Diamonds on the sea
Reimagining the Carbon Footprint (and Revenue) of Global Shipping
“I’m on a boat.” - The Lonely Island, SNL
Transportation has long been a maximalist industry; Planes, pickup trucks, and today’s subject, cargo ships, have been trending larger for decades. This makes sense for the first and third of these categories; We’ll spare you our thoughts on the trend to larger trucks, which is definitely not because the owners of these vehicles are compensating for something, why do you ask?
For planes, leaps in fuselage materials and engine design can yield 15% or more per-seat fuel efficiency improvements even between aircraft theoretically in the same model family (as in the Boeing 737-800 vs 737 MAX). This has obvious and tremendous economic benefits to operators and passengers given that fuel costs represent a third or so of an airplane’s operating expenses.
Cargo ships are, in a lot of ways, the simplest of the major stuff-moving technologies to decarbonize. Size does matter. Efficiency improvements on airplanes are incremental, mostly because the physics of flight and the space restrictions of airport infrastructure lock aircraft into certain form factors. Ditto pickup and long-haul trucks, as restricted by roads, parking spaces, cargo container design, and so much more. Cargo ships are big (often 3-4 football fields long), and have enough raw square footage to layer decarbonization technologies into the same form factor, with little impact on economics.
Point-of-emission carbon capture, solar panels, vertical wind-tunnel sails that resemble smoke stacks? Ships are currently crossing the oceans using some or all of these technologies, at a net emissions savings of 10-25%. They are worthy initiatives, offering multiple angles of attack for startups, but don’t go nearly far enough.
Future of Transport
The startup we’re envisioning is a technology integrator, corporate venture lab, and ecosystem accelerant for the futures of both transportation and manufacturing. Wait, what? Allow us to propose a crazy idea.
Imagine that a big shipping company wanted to deliver the world’s greenest, most profitable cargo ship. Yes, both. Either is fairly simple to accomplish individually. Green shipping is entirely possible through the use of modern sail-powered ships, which can transport cargo on pallets rather than in the familiar lego-block containers. This is being done today, and works perfectly well, aside from the fact that the ships are small and take forever to get anywhere. Team Coral are capitalists and practicalists, and do not recommend this methodology. Profitability is similarly understood; just keep making ships that are a little bigger and a little more fuel efficient every year. But, how could you get both?
To achieve green shipping, you hire a company to layer all the technologies we mentioned previously onto the same ship. Carbon capture, batteries and solar panels for low-speed maneuvering, tubular sails, AI-based route and fuel optimization, heat recapture, etc. A specialized retrofit contractor that can synthesize, install, test and interface with regulators to get all this approved and certified is a tremendous value add to the ecosystem.
Could the shipping companies do this themselves? Perhaps, but we think it’s best done as a separate company funded from several of their corporate venture groups. It’s a heavy industry company, a think tank, a Silicon Valley startup. This is brutally difficult DNA for a shipping company to build internally. We also think it’s best if our startup (Shippi?), takes funding from multiple backers and signs exclusivity arrangements with none of them. Intellectual honesty is a critical and rare currency in an increasingly chaotic year.
Retrofitting ships and advising on the construction of new ones is a huge business and a good northstar for a fledgling company. But, we haven’t addressed the second half of our earlier directive of green + profitable shipping.
Let’s add that layer. What if we made stuff onboard? Captured carbon is a wonderful substance, and the products can be made into concrete, plasticware, running shoes, diamonds, and so much more. It mostly isn’t, because of the enormous energy requirements to create these transformations. Hey, I wonder where we could find carbon and copious waste heat….
Here’s our business model. Shippi undertakes retrofits of imminently decommissioned ships, with the aim of packing in decarbonization tech and adding automation to reduce human costs. As part of these processes, they’re also entitled to find a contractually limited amount of space to install a small factory onboard, capture waste heat for energy, and sell the resulting products at a profit. The shipping company keeps 25% of revenues in perpetuity. We would pay money for plasticware manufactured out of carbon at sea, and we’d bet a lot of others would too.
Plasticware might be the simplest starting point, but the real prize here is, of course, diamonds. High value, significant industrial applications, wildly shitty current producers, and made out of carbon and heat.
Pirate Life
This may, we admit, be an insane idea. Those are the best kind, and our intention with this piece is more as a thought experiment than something we expect to exist in the next 24 months. Shipping is a fascinating industry in that it hasn’t changed much, not really, in a century. The ships are much larger, the fuels liquid instead of coal, the speed and reliability vastly improved. But, if you brought an engineer from a coal-powered cargo ship forward and showed him one of Maersk’s modern marvels, he would know what it was and understand the basic operating principles behind it.
That’s…. a little weird. 2025 is a year of global change, and we expect shipping to be deeply affected. Tariffs, trade wars, and spiking fuel costs are bad for business. There are waves of nationalism, onshoring, and difficulty in procuring raw materials beating the shit out of the manufacturing sector worldwide, and we need to find replacements wherever possible. Most interestingly, shipping has done real work on decarbonizing the sector already, and we’d love to see the progress continue. This will require companies in the space to find new revenue streams that are distinct and uncoupled from their core business.
A good analogy; The airline industry, since inception, has either lost money or just barely broken even. This is because long periods of steady, low-margin profitability are broken up by black swan events every decade or so that wipe out all of the money from the preceding years. Rinse and repeat. Before you ask, yes, we are aware of the hugely shortsighted decisions that aviation has made vis-a-vis stock buybacks and such, but we don’t really blame them for that. As we wrote last week, the purpose of a company is to make money for shareholders and stakeholders, the trick is simply in aligning incentives.
The point is this; The pattern of disruption seen in aviation is coming for every industry that can be affected by the vagaries of global trade and fuel availability. Companies that want to become antifragile will figure out how to not lose quarters and years to these events. So, Maersk and MSC getting into competition with De Beers may be an odd concept, but it’s hugely profitable, sequesters some carbon, puts a dent in the generally horrific traditional diamond trade, and frees up enough cash to continue investing in decarbonization.
In the traditional-tech arena of software businesses, we’re currently seeing a wave of AI-first upstarts grabbing huge market share in defined verticals, and disrupting companies that are a mere dozen years old at most. Let’s get wildly creative and help the pirates come for an industry where they’re actually needed and welcome.
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