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Author: responsivewebsitesdesign_h1zqsb
HomeArticles Posted by responsivewebsitesdesign_h1zqsb
Roadfreight
February 16, 2023 By responsivewebsitesdesign_h1zqsb

Industry warns EU against combustion engine ban for trucks, buses

Vehicle manufacturers, fuel companies, and other industry bodies have warned lawmakers that banning the sale of combustion engine lorries and buses too early could imperil Europe’s road freight industry.

Industry groups have mounted a communications push ahead of the release of new EU CO2 standards for heavy-duty vehicles on Tuesday (14 February), hoping to influence the emission targets.

A recent industry-penned open letter encourages policymakers to consider combustion engine technology as compatible with EU climate targets, so long as fossil fuels are substituted with low-carbon and net-zero liquid fuels, such as biofuels and e-fuels.

In contrast, green campaigners are urging the Commission to phase out the sale of combustion engine lorries as quickly as possible, favouring an industry-wide switch to electric and green hydrogen power trains.

Heavy-duty vehicles make up around 2% of traffic on European roads and are responsible for some 28% of road transport emissions.

For its part, the European Commission states that any technology that can meet the agreed emission standards is welcome. However, a 100% target is considered to represent a de facto ban on combustion engines.

Leaked draft

Brussels has taken an increasingly firm stance on reducing road transport emissions, successfully pushing to ban the sale of new petrol and diesel cars by 2035.

While initially controversial, the Commission’s proposal was subsequently adopted by member states and European Parliament lawmakers in October of last year.

EU finalises deal spelling death of diesel and petrol cars

European Union legislators agreed to a deal late Thursday evening (27 October) requiring new cars and vans to be zero-emission as of 2035, a momentous agreement that sets Europe on a trajectory to a largely electric automotive future.

A leaked draft of the CO2 emission standards for heavy-duty vehicles obtained by EURACTIV suggests it is unlikely that the Commission will repeat its 2035 target, instead opting for a 2040 shift to 100% CO2-free tailpipe emissions at the earliest.

The leaked document leaves untouched the carbon emissions reduction targets for 2025 to 2029 and does not yet specify the necessary emissions reductions afterwards.

Clear battle lines have emerged between the fuel and road freight industries, which are pushing against a potential combustion engine curtailment, and environmental NGOs, which are lobbying the Commission to force a switch to clean vehicles by 2035 at the latest.

New diesel lorries to be allowed until at least 2040

Lorries running on fossil fuels will continue to be allowed beyond 2035, with a potential phase-out coming in 2040 at the earliest, a draft proposal by the European Commission on revised CO2 emission standards for heavy-duty vehicles shows.

‘An unnecessary and risky experiment’

The International Road Transport Union (IRU), a group representing road freight operators, warned that the EU trucking sector is not yet ready to embrace full electrification.

“The vital logistics chains that supply EU citizens with food, medicine and other essentials should not be subject to an uncertain leap into the dark which could jeopardise their stability,” said Raluca Marian, the IRU’s EU advocacy director.

“A complete move away from combustion, notwithstanding that this too can achieve the same objective depending on what is burnt, can only be described as an unnecessary and risky experiment,” she added.

One of the chief concerns of industry is a lack of charging infrastructure across the bloc. Until ambitious charging point goals are secured legislatively, a mandated switch to clean trucks and buses would be too risky, it is argued.

Trade association the Advanced Biofuels Coalition LSB expressed concerns that moving against combustion engines would slow down investments into low-carbon fuels.

“It is essential for policy-makers to recognise the role of renewable fuels in the heavy duty sector in order to ensure certainty for advanced biofuel investments that will be needed for decades to come for the legacy fleet in the transport sector,” said Marko Janhunen, chair of the Advanced Biofuels Coalition and public affairs director at UPM.

If the Commission does not do so, the EU executive is “not acting according to the principle of technology neutrality,” he added.

In a joint statement, vehicle manufacturer trade body ACEA and auto parts manufacturers representative CLEPA argued that incentives should be given to encourage transport operators to invest in zero-emission vehicles rather than implementing bans.

This, they say, would help to build a “solid business case” for such vehicles.

The trade associations argue that in the context of soaring energy prices and the high cost of raw materials, “flexibility” is needed for the European truck industry to compete with the US and China.

Push for 2035 phase out

However, green NGO Transport & Environment said that the 18 year lifespan of trucks means that to meet EU climate targets, the sale of combustion engine trucks and buses must be halted by 2035.

Mandating a 100% CO2 reduction target would incentivise manufacturers and operators to invest in electric vehicles, bolstering the EU’s battery and clean vehicle production. A failure to do so would “deprive our nascent battery industry of investment certainty”.

“The big question for MEPs and governments is does this proposal keep the 2050 net-zero goal alive? Anything less than mandating zero emissions truck sales by 2035 would leave us with polluting diesel lorries still in the fleet by mid century,” said Fedor Unterlohner, freight policy manager at T&E.

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Seafreight
February 16, 2023 By responsivewebsitesdesign_h1zqsb

Container shipping stock prices resilient despite falling spot rates

In our recently published addendum to Financial Health Check, we have reassessed container industry prospects and profitability in view of changes in market dynamics. Amid falling spot freight rates, we have significantly reduced the industry profitability forecast for 2023. Container companies continue to prioritise building cash war chests instead of deleveraging. Also, vertical integration moves will make their business model resilient in the long term.

Low demand drives weak freight rates

While 2021 was the year of easy money, 2022 saw rapid monetary tightening by the central banks around the globe as they changed their stance dramatically to tame the heightened cost of living. Amid the worsening economic situation, container volume growth started to decline. This, coupled with the easing congestion in ports (which added to the effective container capacity), lowered freight rates. Accordingly, Drewry World Container Index declined by 77.5% in 2022. While we expected liners to be aggressive in capacity management, taking advantage of the higher coordination owing to the highly consolidated industry, it seems liners have prioritised maintaining their market share over arresting the free fall in freight rates.

Revenues to decline in 2023 after surging in 2022

Carrier companies posted phenomenal revenues in the first three quarters of 2022. However, we expect a significant decline in 4Q22 numbers on a YoY and QoQ basis. Results declared thus far for 4Q22 point in the similar direction. Hapag-Lloyd’s EBITDA and EBIT slumped by about 32% and 35% QoQ in 4Q22. Similarly, Maersk’s EBITDA and EBIT slumped by 39.8% and 46.0% QoQ in 4Q22. In line with dimming industry prospects, the company expects its EBIT to come in a range of USD 2 – 5bn (vs 2022: USD 30.9bn). We expect a similar trend in the results of other companies under our coverage. Accordingly, we have significantly downgraded our industrywide 2023 profitability estimate, as the effects of the deteriorating macroeconomic environment, improving supply chain logjams, record capacity additions and falling spot freight rates start to affect earnings.

The era of vertical integration

Liners are anxious to insulate their earnings against the mercurial freight market and as such are investing heavily in the businesses of ports and logistics. The race for providing end-to-end integrated solutions played a foundational role in the breakup of the 2M alliance, as the strategies of the two carrier giants Maersk and MSC became irreconcilable. On 25 January 2023, carrier giants Maersk and MSC decided to no longer renew the 2M alliance post its expiration in 2025. While MSC has been focused on aggressive liner fleet expansion via newbuild investments and the S&P market, Maersk has preoccupied itself with expanding its end-to-end logistics capabilities. To this extent, it acquired The Martin Bencher Group, Pilot Freight Services, LF Logistics Holdings Limited, and Senator International. While Maersk’s strategy focuses on the complete value chain, other players are also integrating their capabilities to enhance the value proposition of their offerings. Notably, Hapag-Lloyd acquired a 35% stake in India’s J M Baxi Ports & Logistics from Bain Capital after announcing a new transshipment terminal being built in Damietta, (Egypt), following the purchase of the ports and logistics business of SM SAAM, an acquisition of a 49% stake in Spinelli Group, as well as a 30% shareholding in Container Terminal Wilhelmshaven. HMM revealed a KRW trillion investment plan to diversify its business portfolio over the next five years (2022-26).

Lower multiple to attract value investors

Owing to the high correlation between freight rates and earnings of liner companies, the Drewry World Container Index and the Drewry Container Equity Index move in tandem under normal circumstances, but a divergence in the movement of these indices has been recorded. Despite the continuous fall in freight rates, stock prices of the major liners have started to consolidate at the historically low valuation level. At the current Price/Book (P/B), the industry is half its five-year historical average, marking the opportunity for equity investors. The ongoing consolidation at the current P/B level hints that the financial community has already accounted for the near-term weakness.

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Airfreight
February 16, 2023 By responsivewebsitesdesign_h1zqsb

Frankfurt Airport

Finally, ranking as the top European airport for freight traffic last year is none other than Frankfurt Airport – often known as Europe’s busiest cargo airport. Operating true to its title and ranking, the airport handled approximately 2.0 million tons of cargo.

However, it would be pretty ironic to learn that despite handling so much cargo, last year’s number was a massive 13.3% decline from 2021 and an estimated 5.6% decline from 2019. As with every other airport within the region, Frankfurt Airport was heavily affected by airspace restrictions, the closure of China, and the overall economic slowdown due to inflation.

With the air cargo industry seeing more of an upward trend again this year, Frankfurt Airport is optimistic about the growth of its cargo operations. Although it did not see an increase in cargo volumes during the run-up to the Lunar New Year, the airport is sure that capacity will increase with demand set to grow throughout the year.

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