In my last blog, I wrote about how increased market volatility and disruptions to the global supply chain are driving every tanker shipping company to examine its operations and pay ever closer attention to the market fundamentals that drive our day-to-day business.
Within the post, I also promised to share some more thoughts on deglobalisation and the regionalisation of global trade. Understanding these emerging trends is critical to how we do business because they have the potential to be extremely disruptive to the business-as-usual supply chain we have broadly become used to.
The shifting landscape of global energy flows
The last few years have shown how impactful geopolitical events can be on shipping operations in the short and medium term. Russia’s invasion of Ukraine and its impact energy flows are well documented, as are the material effects it has had on businesses like ours that support our customers with crude oil transportation around the world.
But, more broadly, the global energy landscape under our feet is already shifting. China is the world’s largest energy consumer, and its fossil fuel consumption outweighs the rest of the world combined. In response, domestic policy decisions have seen China become the world’s largest producer of wind energy and generate one third of global solar power.
Renewable energy being used to create e-fuels like hydrogen and methanol will continue to justify liquid transport demand, but clearly, this transport work will require new vessels sailing new routes. Contrary to public expectation, crude will continue to play a role in all of our lives for many years to come – heightening the requirement for us to transport those products safely and sustainably in line with the broader global transition.
The frontrunners in the “power-to-X” transition have yet to be determined. Various EU nations, as are Chile, Canada and others, are already staking their claim. But the implication is clear: the energy transition will not just be about slowing the pace of climate change, but also redrawing the global energy map, and global power equations simultaneously.
The potential rise of deglobalisation and regional trade
Then, we turn to the topic of deglobalisation. I believe the World Economic Forum has produced one of the best write-ups on this phenomenon. As they point out, “the 2008 financial crisis, trade wars, disenfranchised middle classes in developed economies and rising concerns about over-reliance on trade with single partners led to a period of relatively stagnant "slowbalisation.”
“Recent disruptions to global value chains such as the COVID-19 pandemic, the war in Ukraine, growing ideological differences and the green transition”, the WEF argues, “have prompted governments and corporations to reconsider external dependencies.”
It is clear that any disruption to globalisation would be a fundamental disruption to shipping. I am more mixed on the potential for more regionalised trade regimes. After all, the business as usual that we are currently used to operates just fine, with more than 60% of Europe’s trade remaining in Europe, and more than 50% of Asia’s trade remaining in Asia.
Even if these numbers edge up slightly, there will always be a role for shipping to play. For example, it is impossible to square away regional demands for renewable energy generation without global access to metals and rare earth minerals.
I prefer to take a more positive view. Yes, the events of the last few years have brought the global supply chain to a greater level of public awareness, but we can just as easily argue the case that global trade’s relative resilience, not vulnerabilities, have been showcased to the world.
In this context, diversification of trade and potential moves to a more regional model should be seen as an opportunity and, most importantly, a potential reality for us to plan for and adapt around.
Adapting to market volatility and uncertainty
All of these factors sign that we will collectively have to navigate a more volatile and uncertain landscape in the near future. The level of change ahead requires proactive preparation and adaptation, if we are all to meet customer demands, no matter how transformed those customer demands are.
These factors and more are what have underpinned Stena Bulk’s progressive approach over the last few years. We have been unafraid to make the right decisions for our fleet. It remains the case that nothing is off the table for us. You only have to look at the last few years – a period that has encompassed an unparalleled downturn and one of our most vital years on record; and a period in which we have committed to methanol as a marine fuel and to trialling carbon capture & storage to solve our sustainability challenges – to see that we will always be pragmatic about the future.
I would encourage continued shared reflection and preparation for the evolving macroeconomic landscape. These are big issues that will impact us in our personal lives as much as they do our professional ones. I look forward to navigating the next few years in partnership with Stena Bulk’s friends and colleagues, and contributing more insights where they are wanted on this important debate.
By Erik Hånell, President & CEO of Stena Bulk
May 2023