Maritime Shipping – Sector Watch 9 August 2019

Cassidy Shell

Once considered slow-moving and outdated, the maritime shipping industry has experienced a recent influx of digitization and the implementation of new technologies, including autonomous ships, blockchain, drones and geospatial analytics. According to the 2018 Review of Maritime Transport, the United Nations Conference on Trade and Development (UNCTAD) considers technological advances and efforts to curb the industry’s carbon footprint two of the key trends shaping the future of the maritime shipping industry.

Attractiveness

Ships are powered by heavy fuel oil, the most polluting form of fuel. In 2012, maritime shipping emitted 938 million tons of CO2, contributing 2.2% of total global emissions. Trade volumes reached a total of 10.7 billion tons in 2017, and a 3.8% compound annual growth rate is predicted between 2018 and 2023. The International Maritime Organization (IMO) adopted an initial strategy in April 2018 to reduce total annual greenhouse gas emissions of maritime shipping by 50% in 2050, compared to 2008 levels. Additionally, a global limit of 0.5% on sulfur in fuel oil used on ships comes into effect on 1 January 2020.

The options for compliance are to either use cleaner distillate fuels, install sulfur dioxide removal scrubbers, or reduce fuel use. The last option has received the most industry efforts, and shippers are adopting new standards and technology to comply with the IMO’s mandate, including electric ships, autonomous technology, digital freight forwarding and even sails. Maersk is hedging against the possibility of tougher regulations and has set its own goal of zero carbon emissions by 2050, making a sizable bet that new technology will eventually be cheaper than oil.

Business Model

Digital freight forwarders such as Flexport and FreightHub offer technology platforms for supply chain transparency and efficiency. This allows shipping companies to improve operational efficiency, reduce idling and unused cargo space, and in turn, fuel use and operating costs. Flexport’s OceanMatch service matches unused cargo space with other clients’ cargo, allowing customers to only pay for the portion of the ship they use.

Other innovators such as Sea Machines Robotics, Autonomous Marine Systems and Shone Automation are improving efficiency through autonomous surveying, control and navigation technology. Sea Machines and Shone offer autonomous control and navigation systems that can be installed in existing or new watercraft to allow for safer, more efficient navigation. Autonomous Marine Systems has developed unmanned, wind and solar-powered marine robots to provide survey data to shore operations.

Competition

Flexport is a developer of freight forwarding software that organizes and tracks shipments.
Sea Machines is a developer of autonomous control and navigation systems for marine vessels.
Quadrofoil is a developer of electric watercraft.

Technology innovation in the industry is largely coming from new entrants, such as those mentioned above. Founded in 2016, FreightHub has already raised over $50 million with backing from Maersk. The company operates mainly in Europe with over 1,500 customers, including Miele and Home24, and has offices in Berlin, Hamburg, Cologne, Hong Kong and Porto. Flexport has a global presence with nearly $2 billion in capital raised, including funding from GV, DST Global and SoftBank.

Although efficiency improvements have been the target of shipping companies, cleaner fuels will also be necessary to reach the emissions reductions goals set by the IMO. Currently, biofuels are not ready for large-scale shipping operations. First movers in the space will have to shoulder the development costs of commercializing biofuels for shipping, but the potential return could be worth it, especially if regulations and enforcement continue to tighten. In addition, some companies such as New Dawn Traders, Neoline and Quadrofoil are developing sail-driven and electric watercraft to enable zero-emissions shipping and lower operating costs, bypassing the need for alternative fuels.

Innovation in mobility and supply chain management are essential to building a net zero future. Join us in Singapore for Cleantech Forum Asia on 8-9 October to continue the conversation.