Inside Opinion: Who are the Mad Men of Eco-Shipping?

I've been watching the rush to order eco ships recently, as I'm sure have you. Its a bit like the news coverage whenever Apple release a new tablet or phone.

The camera crews sit outside the flagship stores and watch normally intelligent and reasonable people queue up overnight in tents and sleeping bags to snag the first of the new gadgets. You watch the smiling victors emerge from the doors holding aloft the beautifully packaged little boxes, beaming all over their faces.  They are delighted.

The PR says that because they now have fingerprint scanning on their hugely expensive little iPhones, and can run the latest Snow Leopard or Black Panther or Lesser Spotted Garden Moggy that they are cooler and by definition better equipped for modern life than you, the sad loser watching the whole thing unfold on your ancient, positively Jurassic, 6 month old Samsung tablet etc.

You could say I'm a cynic for all this eco ship stuff. As always, I'm more than happy to be proven wrong, but are the 18-22% daily opex savings the makers have variously promised us actually attainable in the real world?

I have my doubts.

Real World Opex Advantage

I speak to a lot of shipowners in the course of my role when I'm not ranting by blog for Ship & Bunker and have spoken at length with a few names you'll likely be familiar with if I were to reveal them.

The consensus seems to be that the actual real world opex advantage is surely far smaller than the numbers the manufacturers have reported.

And therein lies the devil of the detail I suspect.

The Chinese have a shipbuilding workforce of more than a quarter of a million people in several key maritime cities in China in which they have invested untold billions.  The shipping market has cut back drastically its shipbuilding due to a huge overcapacity problem that we are only now (maybe) seeing the top of.

Many of these yards, and similarly new ones in Vietnam and elsewhere, are seeing a very patchy future orderbook. Quite understandably, they are very worried about whether those hundreds of thousands employed in the rapidly expanding shipbuilding can stay employed when the yards are not working.

Even the much better established Chinese, Korean and Japanese yards are concerned that outside the mega boxship and VLGC (for those who can build them) sectors the outlook is not rosy.

The S&P markets have dropped so much that you can buy a two or three year old Panamax bulker for pretty much half the price a new one cost. Since financing is harder to get, every penny counts.

Bleak Outlook for Shipyards

The outlook for the shipyards is a little bleak. The orderbook is still huge but it is smaller than it was and is showing signs of shrinking in a really meaningful sense.

Its as if the shipyards have gone to a management consultant to ask what they can do to get shipowners ordering new ladies again, and the besuited silky tongued Don Draper-alikes have told them to change the market.

"If you don't like the market, change it" : its a very Mad Men thing to say, for those of you who watch it.

So they employed a PR firm who told them that the big go issue in shipping right now is the environment and companies losing money because of high bunker bills and operating costs.

If you think about it the eco ship could well be a PR term someone in a suit who has never been anywhere near a Handymax in his life coined whilst sat in his office sipping Canadian Club and thinking about his hot secretary.

You invent a totally new type of vessel (that is really just the same as the old ones, just with a natty new name) and with it convince every other person who hasn't got one of these new toys that his existing toys (even the brand new ones) will be worthless (in a spot market rate earning sense) and that his whole business model depends on being competitive.

If you don't have the latest toys you have got nothing. It plays on the fears of the owners who have invested millions recently in a nightmare box, wet and dry market and were hoping for a brighter few years when things get better only to find out that eco ships might take it all away...

Very clever.

The Real Thing

Of course it may yet be a real thing. The guys who are rushing stampede style to order these vessels may know better than me. Many people do!

I mean only in the last few weeks we've see Seaspan say their eco ship deals helped them to increased profits, while Ardmore said eco ship deals doubled their revenues.

Cargill - one of the firms chartering Ardmore's vessels - have said that they, along with Huntsman Corp., and UNIPEC UK, last year stated as policy that eco ships are all they'll charter.

Poten & Partners said in September that eco ships commanded an $8,000 premium above the year-to-date average for Trans-Atlantic MR time charter equivalent earnings.

And in October, a ShippingWatch survey declared MR eco tankers are the most profitable ships of their kind in the global fleet.

I could go on, but the point is you don't have to look hard to find someone saying how much better these eco ships are.

But 20%? Really? I mean, how advanced can these super advanced hullforms be? How much more frugal can these new engines be? And how much of this advantage applies in the real world;  a world of demurrage, slow steaming, low freight rates and high cost of new ship mortgages?

We'll find out soon enough who the real Mad Men are.

(c) vesselsvalue.com