First shipping contract with freight earnings linked to carbon dioxide emission reduction

The two companies developed a mechanism whereby freight paid under the COA is linked to the carbon dioxide emissions of KCCC’s vessels, relative to an agreed baseline

KCC Chartering AS (“KCCC”), a subsidiary of Klaveness Combination Carriers ASA (“KCC”) and South32 Marketing Pte Ltd, a subsidiary of globally diversified mining and metals company South32, have agreed to include a carbon pricing mechanism in their existing contract of affreightment (“COA”), KCC said in a media release.

In the six-year COA between KCCC and South32, announced in January 2022, the parties agreed a sustainability framework targeted to reduce carbon dioxide emissions from KCC’s fleet, including fleet used for shipping South32’s caustic soda to Australia.  

As part of this framework, in 2022 KCCC and South32 jointly developed a mechanism whereby freight paid under the COA is linked to the carbon dioxide emissions of KCCC’s vessels, relative to an agreed baseline. In the agreed mechanism, implemented from 2023, KCCC will receive higher freight if actual carbon dioxide emissions are below the baseline and lower freight in the event of under-performance relative to the baseline. Additional freight paid by South32 through this agreement will be dedicated to investments in energy efficiency measures in KCCC’s fleet.

South32 Vice President Sustainability Strategy and Community Holly Buschman said: “We are pleased to reach this new industry-first agreement with Klaveness Combination Carriers ASA.

Klaveness Combination Carriers ASA (KCC) is the world leader in combination carriers, owning and operating eight CABU and eight CLEANBU combination carriers. KCC’s combination carriers are built for transportation of both wet and dry bulk cargoes, being operated in trades where the vessels efficiently combine dry and wet cargoes with minimum ballast. Through their high utilization and efficiency, the vessels emit up to 40% less CO2 per transported ton compared to standard tanker and dry bulk vessels in current and targeted combination trading patterns.

About South32
South32 is a globally diversified mining and metals company. Our purpose is to make a difference by developing natural resources, improving people’s lives now and for generations to come. We are trusted by our owners and partners to realise the potential of their resources. We produce commodities including bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese from our operations in Australia, Southern Africa and South America. With a focus on growing our base metals exposure, we also have two development options in North America and several partnerships with junior explorers around the world.