Shipping Giants ‘Clam Up’ As New IMO Regulations Enter Force

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The International Maritime Organization’s (IMO) latest emissions reduction measures came into force today, a regulatory move which will grant an ‘efficiency rating’ to ships, similar to those used for buildings and household appliances.

The new rules, although enacted, will only become mandatory from 1 January, are expected to drive older ships to the scrapyard, while others will need to reduce speed to comply.

So next year there is an expectation that there will be an effective reduction in available capacity, offsetting newbuildings set to be delivered, reports the Loadstar.

Vessel capacity vs demand level

Various forces could be at play, with available capacity juxtaposed with the level of demand, as well as the actual size of ships scrapped all playing on the cost of shipping freight in the coming year.

Moreover, a carrier’s ability to manage capacity could also play a part, as regulators review consortia block exemptions that have allowed shipping lines to effectively manage capacity and maximise profits over the past two years.

However, not everybody is happy with the IMO’s methodology.

New regulations for existing vessels

From 1 January, shipowners will be required to perform an ‘energy efficiency existing ship index’ (EEXI) calculation on each of their vessels, with a view to granting them a carbon intensity indicator (CII). The calculation factors-in CO2 emissions per distance travelled versus cargo capacity expressed in deadweight tonnes (DWT).

While an energy efficiency design index (EEDI) has been required for newbuilds for some time, the new regulations will be the first to apply to existing vessels.

It has attracted criticism from various quarters however, decried by some as too strict and by others as too lenient. Shipping giant Maersk is among the latter, saying the CII scheme’s highest bracket, an ‘A’ rating, still allows vessels to emit carbon, leaving no regulatory incentive for shipowners to go carbon-neutral.

Maersk and 2M Alliance

And both Maersk and 2M Alliance partner MSC take issue with the CII calculation in its current iteration, which they say does not take into account the actual cargo carried, meaning a vessel running half-empty could attain the same efficiency rating as one fully laden. The measure of cargo carried, the energy efficiency operational index (EEOI), is a separate calculation.

Maersk has expressed, in position papers to IMO, that “the CII does not incentivise cargo optimisation”, while MSC yesterday said: “It would be far better to have an operational indicator that would reward more-productive ships, including based on cargo carried rather than on a theoretical value that may not correlate to transport work performed.”

MSC’s suggestion would be in the interests of owners with large vessels whose CO2 emissions profiles benefit from efficiencies of scale compared with smaller ships. But carriers also point out that the metric, as it stands, could penalise vessels trading on shorter distances or spending longer at berth.

This being the case, CII could lead to perverse incentives, such as deploying larger, fractionally-loaded vessels on feeder routes where smaller, fuller vessels would do, essentially rewarding overcapacity, they claim. Compounding the issue, the smaller ships which operate in coastal or feeder roles are generally older than modern, larger vessels.

Serious thought needs to be given

Global Marketing Systems (GMS), a buyer of scrap vessels, expects to be busy in the coming months and years, as vessels with low CII ratings are sold for demolition. But speaking with The Loadstar, Laxman Kumar, GMS technical director, cautioned: “Serious thought needs to be given as to the rate at which older vessels are phased out of the fleet, and its true benefit to emission savings, to prevent EEXI and CII leading to net-negative outcomes.”

However, within the text of the resolution, IMO has said it has agreed to consider “substantiated proposals” for CII “correction factors” in some cases, which may include the EEOI calculation for cargo carried.

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Source: The Loadstar

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