- The average age of ships has exceeded two years since 2017
- New emissions rules could force older ships to go slower
- One fifth of ships equipped with energy saving devices
- New ships and alternative fuels long term solutions
If shipping is the beating heart of global trade, its pulse is about to slow.
Faced with uncertainty about which fuel to use in the long term to cut greenhouse gas emissions, many shipping firms are sticking with aging fleets, but older ships will soon be able to comply with new environmental regulations. Might have to start sailing at a slow pace, reports Business News.
Strained supply chains
From the following year, the International Maritime Organization (IMO) required all ships to calculate their annual carbon intensity based on the emissions of a vessel against the emissions of cargo – and show that it is increasing progressively. coming down.
While older ships can be retrofitted with equipment for lower emissions, analysts say the fastest fix is a 10% drop in slow speed, with almost a 10% drop in fuel use, according to marine sector lender Danish Ship Finance. With a drop of 30%.
“Basically they are being asked to either improve or slow down the ship, which is mainly ferrying food and energy products,” said Jan Dielemann, president of Cargill Ocean Transportation, the freight division of commodity trading house Cargill. leases over 600 ships for World.
Supply chains are already strained due to increased demand as economies rebound from lockdowns, pandemic disruptions at ports and shortages of new ships. Shipping capacity could take another hit if older ships also move into the slow lane, at a time when record freight rates are driving inflation. read more
Currently, about 5% of the world’s fleet can run on less polluting fuel oil options, according to data from shipping analytics firm Clarksons Research, even though more than 40% of new ship orders will have this option.
But new orders are not coming in fast enough to halt the aging fleet trend in all three main types of cargo ships: tankers, container ships and bulk carriers, data provided to Reuters by Clarkson Research shows.
The average age of bulk carriers carrying loose goods such as grain and coal increased to 11.4 years as of June 2022, from 8.7 five years ago. According to the data, the average age of container ships is now 14.1 years, up from 11.6, while the average age of tankers was 12 years, up from 10.3 in 2017.
“Uncertainties about future fueling have led some shipowners to buy older ships,” said Stephen Gordon, managing director of Clarksons Research.
Tall order
Orders for new container ships hit a record high in 2021 and are still coming in at a healthy clip this year, but with little appetite for new tankers and bulk carriers, the current order book across all three types of vessels stands only in the fleet. of about 10%, down from 50% in 2008.
Shipping companies are responsible for about 2.5% of the world’s carbon emissions and are coming under increasing pressure to reduce both air and marine pollution.
Industry emissions increased last year, underscoring the scale of the challenge in meeting the IMO’s goal of halving emissions by 2050 from 2008 levels. The organization is now faced with a commitment to go further and be net zero by 2050.
Some companies are testing and ordering ships using alternative fuels such as methanol. Others are developing vessels that can be retrofitted to fuels beyond oil, such as hydrogen or ammonia. There has also been a return to the air with giant, high-tech sails being tested by companies like Cargill and Burge Bulk. read more
But many potential low-carbon technologies are in the early stages of development with limited commercial application, meaning most new orders are still for ships powered by fuel oil and other fossil fuels.
Of the ships on order, more than a third, or 741, are scheduled to use liquefied natural gas (LNG), 24 to be powered by methanol and six by hydrogen. Another 180 have some form of hybrid propulsion using batteries, Clarkson data shows.
Many shipping firms are hedging their bets mainly because it is cheaper to prolong the life span of ships and has less risk than building new ones. They also get breathing space while waiting for winning new technologies to become mainstream.
“We have a confrontation between an industry that is too long-term investment-oriented and a very rapid pace of change,” said John Hatley, general manager of Market Innovation in North America at Finnish marine technology company Wartsila (WRT1V.HE).
Cargill says it doesn’t expect many new-built ships in its fleet just yet, but to fit energy-saving devices into older ships and increase their use, while there is still uncertainty about the technology of the future.
They are not alone, according to Clarkson, with more than a fifth of global shipping capacity equipped with such devices.
Devices include Flettner rotors, tail spinning cylinders that act like a sail and allow ships to throttle back when there is wind, or air lubrication systems that propel the hull through tiny bubbles to reduce friction with seawater. Save fuel by covering.
While energy-saving devices go a long way toward tackling emissions, ultimately, newer ships are the better bet, said Peter Sand, analyst at shipping and air cargo data firm Zeneta.
“The next generation of fuel oil ships will be much more carbon efficient, capable of transporting the same amount of cargo emitting only half of what they did a decade ago,” he said.
Poseidon Principle
Shipping firms are set to come under increasing pressure to adhere to targets set by the IMO, which will rate the energy efficiency of ships on a scale from A to E, as the ratings will have a knock-on effect on finances and arrivals. Insurance.
In 2019, a group of banks agreed to consider efforts to cut carbon emissions when lending to shipping companies and established 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 consistently Committed to stay. With IMO policies while assessing shipping portfolio based on environment.
“The decision to lend on older vessels at higher tonnage is going to be an issue,” said Michael Parker, president of Citigroup’s global shipping, logistics and offshore business, adding that environmental factors will be taken into account when lenders make the decision. whether to refinance the ships or not.
“Second-hand ships will continue to receive financing, provided that the owner is doing the right thing about keeping that ship as environmentally efficient as possible,” he said.
One early adopter of the new technology is shipping giant AP Moller-Maersk. It has ordered 12 ships that can run on green methanol produced from sources such as biomass, as well as fuel oil because there is not yet enough low-carbon fuel available.
The Danish company does not intend to use LNG as it is still a fossil fuel and would prefer to move directly to a lower carbon alternative.
Meanwhile, Wartsila is launching an ammonia-fueled engine next year, which it says is generating a lot of interest from customers, as well as a hydrogen engine in 2025.
Wartsila’s Hatley said shipowners face a lot of uncertainty about how to “future-proof” their fleet and avoid regretting the investment decision they made within a few years now.
“They’ll probably wait 20 years for the entire life of the ship, but that’s even more uncertain now because of the speed of change.”
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Source: Business News
