Navigating decarbonisation – contractual considerations
With mounting global efforts to combat climate change, the shipping and offshore sectors are subject to ever-increasing scrutiny and regulatory intervention. Reed Smith shipping partner Nick Austin and associate Eleni Pilaviou highlight the significant challenges of decarbonisation for shipowners and operators. To meet IMO’s target of reducing carbon emissions by at least 50 percent by 2050, the Energy Efficiency Existing Ship index (‘EEXI’, which effectively measures emissions per cargo ton mile) and the Carbon Intensity Indicator (‘CII’, a rating from A to E for operational carbon intensity) will need to be regularly calculated and verified to monitor the performance and energy efficiency of virtually all vessels from January 2023.
Tankers vs bulkers: two sides of the same coin?
Which is the existing pattern in the relationship between tankers and dry bulk carriers? In its latest weekly report, shipbroker Allied Shipbroking noted that “the extent to which the dry bulk and tanker markets are correlated has always been a topic of hot dispute and significant interest in the market, with mixed feelings and contrasting views expressed by many portfolio managers and shipping equity analysts. With some sort of certainty, we can argue that the relationship between these markets is complicated and constantly shifting, showing large variations across different market conditions and regimes. At the same time though, it can’t be disputed that at times we can detect partially correlated activity, which can make further analysis, regarding true performance levels and risk parity metrics, even more complicated”.
Containerships can cut emissions by 14pc through just in time arrivals
Containerships can reduce fuel consumption and resulting carbon dioxide emissions by 14 percent on a per voyage, a new study has found. The study, commissioned by the IMO-Norway GreenVoyage2050’s Global Industry Alliance to Support Low Carbon Shipping (Low Carbon GIA), is centered on Just In Time (JIT) arrivals. (JIT) arrivals allows ships to optimise speed during their voyage to arrive in port when berth, fairway and nautical services are available. The study, released today, shows that containerships can reduce fuel consumption and resulting carbon dioxide emissions by 14 percent on a per voyage basis using JIT arrival.
Newbuilding orders pick up
Ship owners appear to have returned to the newbuilding market, with many deals being reported last week. In its latest weekly report, shipbroker Allied Shipbroking said that “the newbuilding market managed to make a noticeable rebound this week with several transactions coming to light. The overall upward trajectories of late in freight rates for the Tanker, Dry Bulker and Container sectors seem to have rejuvenated the levels of buying appetite being noted in the market right now. Adding to that, – and as seen in the table below – the vivid tone noted in the market as of late could also be due in part to the lifting of the Shanghai lockdown measures which resulted in the re-opening of operations for many major shipyards.
Slow supply growth to support dry bulk market as risks to demand mount
The Baltic Exchange Dry Index (BDI) increased from 1,374 to 5,650 between early January and early October 2021, only to fall back to 1,302 by late January 2022. Since then, the market has enjoyed increased support as Brazilian exports recovered from heavy rains, and Indonesia’s coal export ban was lifted. By end May 2022, the BDI was back at 2,933, up 337 points on the same time last year. A drop-off in grain shipments following the closure of Ukrainian ports and a low level of shipments into China has been a drain on demand, whereas a renewed interest in coal in the European Union has provided new support. Congestion has remained an issue and so far this year, more ships have consistently been stuck for longer than in 2021. This naturally adds inefficiency to the supply chain and reduces effective supply, thereby tightening the supply/demand balance in favour of owners and operators.
Posidonia then and now: a look into the Greek fleet
To celebrate the much awaited return of Posidonia after 4 years, we take a look at how the Greek fleet has developed since the last event in 2018, using VesselsValue data. From 2018 to 2022, the value of the Greek owned fleet increased by 92 percent. This is a considerable increase considering the fleet only grew by 474 vessels (11 percent). The Bulker, Container and LNG fleets grew the most significantly, with Greek owners investing in the rapidly rising Bulker and Container markets, and ships that can carry greener cargo such as LNG. LNG fuel is a clean method of generating energy, and with a healthy infrastructure underpinning it, provides a robust shorter term method of reducing our carbon output in anticipation of green energy sources becoming more reliable and readily available in the future.
Shippers fear carbon tax will hike freight costs still higher
Such is the serious fear of the global business organisation representing cargo owners which export and import across international supply chains, the Global Shippers Forum.
Following the decade-long efforts of the International Maritime Organisation (IMO) to gain agreement on the so-called IMO 2023, a set of energy efficiency measures for existing ships, which final take effect next year, its MEPC will now discuss a further proposal put forward by the shipping industry to introduce a Carbon Tax on bunker fuel. This is intended to incentivise a switch to lower carbon emitting fuel options and could eventually double the current price of tradition bunker fuels. In the first instance GSF is urging regulators to make sure that the potential for shipping lines to remove older tonnage from the market, which they deem uneconomic to upgrade to progressively more demanding efficiency levels, is not used as a disguised means for capacity management resulting in higher freight rates.