Efficiency driving shipping rents as fuel costs rise

PUBLISHED : Saturday, 24 March, 2012, 12:00am
UPDATED : Saturday, 24 March, 2012, 12:00am


Shipping lines could see a two-tier market emerge for their vessels as a result of soaring fuel prices and the introduction of more fuel-efficient ships, the head of Hong Kong's largest ship-management company said.

Anglo-Eastern chief executive Peter Cremers (pictured) said owners of fuel-guzzling vessels would receive less rental income for their ships than owners of vessels that were more economical. Charterers typically paid for the cost of fuel in addition to a daily charter rate when they leased ships from owners, and it would therefore be in their interest to charter ships that had lower fuel consumption.

Marcel Liedts, the firm's chief operating officer, said ships with the latest fuel-efficient equipment consumed around seven tonnes of fuel a day less than older vessels, which amounted to a daily saving of more than US$5,000 at current prices.

With charter rates for dry cargo ships and oil tankers in the doldrums, this saving was the same as the daily lease rate on some routes. Consequently, charterers would seek to negotiate lower charter rates with owners of ships with high fuel consumption to offset the higher fuel bill.

Cremers said owners of older vessels would have to accept lower income or scrap their ships in favour of more modern tonnage. Since fuel is the biggest operating cost facing ship owners and operators, if consumption could be cut by 10 per cent 'then the cost saving is astronomical', he said. Fuel prices have already risen about 15 per cent compared with last year and heavy fuel is around US$750 per tonne. As a result, Cremers said: 'We are definitely getting more interest in fuel management.'

Norwegian ship-classification society Det Norske Veritas estimated the global shipping industry could generate fuel savings and cut carbon emissions by 15 per cent - equivalent to about at 225 million tonnes of carbon dioxide per year - if owners adopted 10 existing technologies. These included cutting ship speeds, improving propeller design with installation of contra-rotating propellers, and hull improvements including the use of air bubbles to reduce friction.

Tim Huxley, chief executive of Wah Kwong Maritime Transport, said owners of high-fuel-consumption vessels would find it harder to charter their ships as new fuel-efficient vessels hit the water.

Harry Banga, vice-chairman emeritus of commodities group Noble, said relatively high fuel costs were driving the emergence of new technologies to increase the fuel efficiency of vessels. 'This will have a direct impact on charter rates, predominantly, but also potentially on asset values,' Banga said.

Cremers also reaffirmed moves to target emerging mainland shipping companies after Anglo-Eastern increased its managed fleet to 412 vessels from 360 ships in January last year. Anglo Eastern already has at least two young mainland shipping companies as clients.