Bulk and box ship buying spree may be to avoid future rule changes

Malcolm Latarche
Malcolm Latarche

22 September 2017


After CMA CGM took the plunge and ordered a series of 22,000teu ships in China, it was surely only a matter of time before rivals MSC would follow suit. Sure enough the company is said to have agreed for a series of 11 ships of slightly larger size to be built by Daewoo in South Korea. MSC is reported as saying that order would not add to its fleet capacity as several smaller 13,000 – 14,000teu vessels will be ending time charters within the period before the full series of new ships is delivered. Of course the owners of the vessels being returned from time charter will likely be seeking new employment for them so there will be an overall increase in container ship capacity which may jeopardise the fragile recovery now beginning to take place. Similarly in the bulker sector, VesselsValue reports that orders for new bulk carriers are on the rise in the second half of 2017. In this sector too there has been a gentle recovery with the BDI rising to new heights for the year in September. It may seem that operators have not learned the lesson from the past but there may be more reasons driving the new ordering surge and despite views to the contrary, owners have always had to keep an eye open for future changes. Newbuilding prices are at low levels now which is always attractive but it is equally likely that owners are beginning to digest the results of MEPC 71 held in July. They have been given a reprise on the need to fit a ballast water treatment system to their ships which may see some older vessels moving to end of life without having to be made compliant with the convention at all. The anticipated cost can therefore be transferred to a new vessel which will have 25 years of trading to recover the outlay. There are other aspects of MEPC 71 that may be coming into play as well. Ships ordered from 2021 will need to comply with NOx Tier III levels if trading into the current SECAs in the Baltic and North Seas as these will be changed into full ECAs covering NOx as wella s SOx. Ordering a ship between now and 2021 will mean that there will be no need to fit the EGR or SCR systems needed to become Tier III compliant because the ship will be exempt from meeting that requirement. In addition, a ship ordered before 2020 will avoid the need to comply with the EEDI Phase 2 efficiency requirements and since there is a move to bring the Phase 3 requirements forward from 2025 to as early as 2022 and add a more stringent Phase 4, it is almost certain that some operators will be looking further ahead.