Bulker Fleet Facing Speed Decline Amid Ageing Tonnage

The bulker fleet's average speed has witnessed a decline amid older vessels in the fleet. File Image / Pixabay

Dry bulk carriers are slowing down on average - signalling lower bunker demand from this segment - with a marked difference in speed emerging between older and newer vessels. according to a report from freight management firm Veson Nautical.

This decline is not only due to the ageing fleet but also regulations like the carbon intensity indicator (CII), which encourage lower speeds to improve carbon efficiency, making older vessels less economical to operate at higher speeds.

"Although slow steaming has improved CO2 operational efficiency, it appears to have led to a notable decrease in the transport work of older vessels in the Bulker fleet," Veson Nautical said in the report.

Data shows that older vessels, especially those built before the 2013 EEDI regulations, are slowing down significantly, further widening the speed gap with newer, more efficient ships.

Veson Nautical notes that a large portion of the current bulker fleet was built before EEDI came into effect, as the 2000s saw a surge in bulker shipbuilding activity, driven by Chinese economic growth and rising demand for iron ore and coal.

"These vessels are now struggling to meet modern efficiency standards, creating a growing divide between newer, more efficient vessels and older ships that are nearing the end of their operational lives."

Average age of bulker fleet

The average age of the bulker fleet has risen from 8 years in 2018 to nearly 12 years today.

As a result of the widening gap between new and old bulkers, a two-tier market has emerged, Veson Nautical argues.

"These modern vessels are expected to command a premium especially in markets such as the US and Europe that have stringent age restrictions and carbon regulations," Oliver Kirkham, senior valuation analyst at Veson Nautical said in the report.

Average speed of bulkers by fixed age category

The report finds that fewer modern bulkers are changing hands, as their efficiency and emissions compliance command premium charter rates. However, older vessels still find demand for low-priority cargoes.

"As emissions regulations continue to tighten globally it is clear that ageing vessels will be pushed into niche markets while newer vessels will dominate more profitable routes," Kirkham noted.