The future of commodity trading

September 11, 2020

A coming carbon price on shipping will change the way we trade commodities. Whether politicians implement carbon pricing globally or locally, or responsible companies implement it internally, insight into your freight emissions is crucial to prepare for this change.

As organisations around the world collaborate to achieve green and sustainable growth, very few question the arrival of carbon pricing programmes for shipping. The EU Parliament vote to include shipping in the EU Emissions Trading System (ETS) from 2022 has accelerated global efforts to put a price on emissions from shipping.

Today’s cost for emitting one tonne of CO2 into the air is quoted at approx. USD 30 in the EU Emissions Trading System, the world’s first and still biggest carbon market. Most companies budget for a strong increase in this cost over the next years.

What if the price doubles - or triples? Can you afford to be unprepared?

If one were to add emission cost on to today's freight cost, this would increase the freight rates of various tanker types by 4-13 % at current rates.

The commodity trader controls most of the emissions drivers in shipping. Making carbon emissions a decisive factor when chartering a ship, choosing destination and making operational choices could effectively reduce major emissions and the cost related to them. Siglar provides neutral and comparable carbon estimates prior to the traders decision-making. Knowing the carbon emissions impact of your different options allows you to reduce your emissions and your exposure.

In the factbox below we show voyage emissions, and estimate the reduction potential of two decisions that drive emissions; speed and ship. The equivalent cost is based on the EU ETS' price.

CEO and co-founder of Siglar, Sigmund Kyvik, is a former global lead trader at Statoil (now Equinor) who knows the importance of staying on top of the game.

“Understanding your freight emissions exposure and learning how to optimize these emissions will decide your success in the future commodity trade”, Kyvik says. “It is crucial to be aware of the CO2 emissions you control with your trading decisions, and to understand how it can affect your exposure.”

Siglar provides the carbon insight you need to prepare for the future of commodity trading.

While waiting for politicians to agree on common systems for carbon pricing, responsible companies lead the way. A rising number of both end-users, manufacturers and charterers are setting emissions reduction targets of their own. Searching for new ways to cut emissions effectively, many companies now look to their value chain emissions. In the commodity markets, chartering and trading represent a part of the value chain with significant reduction possibilities. Ambitious companies have already set emissions limits to their trading operations, and some advocate that reduced emissions will be a future “licence to operate” for trading.  

Facts