Market Survey on Eco-Shipping: Innovation Boost from Eco-Ships and Retrofitting
German and international shipping companies are currently building up new fleets with modern eco-ships while at the same time retrofitting some of their existing ships in order to make them more efficient.
The aim is to meet the growing challenges facing global shipping with regard to efficiency and environmental regulations. This is revealed by the market survey on the subject of “Eco-shipping” published for the first time by HSH Nordbank. It provides a picture of sentiment in the sector on the basis of a customer survey. Some 60 shipping companies took part, providing information on their preparations for the new and more stringent emission regulations, measures to improve efficiency and the related cost and financial situation. 44 percent of the shipping companies participating are headquartered in Germany, 40 percent in the rest of Europe, the majority of which are domiciled in Greece, 11 percent in North America and 4 percent in Asia.
Almost 90 percent of shipping companies agree that as a globalised industry, the shipping sector needs dependable international emission regulations. Background: As of 2015 the new regulations drawn up by the International Maritime Organisation (IMO) require a reduction of the maximum admissible sulphur content of marine fuel from one percent to 0.1 percent and a further reduction of nitrogen oxide emissions of up to 80 percent in certain Emission Control Areas (ECAs). These special zones initially cover the North Sea and the Baltic as well as almost the whole of the North American coast. Further ECAs are planned for the Mediterranean area and Japan. Although the environmental balance per shipped ton in the shipping sector is still the most advantageous among all means of transport, the industry emits more than twelve million tons of sulphur oxide and in excess of two million tons of nitrogen oxide a year. Apart from soot particles, sulphur oxide and nitrogen oxide, exhaust fumes from ships also contain heavy metals, ash and sediments.
“The drastic decrease in charter rates, increasing bunker prices and stricter IMO regulations mean that shipping companies have to minimise their operating costs while simultaneously ensuring that their ships operate in an environment-friendly manner,” says Ingmar Loges, Global Head Shipping International Clients at HSH Nordbank“Three quarters of the shipping companies that took part in the survey are already investing in measures to improve efficiency with a view to meeting the much higher fuel costs and more stringent environmental requirements. With this in mind almost half of the shipping companies are building new eco-ships. These are types of ship that are planned, designed and built exclusively in accordance with the latest energy-efficient and environment-friendly standards. Furthermore, 42 percent of shipping companies participating in the survey are retrofitting their fleet in order to increase efficiency. 36 percent of the companies state that they are bunkering their ships with a much more expensive fuel, which has a considerably lower emission level compared to conventional heavy fuel oil.”
Shipping companies converting half of their fleets
“29 percent of the shipping companies involved in our survey stated that they were converting more than half of their fleet,” said Christian Nieswandt, Global Head Shipping Domestic Clients at HSH Nordbank. However, 38 percent of the shipping companies are only modernising up to ten percent of their own fleet. “Generally speaking, spending on retrofitting makes much more economic sense for larger and more modern ships than for smaller, older ones,“ says Nieswandt.
A third of the shipping companies report that above all optimising and modifying the rudder and propeller number among the most important conversion measures to increase efficiency. In addition one fifth of the shipping companies say that subsequent optimisation of the bow and/or hull represents one of the most important improvements. 22 percent of the shipping companies invest in retrofitting using scrubber technology, which removes the sulphur from engine emissions.
62 percent of shipping companies order newbuilds – almost all of them based on the eco-design
At the time of the survey 62 percent of the shipping companies had already ordered new ships or are planning to do so in the coming year. Of these almost all (94 percent) the shipping companies state their intention to fit their new ships with efficiency-enhancing features. Only six percent are ordering a standard design. 60 percent of the companies agree that this new generation of eco-ships will endanger the competitiveness of the existing fleet. Almost 90 percent even believe that in future the market will be split, with different charter rates for standard designs and eco-designs. “This means that in future older standard designs will be less and less profitable,” explains Nieswandt. “For one thing, compared to modern ships with an eco-design they suffer from lower charter income while at the same time they generate much higher operating costs.”
Most shipping companies invest up to a million US dollars in retrofitting per ship
35 percent of the shipping companies are prepared to spend up to an average of a million US dollars on retrofitting per ship. Almost a third anticipate costs of between half a million and a million US dollars. Overall more than 80 percent of shipping companies interviewed expect their capital spending on retrofitting measures to pay for itself in between one year and five years.
The HSH Nordbank eco-shipping market survey shows that shipping companies are proactively facing up to the ecological and economic challenges by taking measures to improve the efficiency of their active fleet and buying modern ships. Overall the international shipping sector is thus looking to a remarkable innovative boost by means of eco-ships and retrofitting in spite of the still difficult underlying conditions.