Ships age and slow as emissions rules bite
- Average age of vessels up by more than two years since 2017
- New emissions rules could force older ships to run slower
- A fifth of ships fitted with energy-saving devices
- New vessels and alternative fuels the long term solution
LONDON, July 11 (Reuters) – If shipping is the beating heart of world trade, its pulse is about to slow.
Faced with uncertainty about which fuels to use in the long term to reduce greenhouse gas emissions, many shipping companies are sticking to aging fleets, but older ships may soon have to start sailing more slowly. to comply with new environmental rules.
From next year, the International Maritime Organization (IMO) requires all ships to calculate their annual carbon intensity based on a ship’s emissions for the cargo it carries – and show that it is gradually decreasing.
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While older ships can be fitted with devices to reduce emissions, analysts say the fastest solution is simply to slow down, with a 10% drop in cruising speeds reducing fuel consumption by nearly 30% , according to shipping lender Danish Ship Finance.
“They’re basically being told to upgrade the ship or slow down,” said Jan Dieleman, president of Cargill Ocean Transportation, the freight division of commodity trading firm Cargill, which leases more than 600 vessels to transport mostly cargoes. food and energy products. the world.
Supply chains are already strained due to an increase in demand as economies rebound from shutdowns, pandemic disruptions at ports and a lack of new ships. If older ships also take the slow lane, carrying capacity could take another hit at a time when record freight rates drive up inflation. Read more
At present, only around 5% of the global fleet can operate on cleaner alternatives to fuel oil, although more than 40% of new ship orders will have this option, according to data from the shipping analytics firm. Clarksons Research.
But new orders are not coming fast enough to halt the aging fleet trend on the three main types of cargo ships: tankers, container ships and bulk carriers, according to data provided to Reuters by Clarksons Research.
The average age of bulk carriers, which carry bulk cargo such as grain and coal, had risen to 11.4 years in June 2022 from 8.7 five years ago. Container ships are now on average 14.1 years old, down from 11.6, while for tankers the average age was 12, down from 10.3 in 2017, the data showed.
“Some shipowners preferred to buy second-hand vessels due to uncertainties surrounding future fuels,” said Stephen Gordon, managing director of Clarksons Research.
Orders for new container ships hit a record high in 2021 and are still healthy this year, but as the appetite for new tankers and bulk carriers is much weaker, the current order book for all three vessel types is only about 10% of the fleet, compared to more than 50% in 2008.
Shipping companies are responsible for around 2.5% of global carbon emissions and they are under increasing pressure to reduce air and sea pollution.
Industry emissions rose last year, underscoring the scale of the challenge to meet the IMO’s goal of halving emissions by 2050 from 2008 levels. The organization is now faced with calls to go further and commit to net zero by 2050.
Some companies are testing and ordering ships using alternative fuels such as methanol. Others are developing ships that can be retrofitted for fuels other than petroleum, such as hydrogen or ammonia. There’s even a return to the wind with extensive, high-tech sails tested by companies such as Cargill and Berge Bulk. Read more
But many of the potential low-carbon technologies are in the early stages of development with limited commercial application, meaning the majority of new orders are still for ships powered by oil and other fossil fuels.
Among the ships ordered, more than a third, ie 741, are scheduled to run on liquefied natural gas (LNG), 24 can be powered by methanol and 6 by hydrogen. Another 180 have some form of hybrid propulsion using batteries, according to Clarksons data.
Many shipping companies hedge their bets primarily because extending the life of ships is cheaper and less risky than new builds. They also buy time to breathe while they wait for winning new technologies to become mainstream.
“We have a conflict between an industry that is focused on very long-term investments and a very rapid pace of change,” said John Hatley, managing director of market innovation in North America at the Finnish technology company. navy Wartsila (WRT1V.HE).
Cargill says that right now it doesn’t expect to have many new ships in its fleet, but rather to install energy-saving devices on older ships and extend their use, so that there are still uncertainties about future technology.
They are not alone, with more than a fifth of the world’s transport capacity equipped with such devices, according to Clarksons.
Devices include Flettner rotors, tail spinning cylinders that act like a sail and allow ships to slow down in windy conditions, or air lubrication systems that save fuel by covering the hull with small bubbles to reduce friction with seawater.
While power-saving devices go a long way to tackling emissions, ultimately newer ships are a better bet, said Peter Sand, analyst at shipping and cargo data firm Xeneta. air.
“The next generation of oil-fired ships will be much more carbon-efficient, they will be able to carry the same amount of cargo while emitting only half the emissions they did over a decade ago,” he said. he declares.
THE PRINCIPLES OF POSEIDON
Shipping companies are expected to come under increasing pressure to comply with targets set by the IMO, which will rate ships’ energy efficiency on an A to E scale, as the ratings will have a ripple effect in funding and insurance. .
In 2019, a group of banks agreed to consider efforts to reduce 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 committed to be consistent with IMO policies when evaluating shipping portfolios for environmental reasons.
“Lending decisions on used vessels are going to become an issue for older tonnages,” said Michael Parker, president of Citigroup’s global shipping, logistics and offshore business, adding that environmental factors would be taken into account when lenders decide to refinance the vessels. .
“Second-hand ships will continue to be funded, provided the owner does what it takes to make that ship as environmentally efficient as possible,” he said.
One of the early adopters of new technologies is shipping giant AP Moller-Maersk. It has ordered 12 vessels that can run on green methanol produced from sources such as biomass, as well as fuel oil, as 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 it would prefer to switch directly to a low-carbon alternative.
Wartsila, meanwhile, will launch an ammonia engine next year, which it says is attracting a lot of interest from customers, as well as a hydrogen engine in 2025.
Ship owners face many uncertainties about how to “future-proof” their fleets and avoid regretting investment decisions a few years from now, Wartsila’s Hatley said.
“They would prefer to wait maybe the full 20-year life of the ship, but that’s even more uncertain now because of the pace of change.”
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Reporting by Sarah McFarlane; Editing by Veronica Brown and David Clarke
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