Weak Shipping Markets Encourage Bunker Saving Innovation

Star Bulk recently annouced it is among five players collaborating through Capesize Chartering

IHS Maritime & Trade (IHS) Thursday said weak bulk shipping markets may push shipowners to develop bunker-saving designs to make their fleets more economically viable.

"Energy-efficient designs offer a competitive edge in a depressed market, helping to develop a two-tier structure," said Richard Clayton, chief maritime analyst at IHS Maritime & Trade.

"Ships with fuel-efficient engines and improved operating capabilities will be able to negotiate better rates than their older counterparts."

IHS pointed to designs for new Ultramaxes, such as Tsuneishi Shipbuilding's TESS6 Aeroline design, as steps forward in terms of reducing wind drag and improving propulsion efficiency through reduced propeller vibration.

Similarly, Handysize designs such as the Green Dolphin 38 design used at Chinese shipyards are said to feature hulls optimised for fuel efficiency without compromising straight or operational flexibility.

But Clayton also suggested low bunker prices are acting to soften the blow of weak freight rates and potentially to dampen shipowners' enthusiasm for fuel-efficient designs in the short term.

"While the price of bunkers is low, the difference in rates is not so significant, but increasing demand in future will favour modern vessels."

In addition to bunker-saving innovations, "consolidation and collaboration are tried and tested ways to weather the challenging times," said Clayton.

He pointed to the move by five shipowners to collaborate in the creation of the Capesize Chartering venture.

Consolidation and Collaboration: Tried and Tested

"Shipping alliances such as Capesize Chartering help owners to take control over supply and demand in the short term by positioning their vessels to increase freight rates until the market picks up," he added.

Explaining continued tough times for bulk shippers, IHS pointed to a Chinese slow-down and fleet growth.

"After a promising 2013, it looked as if the upturn in the dry bulk market would begin early in 2014," said Clayton.

"However, a slowing Chinese economy led to a fall in the volume of cargo imported.

"This, combined with the steady flow of newbuilding ship deliveries throughout the year, has put freight rates under severe pressure."

Last month, BIMCO said it expected the dry bulk market to improve in quarter two this year but said rates across the board would remain below $10,000 per day.