Bulkers Slowing Down to Comply With Emission Rules

Sailing speeds of older ships in particular have slowed down considerably, as a result of the latest emission reduction rules. In its latest weekly report, shipbroker Intermodal said that “the integration of the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations, in conjunction with the Emissions Trading System, appears to have indirectly limited the availability of shipping tonnage by influencing vessel speeds. Through the analysis of vessel tracking data, it has been observed that the average speed of bulk carriers has decreased to a current low of 10.86 knots. Notably, non-eco vessels have experienced a more significant impact due to these new regulations, aimed at reducing their carbon emissions. In this report, we will conduct a comprehensive analysis of the Supramax sector. Specifically, the trend illustrated in the accompanying chart shows a decline in the speed of both eco and non-eco vessels post the mid-2021 peak, with both categories reaching their lowest recorded speeds, albeit with occasional spikes correlating with increases in the S10TC”.

According to Intermodal’s Head of Research Department, Mr. Yiannis Parganas, “it is particularly noteworthy that this trend did not reverse post-mid-2023, despite a rise in earnings; average speeds continued to decline, although eco vessels exhibited relative stability in their speeds during the latter half of 2023, unlike their non-eco counterparts. Specifically, in 2023, the correlation between S10TC and the speed of eco and non-eco vessels was negative, marking the first instance where a positive correlation was absent for a period exceeding two months in a year.

The negative correlation was especially pronounced among non-eco vessels, which registered a correlation of -0.30 during 2023, with average speeds declining from mid-year despite an increase in earnings, remaining under the 11 knots threshold. Conversely, while eco vessels also demonstrated a negative correlation (albeit marginally below zero), they were more stabilized at an average speed of 11.15 knots in the latter half of 2023 as earnings improved”.

Intermodal’s analyst added that “moreover, the disparity between the speeds of eco and non-eco vessels now exceeds the five-year average during a period that typically sees the smallest yearly difference, coinciding with a traditionally subdued market in Q1 when vessels operate at normal efficiency. The new regulations have restricted non-eco vessels’ ability to accelerate during robust freight markets, unlike eco vessels, thereby widening the profit margin for modern vessels. This is further exemplified in our second graph, which highlights the premium of a 5-year-old Ultramax vessel over a 15-year-old Supramax, currently at a record high of $18.0 million, based on an average price reflective of shipyard builds. The regulations (EEXI/CII and ETS) provide owners of modern vessels greater operational flexibility at higher speeds in stronger freight market conditions, unlike owners of older vessels who are compelled to adopt a more conservative strategy. This approach, combined with the scarcity of offered modern vessels in the secondhand market contributes to the premium observed. Overall, the operation of both eco and non-eco vessels at their lowest recorded speed down by 7.8% and 7.3% respectively from their five-year highs, and 4% and 4.4% from their five-year averages – not only plays a pivotal role in fostering a favorable freight market environment but is also likely to continue influencing interest in the SnP market”, Parganas concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide