- Tightened environmental regulations are driving a shift toward younger, efficient vessels in the dry bulk market.
- Increasing freight costs in Europe are expected as EU regulations intensify and demand for low-carbon vessels rises.
- The charter market is likely to see greater segmentation, with eco-friendly ships at a premium.
The dry bulk freight market faces increasing fragmentation as stricter decarbonization rules and rising capital expenditures reshape supply trends. According to Drewry, varying impacts on vessel utilization and speed by age group signal a preference for newer, efficient ships—a trend likely to strengthen with new regulations in 2025.
Key Supply Shifts Driven by Environmental Policies
Drewry’s AIS data highlights notable shifts in vessel speed and utilization across age categories due to regulatory measures.
While younger vessels typically see higher utilization, contrasting patterns emerged in 2024, with older ships seeing reduced activity.
Vessel Speed Trends
Average ballast speed across vessel types has declined since 2019, with a steeper drop after the 2023 CII and EEXI regulations took effect, promoting slow steaming.
However, speed rose slightly for Capesize vessels in 2024 (January-September), especially for those under ten years, while older ships slowed.
Higher Premiums for Younger, Eco-Engine Vessels
A growing preference for younger vessels is reflected in higher second-hand premiums for newer ships.
Drewry’s analysis found that five-year-old eco-engine vessels command significantly higher premiums than their 20-year-old counterparts.
Widening Rate Differentials
The differential in one-year time charter (TC) rates for eco vs. non-eco vessels has expanded, averaging $2,000 in 2023-24 compared to $1,500 in 2021-22.
IMO Regulations Driving Market Adaptations
The IMO’s emission reduction regulations are pushing vessel owners to adopt strategies such as:
- Speed reduction,
- Energy-saving technologies,
- Low-/zero-carbon fuels,
- Onboard carbon capture.
Fleet Renewal Becomes Imperative
Shipping companies managing multiple vessels are increasingly focused on reducing fleet age.
Newer vessels equipped with efficient engines consume less fuel, aligning with long-term sustainability goals.
Increased Freight Market Segmentation Expected
Upcoming regional regulations, including the EU ETS, will likely push shipowners to take further compliance measures, fragmenting the market as eco-friendly vessels become more valuable.
Drewry’s AIS data showed an increase in younger vessels calling at European ports after EU ETS implementation. In early 2024, no vessels aged 0-5 years were absent from European ports, reflecting a trend toward more efficient fleets.
FuelEU Maritime Regulation to Increase Low-Carbon Fuel Use
Under the EU’s Fit-for-55 package, FuelEU Maritime (FEM) aims to drive low-/zero-carbon fuel adoption starting 1 January 2025, accelerating demand for fuel-efficient vessels.
With the increasing demand for efficient fleets and a limited dry bulk orderbook, the charter market shows short-term upside potential. The EU ETS and FEM regulations will likely drive higher freight costs in Europe and fragment the market further as eco-friendly vessels dominate.
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Source: Drewry
