Shipbroker Simpson Spence Young (SSY) predicts that less than 25 per cent of bulkers and tankers will attain compliance with the Energy Efficiency Design Index (EEDI) and Energy Efficiency Existing Ship Index (EEXI), leaving most of the fleet facing either engine power limitations (EPLs) or another form of CO2 abatement.
A new report published by the shipbroker analyses the last six months and highlights areas of particular interest in its mid-year outlook. The report looks at various drivers of the shipping markets, including the on-going impact of evolving emissions regulations.
Alastair Stevenson, director of digital analytics reports that the effectiveness of speed reductions in lowering energy consumption is clear, with the IMO’s 4th GHG study indicating gains of between 7-8 per cent. As a result, it has been anticipated that owners will choose overridable engine power limitations as a preferred cost-effective option. The EPL reduces power and hence CO2 emissions, lowering the EEXI to required levels.
Stevenson notes that those vessels complying with the EEDI/EEXI will need to be assessed by class societies, creating a substantial logistical challenge. The report states: “However, the practical operational effect of the EPL will be more limited, as operational speeds are frequently under 50 per cent MCR. SSY Digital Analysis estimate that slower steaming speeds resulting from EPLs will lead to a 1- 2 per cent fall in annual tanker and bulker fleet capacity. While this may seem limited, it is worth considering that this decline is centred on periods when faster speeds are needed – to meet a laycan, tidal change or to eligible for time charter. It is this option to speed up that the EEXI limits.”
The report also suggests that green financing has taken a hit, with capital increasingly reluctant to finance unproven technologies. This is regardless of them being classified as green. According to Nikos Stratis, director at SSY Finance, retrofit financing of open loop scrubbers was deemed green financing just over a year ago, but views have changed drastically since then.
SSY chairman Mark Richardson said: “The aim of this report is to offer a concise update on some of our key markets, looking at how the year has developed and what we might expect for the second half of 2021. The first six months of 2021 have been very much focussed on the three Cs: China, Covid and Carbon. The first is still the dominant force in shipping, the second continues to have an impact across the globe, and the third is fast becoming one of the key priorities in sustainable shipping. SSY will continue to watch the market closely and ensure we can provide the most up to date insights to our clients, underpinning our views with the latest research and data.”
Read the full report here.