VIEWPOINT: Unforeseen Consequences: Preparing the Industry for Ongoing Disruption

by Dylan Keil, CEO and co-founder of Bearing AI
Tuesday June 18, 2024

Maritime shipping is the lifeblood of the global economy. That is never more evident than when tragedy or conflict flares along a vital supply line.

Today, Houthi attacks near the Suez Canal are disrupting crucial trade routes, forcing shipping companies to reroute their vessels for the safety of their crews. The collapse of the Baltimore Bridge has temporarily taken a major North American port out of operation, severely impacting the region's trade and placing unexpected pressure on neighboring ports.

There is no question that maritime is critical to the operation of our modern world. However, shipping routes are continuously impacted by geopolitical conflict, growing climate change concerns, weather emergencies, market demands, large-scale disruptions, and more. We cannot change the world's unpredictability, but we can work to build a more resilient shipping industry.

Impacts on Emissions and Supply Chain

Disruptions like the Houthi Attacks in the Suez Canal have significant implications for the supply chain. In 2022 alone, over 22,000 vessels traversed this strategic chokepoint. To avoid this dangerous territory, each of these vessels needs to route around the Horn of Africa, adding an estimated 8 ½ days to each leg of the journey. A single mega-container vessel consuming approximately 150 tons of fuel per day means an increase in fuel usage of roughly 1,300 tons per voyage around the Cape of Good Hope.

With approximately 28 container services journeying between Asia and Europe weekly, we're looking at approximately 56 additional detours every week — 28 to Europe and another 28 returning to Asia. This inflates fuel usage by a staggering 72,800 tons per week, producing 229,300 tons of CO2 emissions. As the Suez Conflict continues, the environmental impact will grow with it.

These statistics are based on average global trade traffic. However, a recent report from Sea-Intelligence indicates that the longer route around the Cape of Good Hope has substantially increased demand. Concerned about receiving their cargo on time for the high season, customers are booking space on ships much earlier, resulting in a 66% spike in demand for empty TEU/miles space since 2019. This surge in demand has driven up freight prices and further contributed to the trade imbalance.

In scenarios like the Baltimore Bridge collapse, diverted container ships and increased idle times at congested ports are only part of the issue. Diverted on-land shipping will significantly increase shipping time, costs, and carbon emissions.

"Aside from the obvious tragedy, this incident will have significant and long-lasting impacts on the region," American Trucking Association spokesperson Jessica Gail said.

Gail noted that 1.3 million trucks cross the bridge annually — 3,600 a day. She said that trucks carrying hazardous materials will now have to make 30 miles of detours around Baltimore because they are prohibited from using the city's tunnels. This will add to delays, fuel costs, and increased CO2 emissions — at a time when the shipping industry is racing to hit net-zero targets.

In recent years, new regulations such as the Carbon Intensity Indicator (CII) and the European Union Emissions Trading System (EU ETS) have aimed to reduce ships' greenhouse gas emissions and promote sustainable shipping industry practices.

These regulations have become stricter as we build toward a net-zero carbon industry. Still, disruptions like the Houthi Attacks, Baltimore Bridge collapse, and others seriously threaten the industry's likelihood of meeting these challenging targets.

Is the Industry Equipped to Handle Ongoing Disruptions?

The current global trade landscape is characterized by geographically concentrated production, which leads to cost efficiencies and lower-priced goods. However, supply chain structures focused on efficiency — often with routes along geopolitical fault lines — are demonstrably more vulnerable to geopolitical conflicts, trade barriers, and interruptions in production.

Efficient routes such as the Suez Canal are essential for shipping companies to provide the most effective and timely service while minimizing fuel usage and carbon emissions. However, when all shipping lines are forced to take a much longer route to avoid danger, how can we guarantee that strict environmental targets can still be met?

Through the latest innovations in machine learning and route optimization, solutions powered by Artificial Intelligence can help empower better decision-making when navigating the unexpected. By forecasting the impacts of rerouting on operation and environmental metrics, ship operators can make informed, data-driven decisions to cut through much of the uncertainty of any supply chain disruption.

Bearing AI has built an AI-powered decision engine trained on large amounts of real-world vessel data.  Bearing's suite of tools can forecast emissions, FOC, cost impacts, global fleet dynamics, and more with industry-leading accuracy. The decision engine also enables companies to simulate a wide range of operating and commercial decisions and see the expected outcome before taking action.

We may not be able to control the unexpected, but we can strengthen our supply chain and safeguard our efforts to comply with environmental standards. By leveraging data and insights powered by AI, we can assist the shipping industry in better preparing for unforeseen events.

Predicting the (Previously) Unpredictable

One of Bearing AI's most significant advantages is its ability to optimize individual vessels' efficiency and overall fleet deployment. It's not just about responding to disruptions when they occur; it's about simulating the future to make proactive decisions. Bearing AI forecasts the projected impact of service disruptions or reroutes with industry-leading accuracy.

By leveraging this cutting-edge technology, the maritime industry can accurately gauge the full impact of its core operational and commercial decisions. This ensures regulatory compliance and operational efficiency and aligns with global sustainability goals, promoting a safer, greener, and more resilient maritime industry.

The question isn't if these consequences will occur but when and how severe they will be. Bearing AI allows the maritime industry to see the full impact of its core operational and commercial decisions and anticipate what comes next. It marks a revolutionary leap from traditional Excel spreadsheets to cutting-edge AI technology — a shift from guesswork to data-driven decision-making.

As the world becomes more uncertain and volatile, the maritime shipping industry will face increasing disruptions and challenges. Handling these disruptions will require new tools and a new way of doing business. Bearing believes the future of shipping is data-driven. With Bearing AI, we're not just adapting to the future of shipping — we're shaping it.