- The average age of the ships has been more than two years since 2017
- New emissions rules may force older ships to run slower
- One-fifth of ships equipped with energy-saving devices
- New ships and alternative fuels are the long-term solution
LONDON (Reuters) – If shipping is the beating heart of global trade, its pulse is about to get slower.
Faced with uncertainty about what fuels should be used in the long term to reduce greenhouse gas emissions, many shipping companies are sticking with older fleets, but older ships may soon have to start sailing slower to comply with new environmental rules.
Starting next year, the International Maritime Organization (IMO) is asking all ships to calculate their annual carbon intensity based on a ship’s emissions for the goods they carry — and show that it’s coming down gradually.
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While older ships can be retrofitted with emissions-reducing devices, analysts say a faster solution is to be slower, with a 10% reduction in cruising speeds, reducing fuel use by nearly 30%, according to marine sector lender Danish Ship Finance.
“They are basically being asked to either improve the ship or slow it down,” said Jan Dileman, president of Cargill Ocean Transportation, the freight division of commodities trader Cargill, which charters more than 600 ships to move food and energy products around. the scientist.
Supply chains are already strained by increased demand as economies recover from lockdowns, pandemic disruptions at ports and a shortage of new ships. If older ships move to the slow lane as well, shipping capacity could take another hit at a time when record freight rates are driving up inflation. Read more
Currently, only about 5% of the global fleet can operate on less polluting alternatives to fuel oil, although more than 40% of new shipping orders will have that option, according to data from shipping analytics firm Clarksons Research.
But new orders aren’t coming fast enough to stem the trend of an aging fleet across all three main types of cargo ships: tankers, container ships and bulk carriers, data provided by Clarksons Research to Reuters shows.
The average age of bulk carriers, which carry bulk cargo such as grain and coal, jumped to 11.4 years by June 2022 from 8.7 five years earlier. According to the data, the average age of container ships is now 14.1 years, up from 11.6 years, while the average age for tankers is 12 years, up from 10.3 in 2017.
“Some ship owners prefer to buy used vessels due to the uncertainty about future fuels,” said Stephen Gordon, managing director at Clarksons Research.
Orders for new container ships jumped to a record high in 2021 and are still doing well this year, but with appetite for new tankers and bulk carriers so much less, the current order book across all three types of ships remains flat. About 10% of the fleet, down from more than 50% in 2008.
Shipping companies are responsible for about 2.5% of the world’s carbon emissions and are under increasing pressure to reduce air and sea pollution.
Industry emissions rose last year, underscoring the scale of the challenge in meeting the IMO’s goal of halving emissions from 2008 levels by 2050. The organization now faces calls to move forward and commit to net zero by 2050.
Some companies are testing and ordering ships that use alternative fuels such as methanol. Others are developing ships that can be modified for fuels other than petroleum, such as hydrogen or ammonia. There’s even a return of the winds with huge, high-tech sails being tested by companies like Cargill and Berge Bulk. Read more
But many potential low-carbon technologies are still in the early stages of development with limited commercial application, meaning the majority of new orders remain for ships powered by fuel oil and other fossil fuels.
Of the vessels ordered, more than a third, or 741, are designated to use liquefied natural gas (LNG), 24 can be powered by methanol and six by hydrogen. Clarkson’s data shows that another 180 have some form of hybrid propulsion using batteries.
Many shipping companies are hedging their bets primarily because extending the life of ships is cheaper and less risky than new construction. They also gain breathing space while waiting for winning new technologies to become mainstream.
“We have a clash between an industry with a very long-term investment orientation and a very rapid pace of change,” said John Hatley, general manager of North America market innovation at Finnish marine technology company Wartsila (WRT1V.HE).
Cargill says it does not yet expect to have many new ships in its fleet, and is instead installing and prolonging energy-saving devices for older ships, while there remains uncertainty about future technology.
They’re not alone, with more than a fifth of the global charging capacity fitted with such devices, according to Clarksons.
Devices include Flettner rotors, tail rotating cylinders that act like a sail and allow ships to roll back when it’s windy, or air lubrication systems that save fuel by covering the hull with tiny bubbles to reduce friction with seawater.
While energy-efficient devices go a long way in tackling emissions, eventually newer ships are your best bet, said Peter Sand, an analyst at shipping and air freight data company Xeneta.
“The next generation of fuel oil vessels will be more carbon-efficient, and they will be able to transport the same amount of cargo emitting only half the emissions they were producing over a decade ago,” he said.
Shipping companies are set to come under increasing pressure to comply with targets set by the International Maritime Organization, which will rate ships’ energy efficiency on an A to E scale, as the ratings will have an indirect impact when it comes to financing and insurance.
In 2019, a group of banks agreed to consider efforts to cut carbon emissions when lending to shipping companies and to develop a global framework known as the Poseidon Principles.
The Poseidon Principles website shows that 28 banks, including BNP Paribas (BNPP.PA), Citi, Danske Bank (DANSKE.CO), Societe Generale (SOGN.PA) and Standard Chartered (STAN.L), have committed to coherence. With IMO policies when evaluating shipping portfolios on environmental grounds.
“Lending decisions on used vessels will become problematic for older tonnage,” said Michael Parker, president of global shipping, logistics and marine business Citigroup, adding that environmental factors will be taken into account when lenders decide whether to refinance the vessels. .
“Used vessels will continue to receive financing, provided the owner is doing the right things about keeping that vessel as environmentally efficient as possible,” he said.
One of the early adopters of the new technology is shipping giant AP Moller-Maersk. It has ordered 12 ships that can operate with green methanol produced from sources such as biomass, as well as fuel oil where there is not enough low carbon fuel available.
The Danish company does not intend to use LNG as it is still a fossil fuel and prefers to switch directly to a low-carbon alternative.
Meanwhile, Wartsila is releasing an ammonia-fueled engine next year, which it says is generating huge customer interest, as well as a hydrogen engine in 2025.
Shipowners face a lot of uncertainty about how to “future-proof” their fleets and avoid regretting investment decisions now in a couple of years, said Hatley of Wärtsilä.
“They’d rather wait maybe for the entire 20-year life of the ship, but that’s a lot more ambiguous now because of the pace of change.”
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(Reporting by Sarah McFarlane). Editing by Veronica Brown and David Clarke
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