The rapid expansion of renewable energy markets around the world could have a radical impact of the shipping industry as demand for the key cargoes of oil and coal dwindles, a new report has warned.
Decarbonisation of the global energy system will cut the size of the world’s tanker fleet by one-third in the next decade, according to forecasts by industry consultancy Maritime Strategies International (MSI), while demand for ships carrying dry commodities, including coal and iron ore, will drop by 14% by 2035.
“While some sectors of the shipping market would be relatively unscathed – containerships being the most notable – sectors in which hydrocarbons make up a significant proportion of the cargo mix would undergo decades of stagnant or falling demand,” said the authors of the MSI study.
“The oil tanker market is most exposed to the low carbon transition as its entire cargo base is made up of fossil fuels.”
The report, which follows a study for the European Climate Foundation, presents a scenario for the future shipping industry where oil consumption will be cut in half by 2050 and coal consumption will drop by 80%.
“Renewables see the biggest net gain across the forecast horizon, increasing from 5% in 2020 to 16% in 2050, whilst Biomass/Biofuels see substantial growth to 2030, rising to 12% of global demand, but see little proportional gain beyond that,” the report authors said.
With the demand for shipping changing, MSI concluded the oil tanker market will be hardest hit with the number of vessels on the water set to shrink and the price of giant super-tankers forecast to tumble.
MSI calculates the price of a five-year-old VLCC (Very Large Crude Carrier), the largest class of tanker trading today, would fall by 29% by 2030, with rates for the vessels are predicted to be one third below their long-term median in the decade that followed.
With less coal to be shipped, dry bulk vessels would also see lower demand for their services.
The cost of 180,000-tonne capsize ships – the biggest of the dry good carriers which carry iron ore and coal – would collapse by 40% by 2030 as earnings plunged to roughly half of their long-term median, said MSI.
There may be also be downward market pressure as the shipping sector adjusts to tighter environmental regulation, the report authors added.
“Renewable or non-carbon fuels may emerge, as could synthetic fuels – from carbon capture, for example – and all would provide alternative sources of demand that are ideally suited to conventional bulk or gas shipping,” it said.
“But all of these potential sources of demand are in their infancy and a distant respite from the bleak picture painted above.”