MEPC 75: Lack of Regulatory Progress Bad for Industry Orderbook, CO2 Emissions

2012-built Kai Xuan: Dry bulk's biggest five-year concentration of dwt capacity was built in the years 2009-13. File Image. Image Credit / Copyright Ship & Bunker

Last week's draft approvals at the 75th session of the Marine Environment Protection Committee (MEPC 75) could spell bad news for the industry's orderbook and CO2 emissions, according to shipbrokers SSY.

In a press statement Thursday, SSY said a combination of market uncertainties and doubts over the development speed of financially viable low carbon ship designs has caused newbuilding orderbooks to fall to historically low levels relative to existing fleets.

"The current bulker orderbook of 56.1 Mdwt represents just 6.3% of the existing capacity, the lowest percentage in almost 30 years," said Derek Langston, Head of Research at SSY.

At the same time, the dry bulk carrier fleet is also aging, he added, noting "the ratio of 15+ year old vessels to the orderbook is the highest since 2003."

SSY believes the draft approvals taken at MEPC 75 could now compound these trends "for several more years", rather than reverse them.

"There seems little prospect of an immediate regulatory-driven acceleration in demolition (and replacement newbuilding demand)," SSY said.

The lack of regulatory progress is seen leading to limited scrapping activity and continued slow steaming by much of the existing dry bulk carrier fleet.

SSY also points to a recent report by Marine Benchmark that showed a net increase in maritime GHGs since 2011 as the effects of an expanding global fleet have exceeded efficiency gains.

"The combination of low newbuilding deliveries, a potential rebound in demand and an ageing fleet implies that CO2 emissions are more likely to track fleet growth this decade, which suggests that the shipping industry cannot deliver an absolute reduction in CO2 emissions by 2030," said Torbjorn Rydbergh, Managing Director of Marine Benchmark.

The Marine Benchmark report can be found here: https://www.marinebenchmark.com/wp-content/uploads/2020/11/Marine-Benchmark-CO2.pdf