Anticipating the Future for Tanker Shipping: More Regional, Less Global

In an era that may well become known for its unforeseen and unprecedented events – including the Covid-19 pandemic and Russia’s invasion of Ukraine - the tanker shipping industry faces supply chain disruptions, market volatility and an array of evolving challenges. The fragility of the global economy, combined with forces such as decarbonization, calls for vigilance and flexibility now more than ever.

The past few years have forced every tanker shipping company to reevaluate their operations and closely monitor the market fundamentals that drive daily business. One emerging trend that warrants our attention is the deglobalization and the regionalization of global trade. Understanding these shifts is crucial because they have the potential to disrupt the established supply chain norms we have come to rely on.

Transformations in the global energy landscape

Recent geopolitical events have again highlighted just how tied our industry is to the global landscape. Russia's invasion of Ukraine and its repercussions on energy flows have been widespread, with the need to ‘self-sanction’ significantly impacting businesses supporting oil transportation worldwide.

That’s not to mention the fact that the global energy landscape itself is undergoing a transformation. China, the world's largest energy consumer, has taken bold steps to reduce its reliance on fossil fuels, becoming the world's largest producer of wind energy and generating one-third of global solar power. The shift towards renewable energy and the production of e-fuels like hydrogen and methanol will continue to drive liquid transport demand, forcing the deployment of new vessels on new routes. And, contrary to some expectations, there is every indication that crude oil will continue to play a vital role in our lives for years to come, emphasizing the need for safe and sustainable transportation in line with the broader global energy transition.

The frontrunners in the transition have yet to be determined, with various EU nations, as well as Chile, Canada, and others, staking their claim to be able to produce alternative fuels at scale. However, it’s evident that the energy transition is not merely about combatting climate change, but also about refocusing the global energy map and power equations on a global scale.

Meanwhile, deglobalization has been on the radar of global economic analysts for some time. Events such as the 2008 financial crisis, trade wars, disenfranchised middle classes in developed economies, and concerns about over-reliance on single trading partners led to a period of what some have dubbed "slowbalization”, according to the World Economic Forum.

Recent disruptions to global value chains have prompted governments and corporations to reconsider their external dependencies. Any disruption to globalization would undoubtedly have far-reaching implications for the shipping industry.

While there's debate about the potential for more regionalized trade regimes, the current global trade model, responsible for over 60% of Europe's trade remaining in Europe and more than 50% of Asia's trade staying within Asia, appears robust. Even if these percentages increase slightly, global access to metals and rare earth minerals will remain essential to meet regional demands for renewable energy generation. Therefore, shipping will always have a role to play.

Taking a positive view, the events of recent years have not only raised public awareness about the global supply chain's vulnerabilities but also showcased its resilience. In this context, diversifying trade and transitioning to a more regional model should be seen as an opportunity and, importantly, a potential reality for the industry to plan for and adapt to.

All these factors point to the need for the shipping industry to navigate a more volatile and uncertain landscape in the near future. Preparing proactively and adapting to these changes is essential to meet evolving customer demands, no matter how transformed they may be.

At Stena Bulk, we've embraced a progressive approach in recent years, making strategic decisions for our fleet in response to changing market dynamics. Our willingness to explore alternative marine fuels like methanol through our joint venture with Proman and trial carbon capture and storage to address sustainability challenges reflects our pragmatic approach to the future.

Also of note are our efforts to closely monitor biofuel development, for example. Biofuels are an archetypal example of the challenges associated with scaling alternative fuels within shipping. Historically, the collective belief was that the main challenge of biofuels would be sourcing enough sustainable feedstock. However, indications today are that the major hurdle for widespread biofuel adoption lies not in feedstock availability but in legislative barriers hindering the positive development of the fuel. This is the sort of challenge that all shipowners, Stena Bulk included, will have to navigate. We are trying to navigate it with a mindset of curiosity and with a different perspective than we may have employed until recently.

More broadly, this speaks to the core challenge of future fuels.  Many shipowners, including us, hesitate to order new vessels unless longer contracts exist. The uncertainty surrounding future fuels adds complexity to decision-making processes. Despite these challenges, we are committed to understanding the way forward, leveraging our resources, and embracing a proactive approach to overcome obstacles in pursuing a range of alternative solutions. 

As we have established, there is no stronger incentive to do this than investing in the safety and sustainability of tanker shipping as a flexible means to prepare for the future. By doing so, we will forge a resilient tanker shipping sector capable of adeptly navigating and adapting to any challenges that come its way, whether they involve shifts in cargo demands, changes in fuel preferences, technological advancements – or the as-yet unforeseen twists and turns of history.

Erik Hänell is CEO and President of Stena Bulk.