Tag: global shipping

Guest Post: The Global Initiative for Green Shipping Corridors

Our Guest Post comes from Dr. Drew Stapleton, Professor of Operations Management at the U. of Wisconsin-La Crosse

Last year, the US Department of Energy and the UK Department for Transport simultaneously requested information relating to the establishment of a green shipping corridor (GSC) between the countries. The GSCs are “maritime routes that showcase low- and zero-emission lifecycle fuels and technologies with the ambition to achieve zero greenhouse gas emissions.”

GSCs have been gaining popularity in recent years. In 2021, nearly two dozen nations expressed their support for the zero-emission routes by signing onto the Clydebank Declaration, which sets the goal of establishing at least five GSCs by 2025. Since then, development has begun on two such corridors—one between LA and Shanghai, and the other between Montreal and Antwerp. By sharing cost and risk burdens by the key stakeholders in the production of zero-emission ships and the use of green fuel oils, the GSC is conceived as an effective policy mechanism and logistics strategy to reduce GHG emissions at sea as well as to mitigate business risks in the value chain.

The ports of LA, Long Beach and Shanghai have announced the creation of the first- ever green shipping corridor designed to accelerate emissions reductions at three of the world’s largest container ports and from vessels in transit from China to Southern California. Leaders from the globe’s largest carriers are on board. Maersk, CMA CGM, Hapag-Lloyd and other shipping lines called for an end date to building vessels powered only by fossil fuels.

Maersk established a net-zero emission target to be reached in 2040. The Danish ocean carrier also aims to procure 100% net-zero steel by 2050 for use in its vessels. CMA CGM’s goal to reach net-zero emissions in its operations is set for 2050. As part of its decarbonization efforts, the French ocean carrier launched a program that incentivized shippers to return their containers early in exchange for carbon credits. Hapag-Lloyd has a goal to reach net-zero emissions in its operations by 2045. MSC has set up a goal to reach net-zero by 2050.

The U.S. believes GSCs are a key means of spurring the early adoption of zero-emission fuels and technologies that will help to achieve zero emissions no later than 2050, and calls on all countries to adopt ambitious actions to create a clean maritime future.

Classroom discussion questions:

  1. Are the emission targets realistic?
  2. Provide details regarding the Clydebank Declaration.

OM in the News: Shipping Woes Snarl Global Supply Chains

Congestion at Ningbo is spreading as big operators divert ships away from Ningbo.

A major container terminal at China’s Ningbo Port remained shut a week after operations were suspended from a single Covid-19 case, with dozens of ships lining up to load cargo for western markets ahead of the year-end shopping season. The congestion is spreading to other ports like Shanghai and Hong Kong as big operators divert ships away from Ningbo.

The cascading effect will lead to crowding at ports along the Asia-to-Europe and trans-Pacific routes that could further slow the flow of goods. writes The Wall Street Journal (Aug. 21-22, 2021). It will also hit cargo owners from giant retailers like Walmart and Amazon to mom-and-pop shops, which will have to deal with late deliveries and higher transport costs as they work to restock ahead of the holidays.

Ningbo is the world’s third-largest container port and a big gateway for Chinese exports like furniture, home goods, toys and auto parts headed to markets in the U.S. and Europe. A growing number of Chinese warehouses are filled with finished goods they can’t ship out as containers and shipping costs keep surging.

About 10% of the global container capacity is stacked on ships stuck outside congested ports. The backlog has stretched across the Pacific Ocean to the ports of Los Angeles and Long Beach, which together handle 1/3 of all containers coming into the U.S. Thirty-seven container ships were anchored outside those two ports this week. Other congested ports include NYC and Savannah, the Netherlands’ Rotterdam, and Antwerp in Belgium.

The lack of capacity is pushing big American retailers to charter their own ships rather than pay freight rates that have quadrupled since the start of the year. Daily freight rates for sailings from China to the U.S. West Coast are now at $16,425 per container compared with $3,886 at the start of the year. Rates from Asia to Europe are at $14,038 up from $5,662 in January.

Classroom discussion questions:

  1. What techniques in Supp. 11 of your Heizer/Render/Munson OM text can be used to address this problem?
  2. What other global factors have impacted ports and created logjams?