Eco Vessels Losing Their Advantage as Bunker Prices Fall

In the near future, less fuel efficient vessels are benefiting from low oil and fuel prices. 

Fuel-efficient ECO vessels may be losing their advantage over their less-efficient peers as oil prices continue to plummet, according to a report by Greek-based Intermodal Shipbrokers Co. 

Presently, companies who bought discounted Chinese ships that have a higher fuel consumption are reaping the benefits, said Intermodal sales and purchase broker Theodore Ntalakos.

"The desired rate of return on an investment can come either from the higher earnings of a highly efficient ECO vessel, but also from the lower initial investment on a less fuel efficient vessel," he said. 

"Fact is that the fuel efficiency benefit disappears as bunker prices drop."

Oil prices are currently at their lowest point since 2010, and Ntalakos said that the trend is also forecasted to continue into the near future. 

The International Energy Agency recently lowered its outlook on global oil demand for 2014, in addition to predicting a continued drop in demand for the first and second quarters of 2015. 

Demand is expected to improve in the latter half of 2015 as the macroeconomic backdrop improves. 

In the long term however, Ntakalos said that he still saw ECO vessels as being the smarter option, especially in light of tightening environmental regulations globally. 

"The truth is that irrespective of bunker prices, a more efficient vessel will always be more competitive and there is no doubt that there are other considerations when evaluating a new shipping investment, such as EEDI (Energy Efficiency Design Index) and emissions' control imposed by the regulatory bodies that only new ships can address," he said. 

"And although complying with these regulations may not have a positive effect on the pockets of ship owners like reduced fuel consumption does, for a forward-looking owner the new designs and the new technologies should be the main part of their strategy."

A report from late last year also showed that eco-tankers earned the highest profits, though only by a small margin.