IMO Has 44 Days to Land a Net-Zero Deal as Alternative-Fuel Orders Fell 47% in 2025

The Analysis

It is late October and nobody in your building is talking about the IMO. Procurement is closing the first-quarter order file. The distribution centre is carrying forty-one days of cover because the August push did not sell through the way the forecast said it would, and the finance director has written next year's gross margin plan on the assumption that freight behaves roughly the way it behaved this year. On Monday the logistics team will circulate the request for quotation for the annual ocean tender: one line for base freight, one line for bunker adjustment, one line for everything else. Every dollar of climate regulation that lands in your landed cost over the next three years has to arrive inside those three lines, and almost nobody filling the template in knows which one it arrives in.

Two things surfaced in Shanghai on 21 and 22 October. Arsenio Dominguez, Secretary-General of the IMO, put a clock on the table at the Global Maritime Forum annual meeting: forty-four days to the reconvened session on 4 December, and he would not promise the net-zero framework survives it. In the same week the newbuilding figures from DNV circulated: two hundred and seventy-five alternative-fuel-capable ships ordered worldwide in 2025 against five hundred and fifteen in 2024, a fall of forty-seven per cent; the first three quarters of 2026 already pulled three hundred and eleven back. The ICS barometer has twenty-two point seven per cent of respondents saying they have paused or slowed decarbonisation work. Green fuel sells at two to three times conventional fuel. Shippers tell BCG they will pay a three per cent premium.

Stack those five numbers and they stop being five stories. A forty-seven per cent collapse in orders is not a mood reading, it is missing steel that would otherwise have been lifting boxes in twenty twenty-eight and twenty twenty-nine. A three per cent appetite set against a fuel penalty of two to three times is not a negotiating position, it is the size of a hole somebody has to fill. And forty-four days is roughly the length of the window in which an annual ocean contract gets drafted, bid and awarded. Those are three versions of the same fact, and the importer is the party who gets to fund it.

Start with the orderbook, because it is the only one of those five numbers that is already frozen. Ordering a ship in 2025 was a bet with twenty-five years on it. That hull will still be trading in twenty forty-five under rules nobody has written. The premium for dual-fuel capability is real money, and nobody spends real money against a regulation that might not survive a vote in December. So owners waited, and waiting is what two hundred and seventy-five versus five hundred and fifteen looks like when you write it down. It is fifty-three point four per cent of the year before. It is two hundred and forty hulls short, and no amount of conference language conjures them back.

Waiting had a price, and the bill is being handed forward. Assume a mainstream newbuilding slot runs two to three years from signing to delivery. The twenty twenty-five trough therefore sets the size of the compliant fleet arriving in the twenty twenty-eight and twenty twenty-nine windows. The twenty twenty-six recovery does not rescue those windows, because those hulls land later. Annualise the first nine months at the same quarterly pace and twenty twenty-six runs to roughly four hundred and fifteen orders, still about nineteen per cent below twenty twenty-four, and the useful part of that arrives after the trough has already bitten.

Turn the missing ships into something you can picture. Assume each of those two hundred and forty hulls carries about ten thousand TEU, a round figure stated here as an assumption rather than anything taken from the DNV release, and the trough represents roughly two point four million TEU of capacity that will never be delivered into the twenty twenty-eight window. Nobody knows what share of that number is yours. Everybody will price as though all of it is theirs to lose.

There is a second reading of the recovery worth holding on to. Those three hundred and eleven are counted as alternative-fuel capable, not as alternative-fuel consuming. A dual-fuel hull can sail perfectly legally on the cheap thing, and will do so for exactly as long as green fuel costs two to three times conventional and the only premium on offer is three per cent. Capability bought today is an option the owner keeps. It is not a promise to operate the ship the way you assumed when you signed for it.

Before putting arithmetic on any of it, notice that the two headline numbers are not measured against each other. Three per cent is a share of freight spend. Two to three times is a multiple of the price of a tonne of fuel. Putting them next to each other, which every panel did last week, compares a percentage of your invoice with a ratio in somebody else's bunker tank. To make them argue properly you have to push the fuel multiple through the whole cost stack, and that means saying your assumptions out loud, which is where most of the disagreement actually sits.

Assume fuel is thirty per cent of a vessel's voyage cost on your lane, and assume voyage cost is roughly seventy per cent of the freight rate you pay, the remainder being terminal handling, inland legs and administration. Take green fuel at the midpoint, two and a half times conventional, so every unit switched carries a hundred and fifty per cent uplift on that unit. A mandate forcing a ten per cent blend lifts the carrier's cost by ten per cent of one hundred and fifty per cent of thirty per cent, which is four and a half per cent of voyage cost, which is three point one five per cent of your freight rate. Push the blend to twenty per cent and it becomes six point three. Those are the only two assumptions worth fighting about; the multiplication after them is arithmetic.

Now set it against the three per cent shippers told BCG they would pay, and solve for the interesting number: the blend share at which the carrier's cost equals what the cargo side says it will absorb. Three per cent divided by one point five, divided by nought point three, divided by nought point seven, gives nine and a half per cent. Run it at the cheap end of the fuel multiple, two times, so the uplift is a hundred per cent on each unit switched, and the crossover sits at fourteen point three per cent. At the expensive end, three times, it is seven point one per cent. The whole commercial argument between an owners' association and a shipper council over the next two years happens inside a seven to fourteen point band of blend share. If somebody quotes you certainty outside that band, ask them which assumption they moved.

Make it yours. Assume you move forty forty-foot high-cube boxes a month on Asia to north Europe, four hundred and eighty a year, at an assumed all-in rate of two thousand two hundred dollars a box. Your annual ocean spend on that lane is one million fifty-six thousand dollars. Three per cent is thirty-one thousand six hundred and eighty a year, two thousand six hundred and forty a month, which is what you have told the market you will tolerate. At a twenty per cent blend with the mid-range fuel multiple, the carrier's own arithmetic lands at six point three per cent, sixty-six thousand five hundred and twenty-eight a year. The gap between the two, thirty-four thousand eight hundred and forty-eight, does not evaporate. It relocates, and the only thing that matters to you is which line it relocates into.

Per box that is sixty-six dollars at three per cent and a hundred and thirty-eight dollars sixty cents at six point three. Assume each box carries sixty thousand dollars of goods at cost, so freight is already three point six seven per cent of that, and the distance between the two outcomes is nought point one two one percentage points of landed cost. Say that out loud in a budget meeting. The largest regulatory repricing this industry has ever attempted, argued over for a decade, is worth twelve basis points on your landed cost. If anyone suggests you reorganise your sourcing map around it, somebody in that room has confused the size of the argument with the size of the number.

Here is the part that did not make it into any of the coverage, and it is the reason any of this should interrupt your week. Compliance is not going to be sold to you as a premium; it is going to be allocated to you as a tier. A surcharge is something you can refuse. Allocation is not. Once the twenty twenty-five trough has fixed how much compliant tonnage exists in the twenty twenty-eight window, the scarce thing is not the fuel, it is a booking on a ship legally able to burn it, and whoever controls that tonnage decides which contracts it serves. Your three per cent offer is a bid in an auction that closed in twenty twenty-five, when two hundred and forty hulls were not ordered.

You can watch the mechanism start inside the invoice architecture, which is where Vivian Zhao spends her working life: a cost that cannot be collected under its own name migrates into the base rate, and the only defence is to force the two to be quoted separately at tender and tracked separately at renewal. Carriers are not being dishonest when this happens. They are doing arithmetic in the one place where nobody reads.

The twenty-two point seven per cent who told ICS they had paused tells you the split has already begun, and pausing is not a neutral act. Every owner who pauses makes the ships they already own more valuable and the ships they have yet to order more expensive, and both of those push the same way for you: they will protect their compliant hulls for the contracts that pay for them. That is not a conspiracy. It is what any operator does with an asset that cannot be replaced quickly.

When does it reach you? Not in twenty twenty-eight. It reaches you in the next six weeks. Assume a conventional tender calendar: enquiry out in late October or early November, bids back before the Christmas shutdown, rates awarded in January, effective the first of April. The forty-four day countdown ends inside the drafting window, before most bidders have finished filling the template in. Whatever the delegates decide on the fourth of December, the quotation landing in January was priced by somebody who had to decide whether to carry that risk before knowing the answer, and a risk carried into a quote gets charged at full price whether it materialises or not.

That cuts both ways, and it is worth naming the two branches plainly. If the framework passes, carriers will insert a compliance or fuel-transition clause into mid-cycle quotations and into the next tender, referenced to an index you cannot audit. If it fails, the cost does not evaporate; it reappears as caution, as dearer charter rates for the tonnage that did get ordered, and as a base rate quietly absorbing what nobody will put a name to. Ask a pricing manager in January which of those worlds they priced and you will hear that they priced both.

The version that makes a liar of this column is easy to state. If you buy spot, or your lane is served by tramp tonnage with no compliance tier, or you buy FOB with the supplier nominating the vessel, none of this structure is yours to buy and paying for access to it is money burned. Below roughly two hundred boxes a year on one lane you will not be offered an allocation tier in any case, and your best strategy is index-linked pricing with a short reset and no pretence of partnership. Above that line you are already in the auction whether or not you raise a paddle.

There is a standing temptation to answer allocation risk with inventory, and the arithmetic is unkind to it. Assume the practical cost of sitting outside the compliant tier is that peak-season bookings get unreliable enough to add ten days of effective lead-time variability. Ten days on top of an assumed forty-one days of cover takes you to fifty-one, which at forty boxes a month is thirteen point three extra boxes of goods parked somewhere in the network, about seven hundred and ninety-eight thousand dollars at sixty thousand a box. Carry that at an assumed ten per cent annual cost and you are paying seventy-nine thousand eight hundred a year to insure against a thirty-four thousand eight hundred gap. Buying the tier is less than half the price of stocking around it.

Payment terms do not rescue it either. Assume your weighted cost of capital is ten per cent and you are being asked to accept net thirty instead of net sixty on the same million and fifty-six thousand of freight. Thirty days of float at ten per cent is worth about eight thousand six hundred and eighty dollars a year. Real money in procurement terms, immaterial against a thirty-four thousand gap, and nowhere near what you lose by sitting in the wrong tier in a tight quarter.

Which way does the leverage lean? In the spot book it leans to the carrier for the next eighteen months, because the trough is behind you and nothing can be delivered into it. In the annual tender it leans further than usual towards whoever will commit term, because a lender financing an expensive dual-fuel hull will pay up for a three-year volume commitment from a named counterparty far more readily than for steel nobody has contracted to fill. That asymmetry is the exploitable part, and it holds in both outcomes of the December vote.

So this is the contract I would put on the table if the desk were mine, worked out against the same three numbers. Quote base freight and every adjustment separately, each tied to a named index, with the conversion arithmetic attached as an annex rather than described in prose. That one clause is worth more than any discount on the table, because it converts an argument you cannot win into an audit you can actually run.

Then buy the tier with volume rather than promising sentiment. Take sixty per cent of the lane into a twenty-four month commitment at base plus a named compliance line capped at three per cent of base, and leave forty per cent index-linked so you keep a live read on where the market really is. Above the cap, share the excess fifty-fifty. A cap nobody can price is decoration; a cap with a trigger and a divisor is a term.

Give yourself a collar while you are there. A quarterly reset inside a band of fifteen per cent either side of the reference index stops either side harvesting a month of panic, and it keeps the renewal conversation annual rather than perpetual. Insist on the right to walk without penalty if a pass-through clause is invoked above the cap, because that is the one condition under which the structure stops making sense for you.

If you route through a forwarder rather than buying direct, the same three questions get asked one layer above you, and you want to be in the room. Consolidators aggregate exactly the bidding power a forty-box shipper does not have alone, and they will be offered the allocation tier before you are. Ask them in writing which tier they intend to buy on your behalf, and get the answer before the tender closes rather than after the first rollover.

Some of you closed the twenty twenty-seven rates in September, before any of this was on the table. If that is you, the lever is the same but the opening moves are different: ask for a mid-term review clause triggered by the fourth of December rather than by a date you pick yourself, get the compliance line named now even if it sits at zero today, and accept that the January conversation buys you twenty twenty-eight rather than next year.

The internal piece matters as much as any clause. If your twenty twenty-seven objective was written as freight spend flat in absolute dollars, rewrite it now, before the tender closes, as landed cost per unit shipped with a named compliance assumption sitting behind it. Otherwise you will spend the whole of next spring explaining a number you were never going to hit, and the cut will fall in the one place that protects you, which is the volume commitment that bought you the tier.

Forty-four days is not long enough to rebuild an orderbook and it is more than long enough to sign a bad contract. Three hundred and eleven alternative-fuel orders in nine months of twenty twenty-six says the owners have finished waiting; twenty-two point seven per cent paused says they have not finished arguing. The job in front of you is not guessing which of those wins on the fourth of December. It is making sure the contract you sign in January is priced sensibly either way.

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— By Grace Yang