SIMIC

From next year, the International Maritime Organization (IMO) requires all ships to calculate their annual carbon intensity based on a vessel's emissions for the cargo it carries - and show that it is progressively coming down.

While older ships can be retrofitted with devices to lower emissions, analysts say the quickest fix is just to go slower, with a 10 per cent drop in cruising speeds slashing fuel usage by almost 30 per cent, according to marine sector lender Danish Ship Finance, reports Reuters.

"They're basically being told to either improve the ship or slow down," said Jan Dieleman, president of Cargill Ocean Transportation, the freight division of commodities trading house Cargill, which leases more than 600 vessels to ferry mainly food and energy products around the world.

Supply chains are already strained due to a surge in demand as economies rebound from lockdowns, pandemic disruptions at ports and a lack of new ships. If older vessels move into the slow lane as well, shipping capacity could take another hit at a time when record freight rates are driving up inflation.

At the moment, only about 5 per cent of the world's fleet can run on less-polluting alternatives to fuel oil, even though more than 40 per cent of new ship orders will have that option, according to data from shipping analytics firm Clarksons Research.

But the new orders are not coming in fast enough to halt the trend of an ageing fleet across all three main types of cargo vessels: tankers, container ships and bulk carriers, the data provided to Reuters by Clarksons Research shows.

"Some ship owners have preferred to buy second-hand vessels because of the uncertainties around future fuels," said Stephen Gordon, managing director at Clarksons Research.

Orders for new container ships surged to a record high in 2021 and are still coming in at healthy clip this year, but as the appetite for new tankers and bulk carriers is much lower, the current order book across all three types of vessels only stands at about 10 per cent of the fleet, down from over 50 per cent in 2008.

Shipping companies are responsible for about 2.5 per cent of the world's carbon emissions and they are coming under increasing pressure to reduce both air and marine pollution.

The industry's emissions rose last year, underlining the scale of the challenge in meeting the IMO's target of halving emissions by 2050 from 2008 levels. The organization is now facing calls to go further and commit to net zero by 2050.

Some companies are testing and ordering vessels using alternative fuels such as methanol. Others are developing ships that can be retrofitted for fuels beyond oil, such as hydrogen or ammonia. There's even a return to wind with vast, high-tech sails being tested by companies such as Cargill and Berge Bulk.

But many of the potential low-carbon technologies are in the early stages of development with limited commercial application, meaning the majority of new orders are still for vessels powered by fuel oil and other fossil fuels.

Many shipping firms are hedging their bets mainly because prolonging the life span of vessels is cheaper and lower risk than new builds. They also gain breathing space while waiting for the winning new technologies to become mainstream.

Cargill says that as of now it doesn't expect to have many new-build ships in its fleet, instead fitting energy saving devices to older vessels and prolonging their use, while there's still uncertainty about future technology.