The Importance of Sustainability in the Shipping Sector

According to the World Bank, the international freight forwarding industry is responsible for 3% of the world’s total greenhouse gas emissions (GHG) annually. If no action is taken, the international freight forwarding industry will account for 17% of global GHG emissions by 2050. 

Every international freight forwarding company is responsible for these emissions, and sustainable transport is the biggest challenge for the shipping industry. Shipping is crucial for economic growth, helping nations move essential products to cater to the demand. Every logistics company in the Philippines, freight forwarding enterprise, and shipping company should do their best to make shipping sustainable. 

Here are some reasons why sustainability in the shipping industry is essential. 

Why is Sustainability Important in International Freight Forwarding?

Online e-commerce has grown exponentially since the pandemic, and the global shipping industry is needed now more than ever. Joining the fight against climate change is a way for the worldwide shipping industry to thrive more. Shipping companies choosing to continue their operations via sustainable means reduce environmental threats as they step towards green and sustainable shipping.

Sustainability is also the current trend when it comes to different transport industries. Automobile manufacturers have constantly been developing electric cars for the longest time. The aviation sector is also doing its part to reduce carbon dioxide emissions to the point where flights today generate 50% fewer emissions than flights in the 1990s. 

A sustainable shipping industry does not only reduce global carbon dioxide emissions. It also prevents oceans from having oil spills which can harm various organisms living in different water bodies and limit people’s access to clean water.  

How Can the Global Shipping Industry be More Sustainable?

Compliance with environmental regulations is one of the best ways to have a sustainable shipping industry in a country. Nations and businesses in the maritime world have agreed to comply with the global conservation goals of the following three decades set by the International Maritime Organization and the Sustainable Shipping Initiative

Creating a sustainable work environment can also promote sustainability in the sector. Making eco-friendly ports, switching to alternative fuels, and investing in green technologies can go a long way in fighting the rising global greenhouse emissions. Having a greener shipping environment also benefits the safety and trust of workers within the industry, enabling them to build more vital trust and transparency in the workplace. 

In addition, increasing vessel efficiency can also be a game changer for many international forwarding firms. They can do this by using cleaner ballast water, decreasing marine litter, using alternative fuel sources, and enhancing the ship recycling process. And when vessel efficiency is optimized, less carbon footprint is produced. 

Shipping Companies that Go Green

As economies rebuild after the negative impact of the COVID-19 pandemic, the shipping industry will continue to be an essential part of society. But various traditional practices in the sector have led to the rise of GHG emissions over the years, resulting in the need to adopt sustainable methods to protect the environment and workers in the industry. 

If you need a sustainable international freight forwarding company with exceptional service, Excelsior Worldwide Freight Logistics has been one of the leading shipping companies in the Philippines for almost 20 years. We provide freight services for land, sea, and air. Excelsior has everything you need regarding logistics, and our mission is to ensure that your shipment will arrive at its destination safely.

If you want to know more, call us at (+632) 8525-9775, email us at wecare@excelsior.ph, or message us through our contact page

How Different Conflicts Affect the Global Shipping Industry?

After multiple countries restarted their economies after years of being under lockdown, the maritime industry saw an increase in demand as businesses wished to press on and leave behind the turbulent times of the pandemic. This led to increased fuel costs that negatively affected the shipping industry as high fuel costs resulted in high shipping rates.

Shipping and freight forwarding companies had to raise shipping rates in response to high fuel prices as early as the last quarter of 2021. Even though shipping costs rose after economies reopened, this was still a sign that international trade was starting to return to normal. Still, another crisis popped up in the early months of 2022 that hit international freight.

On February 24, 2022, under the guise of a special military operation, Russia essentially invaded Ukraine. Russia was then struck with different sanctions that affected a lot, including Russian oil getting cut off from the market and further driving both oil and gas prices up. The current war did not only affect oil and fuel prices as international freight took a bigger hit thanks to the sanctions, cancelled flights, extended flights, and inflation.

In addition to the war in Ukraine, the current tensions in Taiwan can also affect the current state of global shipping as China’s People’s Liberation Army continues its military drills that simulate a blockade on Taiwan. This is after US House Speaker Nancy Pelosi visited Taiwan.

Ukraine War and Chinese Military Drills of Taiwan

War in Ukraine

Air transport is by far the most affected by the Russia-Ukraine War as multiple airlines reduced or stopped their operations between Europe and Asia. Those that continued their operations had to use extended air routes as both Ukrainian and Russian airspaces are currently closed. Thanks to extended air routes, airlines had to use more fuel, contributing to both higher fuel prices and skyrocketing prices of goods.

fuel costs that negatively affected the shipping industry
A screengrab of the current state of air traffic in Ukraine. Note the lone aircraft in the middle of the Black Sea. Due to sanctions, all airlines either avoid or skirt the Black Sea to avoid going into Russian airspace. Any aircraft in the middle of the Black Sea are likely military aircraft. Photo from live flight tracker Flightradar24.
fuel costs that negatively affected the shipping industry
A screengrab of a longer flight path taken by a BELAVIA Boeing 737-8K5flying from Antalya to Minsk. Photo from live flight tracker Flightradar24.

Land freight that relies on routes going through Russia, Belarus, and Ukraine to go to and fro the European Union, China, and South Asia no longer has any safe overland routes. This means that international freight forwarding companies will need to use different routes through the UAE, Serbia, Turkey, or Romania. Customs brokers will also need to adapt to the different language barriers and document processing procedures.

The war on Ukraine also affected maritime routes in both the Sea of Azov and the Black Sea, as the routes are no longer safe. Several merchant ships have been attacked off the coast of Ukraine, making it certain that sea freight will be unreliable until the war ends. Although Russia and Ukraine recently signed a deal to allow grain shipments to move through the Black Sea to mitigate the risks of worldwide famine. Whether this means that the sea lanes will be safe for now is unknown, but Shephard Media noted that the tentative nature of the grain deal might not significantly shift the current security situation in the Black Sea, so it might not still be safe to set sail.

Like how land freight will need to rely on other routes, sea freight will also need alternative routes, making air routes a more viable option for shippers and freight forwarders.

Military Drills Around Taiwan

The blockade on Taiwan also further limited the remaining available air routes as China warned airlines to avoid flying in areas around Taiwan where the military exercises are currently held. China has also designated certain six areas of airspace as danger zones that all civilian aircraft must avoid.

US House Speaker Nancy Pelosi visited Taiwan
Graphic representation of the areas where the People’s Liberation Army (PLA) plan to hold military drills. Photo provided by the People’s Liberation Army.

While airlines have cancelled flights to Taipei and have rerouted other flights to avoid the airspace in the past few days, air traffic has just returned to normal, at least on August 8, 2022.

international freight forwarding companies
A screengrab of a longer flight path taken by an ANA Boeing 787-9 flying from Tokyo to Taipei. Source: https://www.flightglobal.com/air-transport/china-military-drills-off-taiwan-prompts-flight-rerouting-cancellations/149738.article

Even if air traffic has returned to normal, some disruptions are still expected as military drills continue around Taiwan. The extended military drills can herald a “new normal” for freight and shipping off Taiwan.

The Cost of Shipping Rising

international freight forwarding companies
ClarkSea Index Chart by UNCTAD Secretariat, based on Clarksons Research data up to April 8, 2022. Source: https://unctad.org/ukraine-in-focus/maritime-trade-disrupted

The ClarkSea Index is a barometer of shipping fortunes, and during the War in Ukraine, it’s seen that the earnings of the shipping industry improved as the cost of shipping increased. The chart focuses only on tankers, bulkers, containerships, and gas carriers, but it’s safe to say that even the cost of shipping through the air has also increased.

The flight restrictions in Ukraine and Russian airspace effectively removed about 10 million miles of airspace and international freight routes utilized by 20% of the world’s air cargo. This resulted in longer flights and lower air capacity as carriers took alternate routes or canceled flights altogether.

If the military drills off Taiwan continue, there is a chance that the supply chain will further be negatively affected by increasing the cost of goods and causing certain shortages.         

Skyrocketing prices

As shipping and freight forwarding routes were negatively affected by flight restrictions and the redrawing of route maps, the cost of transporting goods also increased as freight forwarders, and shippers had to use different routes and use other means to adapt. Longer and alternative routes will jack up fuel costs and then jack up the cost of the goods themselves.

The cost of fuel and energy reliant on fossil fuels already rose due to the higher oil prices, and the cost of other goods will only continue to skyrocket as transportation routes remain restricted. Some food prices, for one, have already eased but still remain high, but things can change if more routes end up getting closed off.

When the war in Ukraine started, there was speculation that electronic vendors might raise prices while using Ukraine as an excuse. PC Gamers didn’t exactly see this change in prices as both GPU prices and cryptocurrency crashed, and other PC parts didn’t see any price increase, at least not significant enough to warrant attention if there was any. However, because Taiwan is export-focused and its main products include electronics, there is arguably a bigger chance of prices increasing if exports are disrupted. Taiwan’s other products include the following:

  • electronics
  • information
  • communication and audio-video products
  • base metals
  • plastics & rubber
  • machinery

Taiwan’s chip manufacturing industry will also be affected as China halts its sand exports to Taiwan. The continuation of military exercises and the rerouting of sea and air freight to the country, halts in sand exports to Taiwan, and possible complications if the situation worsens can negatively affect the prices of electronics and PC parts.

For simplicity’s sake, it’s safe to assume that prices for multiple products will only skyrocket when multiple conflicts are happening that can disrupt the supply chain. As long as the war in Ukraine continues and if the situation in Taiwan worsens, there will be shortages, and price increases and the world will need reliable freight forwarders and customs brokers to keep the supply chain up and running.

Conclusion

Everyone involved in the shipping and freight industry will need to adapt to ensure that they can continue their operations amid different crises and supply chain disruptions. Shippers can only adapt to the situation and look for other transportation routes, hire competent customs brokers to ensure that shipments reach their intended destinations through the new routes, and futureproof their operations.

Businesses will need to look for reputable freight forwarders to outsource logistics to ensure that they can continue importing and exporting goods. Excelsior Worldwide Freight Logistics is one such reputable company that offers international freight forwarding and customs brokerage services.

Excelsior Worldwide Freight Logistics constantly endeavors to be a company of enduring greatness by providing only time-conscious, client-oriented, and exceptional delivery service. We also conduct free orientation for anyone who is willing to learn. It is our advocacy to share our knowledge & experience worth more than a decade in the business. Visit our website today at www.excelsior.ph to learn more about us and our service.

Why are Fuel Costs High and How it Affects the Shipping Industry?

The Philippines is currently seeing high fuel prices, and the public transportation sector is currently reeling from the effects as drivers are forced to pay for expensive gas. Although rollbacks could happen in the future, it won’t change the fact that fuel costs are still high worldwide.

From regular commuters to international freight forwarding companies, many people are heavily affected by rising fuel costs that effectively increase gas prices, transportation rates, and shipping costs.

international freight forwarding companies

Why is Gas Expensive?

Increased Demand After Strict Lockdowns

The price for crude oil initially went up when the demand for oil and gas returned as the global economy emerged from strict COVID lockdowns. Both oil and gas prices went up as major economies reopened. Because the Philippines is a net oil importer, gas prices in the country will naturally go up when international oil prices spike.

According to the U.S. Energy Information Administration, the top five oil producers in the world in 2021 are the following:

  • United States – 18.88 million barrels per day or 20% of the world’s total
  • Saudi Arabia – 10.84 million barrels per day or 11% of the world’s total
  • Russia – 10.78 million barrels per day or 11% of the world’s total
  • Canada – 5.54 million barrels per day or 6% of the world’s total
  • China – 4.99 million barrels per day or 5% of the world’s total

These five countries contribute 53% of the total world oil production, and anything that can affect both the production and sale of these countries’ oil will affect the cost of oil. Since oil becomes fuel when refined, expensive oil will then become expensive gas.

While the initial oil and fuel price hike were because of the increased demand, the situation worsened thanks to the Ukraine war.

Russia’s Invasion of Ukraine Cut Down Oil Supply

Because Russia invaded Ukraine on February 24, 2022, the world responded with multiple sanctions to penalize Russia. Due to the sanctions imposed by the European Union, the United States, and other economies, Russia has been selling less oil in the market, resulting in lower supply and higher prices.

Europe started ditching Russian oil by reducing the amount of oil they buy from Russia while shopping around for alternative sources. Some countries still buy some Russian oil because they have become too dependent on it, making it hard to look for alternatives. Because there aren’t enough oil alternatives in the market due to oil producers winding down production, oil prices will remain high until Russian oil returns to the market.

As the war sees no sign of ending anytime soon, it’s unlikely that the global oil supply and prices will return to normal anytime soon.

Effects on the Freight Forwarding and Shipping Industry

Even before the Ukraine War, shipping operators in the Philippines had already imposed bunker fuel surcharges to recover from high fuel costs. Fuel accounts for a freight forwarder and shipping company’s operating costs, so they’re recovering the losses through surcharges. In fact, the Philippine Civil Aeronautics Board has already upgraded the passenger fuel surcharge to Level 4, which equates to P108 to P411 per passenger for one-way domestic flights and P543 to P5,026 per passenger for one-way international flights.

The current surcharge is Level 11, which equates to P355 to P1,038 per passenger for one-way domestic flights and P1,172.07 to P8,714.84 per passenger for one-way international flights. Cargo fuel surcharge is also Level 11, which equates to increases of P1.82 to P5.34 per kg for domestic flights and P6.03 to P44.80 per kg for international flights.

Adding the war in Ukraine to the equation, fuel prices will naturally go up. Philippine Multimodal Transport and Logistics Association, or PMTLAI, president Marilyn Alberto noted that trucking costs would continue to spiral as fuel costs continue to increase. International air freight forwarders in the European Union and the United Kingdom were barred from flying in Russian airspace, creating difficulties in going to East Asia, effectively increasing fuel consumption which then increases fuel cost and transit times.

Alberto said that even if the Philippines does not make any significant trade with Russia and Ukraine, the country will still feel the ripple effect of the following:

  • Higher fuel costs
  • Long transit times
  • Suspension of services
  • Delays due to inspections of cargo bound to Russia to comply with sanctions

The ripple effect increases air and ocean freight rates due to longer container routes, high fuel prices, and possible high surcharges.

Conclusion

The reopening of multiple economies increased the demand for fuel and oil, resulting in higher fuel costs. Both the Ukraine War and the ripple effect of lower oil supply and longer transit times also added to the already high fuel costs. The cost of international freight forwarding will remain high, and it will take time for it to go down. Even so, freight forwarders and logistics companies will continue to operate, and it’s more important than ever to rely on a reputable company.

Excelsior Worldwide Freight Logistics conducts free orientation for those willing to learn. It is our advocacy to share our knowledge & experience worth more than a decade in the business. Visit our website today at excelsior.ph to learn more about our service.

Excelsior Worldwide Logistics Corp.