolution and allowed for the massive expansion of sea trade, it was not without cons. Low fuel-efficiency, large size and high fuel consumption limited range and reduced cargo-carrying capacity on ships. Steam plants are also terribly inefficient at partial loads. 

A better solution was needed, and the marine industry found it with the invention of the “Doxford engine” – the first marine diesel.

Developed by the British engineer and inventor William Doxford in the late 19th century, the Doxford engine was known for its reliability, efficiency and compact design, making it a preferred choice for many shipbuilders and operators.

It was a two-stroke, single-acting engine that featured innovations such as the use of an opposed piston design, which allowed for better fuel economy and reduced vibration. Doxford engines helped revolutionize the maritime industry by providing a more efficient and cost-effective means of propulsion compared to traditional steam engines.

The popularity of the engine exploded, and Doxford’s company grew to become one of the largest shipbuilders in the U.K. However, competition in the space was fierce and, despite its advantages, the Doxford engine gradually fell out of favor in the latter half of the 20th century as more modern engine designs, such as the MAN B&W engine, gained popularity. These newer engines offered higher power output and greater fuel efficiency, and the MAN B&W is one of the most widely used and recognized engines in the maritime industry today.

But there was more to come.

Dual-Fuel Engines

Modern diesel engines are incredibly efficient, yet not without their cons – primarily emissions. With international mandates aimed squarely at reducing the marine industry’s carbon footprint, there’s still need for innovation, and MAN ES delivers.

Continuing the B&W line, the company has developed the world’s first two-stroke methanol engine – the MAN B&W ME-LGIM. Specifically designed to meet the needs of the maritime industry, it’s a versatile solution suited to a wide range of vessel types. Simple handling, storage and bunkering of methanol, combined with relatively simple auxiliary systems and the potential to be carbon-neutral, make it an attractive option for meeting decarbonization targets.

In 2023, Maersk Line launched the world’s first dual-fuel, methanol-powered container vessel, powered by MAN ES. The Laura Maersk can carry 2,136 TEUs and sail up to 6,000 nautical miles on methanol, saving 100 tons of C02 per day compared to an HFO-burning vessel. The vessel’s name is not without significance: The first steamship Captain Peter Maersk Møller bought in 1886 was named Laura. It was the first vessel to wear the white, seven-pointed star on a light blue background – the symbol that eventually became the logo of A.P. Møller - Maersk.

While the Laura Maersk is the first container ship of its kind, it’s just the latest in a line of about 150 dual-fuel, methanol-powered vessels delivered since 2016. Such exponential growth shows the value of the solution and the direction the industry is moving.

Tier 4 Solutions

Engine emissions in the U.S. are regulated by the Environmental Protection Agency (EPA). The highest standard currently is Tier 4, which imposes major reductions in NOX, particulate matter (PM) and hydrocarbons (HC).

These reductions are commonly met using a selective catalytic reduction (SCR) exhaust gas treatment system. A reductant – usually a urea solution – is injected into the exhaust and funneled through a mixing chamber to a reactor containing a catalyst that enables a series of chemical reactions. While effective, the SCR after-treatment technology requires space and weight provisions for urea tanks, dosing pumps, stainless-steel piping, mixing chambers and the SCR reactors.

An alternative methodology to meet the IMO Tier III or EPA Tier 4 standards is to limit the formation of NOX in-cylinder through exhaust gas recirculation (EGR) technology. Wabtec Corporation is the first to launch a medium-speed, marine diesel engine series certified to meet stringent EPA Tier 4 and IMO Tier III emissions standards without the need for urea aftertreatment (see this edition’s “Executive Achievement” feature).

Fewer auxiliary systems and supply chain complications are two of the reasons that the Wabtec 16V250 Series Marine Diesel Engine was selected by the U.S. Maritime Administration for the five new National Security Multi-Mission Vessels (NSMVs) currently under construction. Wabtec’s design saves up to 40 percent of valuable shipboard space, provides significant maintenance and reliability cost savings and reduces operational hazards and costs associated with handling after-treatment chemicals like urea.

The ships are designed as training vessels for the U.S. maritime academies and will also be equipped to provide emergency humanitarian relief in areas affected by natural disasters such as hurricanes. They will replace the aging current fleet of training ships – still powered by steam.

Wabtec’s EPA T4/IMO III marine diesel engines are available in V (12- and 16- cylinder) and L (6- and 8- cylinder) configurations and range from 2,280 bhp to 6,300 bhp. Wabtec’s installed base is supported by a worldwide parts and service network of authorized partners.

From Training to Deployment

While alternative fuels are a recognized solution to meeting emission-reduction goals, there’s still a major hurdle to overcome: the supply chain.

It’s less of an issue for feeder vessels or those calling major ports with sufficient infrastructure but can be a major issue for vessels sailing to ports unknown for indeterminate periods of time – like those operated by the U.S. Navy.

Maintaining a mission-ready force while considering the Navy’s aggressive Climate Action 2030 goals is no small task. With a history of supporting the U.S. Navy, U.S. Coast Guard, Military Sealift Command and Canadian Coast Guard for more than 100 years, Fairbanks Morse Defense (FMD) is rising to the challenge.

A recent memorandum of understanding was signed between FMD and Oak Ridge National Laboratory (ORNL), the Department of Energy’s largest multidisciplinary laboratory, to collaborate on the development and integration of alternative fuel technologies aimed at reducing the marine engine’s reliance on fossil fuels, all while answering the question:

 How to deliver solutions without compromising availability and power?

The modern fleet has huge power demands to run advanced sensor packages and weapons systems. The modern powerplant needs to meet this demand with fuel flexibility in a reliable way. This collaboration between FMD and ORNL is a giant step forward in developing a solution for this unique market where you cannot be in a situation where you’re unable to respond.

The ZEVI Competition

Across the pond, there’s another initiative taking place.

The U.K. government, in conjunction with Innovate U.K., has launched a Zero Emission Vessels and Infrastructure (ZEVI) competition to support the design and development of near-commercial, clean maritime solutions. Cummins has been chosen for one of the sponsored projects.

A total of £4.4 million in funding will be leveraged by Cummins and its fellow project stakeholders – Ocean Infinity, the Aberdeen Harbour Board and Proman AG – in the deployment of a U.K.-designed and built methanol conversion kit for a high-horsepower marine internal combustion engine, offering the U.K. an important foothold in enabling the transition to cleaner maritime fuels.

“This project, with its focus on the conversion of existing engine installations, offers a seamless transition between today and the future builds of new, cleaner technology ships,” says Molly Puga, Cummins’ Executive Director for Strategy, Product Planning & Digital. “It dismisses the need for a major vessel overhaul and creates an immediate positive impact on carbon emissions reduction in all environmental and operating conditions, ultimately helping the maritime sector meet our global climate needs.”

Retrofitting the popular Cummins QSK60 engine for dual-fuel HVO (hydrotreated vegetable oil) and methanol technology will be a big step toward developing the U.K.’s alternative fuel supply chain and easing the energy transition by modifying existing equipment.

The Third Revolution

Steam followed sail, and diesel followed steam.

Each age pushed the boundaries of the technology of the day until the next major shift needed to occur.

The third shift is happening right now, driven by climate change and the demand to work cleaner while maintaining and even improving efficiency.

Alternative fuels, smarter technology and scalable solutions are all required to meet these demands. Fortunately, through collaboration and cooperation, the global maritime industry is rising to the challenge and poised to propel us into the future. 

Master mariner Sean Hogue is a regular contributor to the magazine.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.

 

One Quarter of the Fleet Will be Alternative-Fuel Capable by 2030

The dual-fuel methanol boxship Laura Maersk on her maiden voyage, 2023 (Maersk file image)

PUBLISHED JAN 3, 2024 9:52 PM BY THE MARITIME EXECUTIVE

 

After another banner year for LNG-capable ordering activity, nearly half of all newbuild tonnage on the world's shipyard orderbooks is ready for alternative fuels, according to a year-end shipbuilding review from Clarksons. 

"Across 2023, we recorded ~539 newbuild orders involving alternative fuel capable vessels, 45 percent of all orders placed by tonnage," said Global Head of Clarksons Research Steve Gordon. "While we remain only at the start of a vital and unprecedented fleet renewal investment program, a start has been made with 49 percent of current orderbook tonnage now alternative fueled."

The proportion is much higher in some segments of the fleet. More than 80 percent of all boxships and car carriers ordered in 2023 are dual-fuel capable, and the percentage rises well above 90 percent when including dual-fuel "ready" vessels in these two classes. By contrast, Gordon said, uptake in the bulk carrier and tanker orderbooks has been limited. 

As in the past, LNG took the lead in "alternative" fuel ordering, accounting for 220 vessels (including orders for LNG-fueled LNG carriers). 125 orders specified methanol, and four pacesetting new orders will be able to burn ammonia. 

Taken together with expected scrapping trends, the progress in the orderbook means that about a quarter of all tonnage could be alternative-fuel capable by 2030. (Clean fuel availability and cost-competitiveness are a separate matter, as recently noted by BIMCO.)

Other technological solutions are also gaining traction, like onboard carbon capture. Clarksons counts 31 ships that are currently testing some form of carbon capture, plus another 22 on order. 

The uptake of alternative-fuel technology is still overshadowed by the commercial promise of high sulfur fuel oil, according to Clarksons' numbers. 420 existing ships installed a scrubber last year, allowing them to lawfully consume HFO and save about $200 per tonne on fuel. HFO-capable vessels now make up about 27 percent of global tonnage, and more are on the way: over 320 newbuilds were ordered with scrubbers fitted last year. 

 

Airbus and Louis Dreyfuss Order Three Wind-Assisted Cargo Ships from China

Airbus ordered three cargo ships that use rotors (LDA)

PUBLISHED JAN 3, 2024 6:07 PM BY THE MARITIME EXECUTIVE

 

 

European aviation company Airbus working with French shipping company Louis Dreyfus Armateurs (LDA) is moving forward with their plan to launch three new ro-ro cargo vessels with wind-assisted propulsion. A division of LDA signed an order on January 2 to build the three vessels with China’s Wuchang Shipbuilding, a division of China State Shipbuilding Corporation (CSSC) with delivery to begin in 2025.

Airbus and Louis Dreyfus Armateurs announced the plans for the three vessels in October 2023 highlighting that they would not only greatly increase the capacity to transport aircraft components for Airbus but at the same time dramatically reduce carbon emissions. Airbus’ goal is to reduce emissions from its Atlantic ships by 50 percent by 2030 compared to a 2023 baseline, cutting the total emissions from 68,000 to 33,000 tons.

The vessels are larger than the current ships owned by LDA and chartered to Airbus, but at the same time use an innovative design. Each will be equipped with two dual-fuel methanol-fueled main engines as well as two dual-fuel methanol-fueled auxiliary engines. Initially, they expect the vessels to operate on marine diesel transitioning to e-methanol. Further reducing emissions with be six Flettner rotors. Wuchang also highlights that they will be equipped with an energy-saving optimization management system.

Emissions from the vessels when they begin entering service in 2025 are expected to be 11,000 tons of CO2 annually by 2030. As they increase the use of e-methanol, emissions will fall to 5,000 tons each by 2040 for the three new ships.

Compared with the three current cargo ships operating for Airbus, the new vessels will have a larger carrying capacity design to support Airbus’ plan to increase production of its A320 class of planes to 75 aircraft per month by 2026. The new vessels will have the capacity to transport around 70 40-foot containers and six aircraft subassembly sets. This will include wings, fuselage, engine pylons, and horizontal and vertical tails. Airbus has said any excess capacity could be used by other divisions or its partners.

After delivery, the ships will operate trans-Atlantic transporting the components between Airbus’ production base in Saint-Nazaire, France, and its aircraft assembly line in Mobile, Alabama. Two of the existing vessels, Ciudad de Cadiz and City of Hamburg, will be retired while the third, the Ville de Bordeaux, will move to operations in the Mediterranean.

The ships are part of a pioneering effort to use advanced designs for the shipping industry and are part of an overall plan to reduce emissions. Another French operation recently commissioned the Canopée (5,500 dwt), which is being called the first hybrid industrial vessel. It is equipped with collapsible wing sails and is being used to transport assemblies for the European Space Agency’s Ariane program between Europe and the launch facility in French Guiana. A third French company, Zéphyr & Borée, was believed to have ordered five containerships that also feature wingsails.

 

Japan’s Largest Offshore Wind Farm Starts Commercial Operations

The Ishikari Bay wind farm is the largest commercial wind farm in Japan (JERA)

PUBLISHED JAN 4, 2024 4:26 PM BY THE MARITIME EXECUTIVE

 

 

Japan’s largest commercial wind farm and one of the very first to be completed offshore was commissioned near Hokkaido, the northernmost of Japan’s main islands. Located on the west side of the island in the Sea of Japan, the wind farm began commercial operations on January 1 as part of the government’s efforts to accelerate the use of renewable energy.

The development of offshore wind power generation has been slow in Japan in part due to the challenges faced by the geography. Most of Japan’s coastal regions have greater ocean depth which favors floating wind turbines and in addition, the region is exposed to typhoons, volcanoes, and earthquakes. Despite this, the government has outlined a plan to go from virtually nothing to at least 10 GW in the pipeline by 2030. By 2040, the plan calls for as much as 45 GW of offshore power generation capacity.

The Ishikari Bay New Port Offshore Wind farm is located near the city of Ishikari. It adopted a design suited to the challenges of operating offshore in Japan with specially suited Siemens Gamesa wind turbines. It is also the first wind farm in Japan to adopt the larger 8 GW turbines. Because of the geographic challenges, the wind farm in in a nearshore position.

The project consists of 14 wind turbines. It has a total power capacity of 112 MW. The design also incorporates a battery storage capacity which is a distinguishing feature of the wind farm. It will permit the storage of electricity which can help to reduce fluctuations and ensure a consistent power feed into the Hokkaido Electric Power Network.

The wind farm was developed in a partnership between Jera, Japan’s largest power generation company, and Green Power Investment Corporation, which Jera owns in conjunction with NTT. GPI was founded in 2004 dedicated to the development, construction, and operation of renewable energy projects. In 2020, it completed the 122 MW onshore wind farm at Tsugaru, which was then the largest in Japan. Jera and NTT acquired GPI last year in a deal valued at more than $2 billion, which the Japanese media outlet NHK reported was the most ever paid to buy a Japanese renewable energy company.

A year ago, Japan commissioned its first large offshore wind farms, a two-phase nearshore project in Akita Prefect on the main island of Honshu. One of the two neighboring installations has the capacity to provide 84 MW with 20 fixed-bottom 4.2 MW turbines while the other location has 13 turbines. The total site has a capacity of approximately 138 MW.

Japan recently completed its next round of auctions selecting three groups including Jera, which along with Tohoku Electric Power and J Power won the rights for a 315 MW wind farm also to be located in Akita. Germany’s RWE was part of another consortium awarded a site and the third went to a partnership between Sumitomo and Tokyo Electric. The three projects have the potential to provide 1.4 GW of offshore power capacity by the end of this decade.