Bulker owners and operators have been told not to rely on the upcoming efficiency regulations to support rates. Most of the bulk fleet is expected to fit engine power limiters in order to meet the Energy Efficiency Existing Ship Index (EEXI) regulation from January 1, 2023. The kit caps speed, thereby reducing fuel consumption and cutting emissions. Analysis of last year’s trading patterns by London-based consultancy Maritime Strategies International showed average weighted vessel speeds were at 11.3 knots. If these ships had EPLs, actual speed would have been affected by less than 5.5% in more than 90% of cases. Average speeds would have had to have been 1.7% lower to meet the IMO’s EEXI regulations, its calculations showed. But fleet inefficiencies caused by regulation will not be enough to stop dry bulk shipping demand falling between now and 2027, according to senior analyst Will Fray,

A combination of stalling growth on key long-haul dry bulk trades, coupled with an unwinding of Covid-related fleet inefficiencies will see demand for dry bulk tonnage decrease over the next five years — despite strong growth on short-haul intra-regional minor bulks trades,” he said in a report. In MSI’s base case, deadweight demand falls by 1.4%, despite an overall 7% expansion of dry bulk trade. The analysis is contrary to other views in the market that inefficiencies in the fleet (and therefore earnings and asset values) will rise through the next five years as upcoming environmental regulations take effect. MSI expects that easing congestion is expected to more than offset a slowing down of the fleet. In some cases, engine power limitation will be substantial, cutting speeds by more than a quarter. However, in other instances, such as with capesizes, trading speeds will be little impacted by EPLs, and this vessel type may be more prone to scrapping, especially for vessels built before 2007.

MSI expects the Carbon Intensity Indicator (CII) will also have a meaningful impact on speeds. It is forecasting a 2.2% drop in speeds next year versus 2021 levels in its base case scenario, with a 2.8% drop by 2026. “The CII potentially has the power to change the trading patterns of the fleet, favoring longer-haul business and penalizing ports with longer load/discharge times,” MSI said. “It could also lead to seasonal effects where certain trades are favored later in the year for ships which have for the year to date traded with lower emissions efficiency.”