European Shipping Braces for Compliance Costs as FuelEU Maritime Takes Effect

European vessel operators are navigating a costly new regulatory landscape as the FuelEU Maritime regulation enters full force, compounding pressures from persistent Red Sea disruptions and tight capacity across global routes.

The regulation, part of the EU's Fit for 55 package, mandates a 2 per cent reduction in greenhouse gas intensity for ships calling at European ports, rising to 80 per cent by 2050. Industry executives expect emission surcharges in 2025 to nearly double compared with 2024, as shipping companies must now surrender allowances for 70 per cent of their emissions, up from 40 per cent last year.

Global container shipping rates climbed 7 per cent this week to $1,927 per 40-foot container, reversing a three-week decline. The uptick reflects continued strain on routes between Asia and Europe, where vessels remain diverted around the Cape of Good Hope following Houthi attacks that began in late 2023.

Despite a January ceasefire between Israel and Hamas, Houthi forces have maintained their maritime campaign. Houthi leader Abdul-Malik al-Houthi stated that targeting Israeli maritime routes will continue until the aggression against Gaza stops and the unjust siege is completely lifted. The disruption has added 10 to 14 days to transit times and increased voyage costs by approximately $1 million per journey.

Meanwhile, dry bulk newbuilding contracting capacity has fallen 54 per cent year-over-year, signalling caution among shipowners amid regulatory uncertainty and potential overcapacity concerns. European ports are preparing for potential congestion if carriers eventually resume Red Sea transits, with experts warning that simultaneous route changes by major alliances could overwhelm port infrastructure.

The confluence of environmental compliance costs and geopolitical disruption is reshaping European maritime trade patterns, with industry participants adapting to what many consider the sector's most challenging operating environment in decades.