Fleet renewal: better for the environment and the bottom line

The IMO Net-Zero Framework, approved at MEPC 83 in April and under consideration for adoption, will see the implementation of a Global Fuel Standard (GFS), and require ships to gradually reduce their greenhouse gas emissions (GHG) by adopting lower carbon intensity fuels as measured on a well-to-wake basis. Fees, levied on ships based on the amount of CO2 emitted, will be collected in an IMO Net-Zero Fund. The idea behind the GFS is to incentivise the uptake of zero- and near-zero GHG fuels.

With a GFS potentially becoming a reality by 2027, Safe Bulkers president, Loukas Barmparis, is confident his company is well prepared for “a new era towards decarbonisation” heralded by the IMO Net-Zero Framework.

His confidence is underpinned by US$650M in capital investments made by the Big Board-listed dry bulk marine transportation company since 2022 in fleet renewal. With some 45 dry bulk carriers, Safe Bulkers has shed older tonnage, acquired new secondhand vessels and ordered eco-friendly newbuildings, lowering the average age of its fleet to 10.1 years. It will add another six newbuildings - two of which are methanol dual-fuelled Kamsarmax ships – between Q2 2026 to Q1 2027.

If the IMO Net-Zero Framework is adopted, Mr Barmparis said GFS “will represent substantial costs towards decarbonisation”. But Safe Bulkers has prepared itself by adding 18 “Phase 3” ships, and “through the mechanism of pooling, will be able to avoid penalties of all these regulations,” said Mr Barmparis.

“Phase 3” ships are those that meet IMO Energy Efficiency Design Index (EEDI) requirements related to the reduction of GHG emissions. These ships have engine technology that meets IMO NOx Tier III emissions regulations.

“Our environmental investments have a relatively short payback period”

But Mr Barmparis told listeners of the Capital Link webinar that the company’s investments are not just on a theoretical basis; they also improve the bottom line. “It is important to note that all our environmental investments have a relatively short payback period, reflected through fuel savings to premiums in charter rates,” he said. “Saving two tonnes of HFO per day means saving six tonnes of CO2.” While noting such investments are good for the firm’s carbon footprint, Mr Barmparis said: “The benefit in the charter hire exceeds US$1,000 per day, meaning you have a payback period of about a year for painting your vessel with low-friction paints.”

He also emphasised that Safe Bulkers benefits from better charter rates through its investments in Phase 3 vessels. He noted according to recent sector information, there is a US$2,500 charter per day charter hire rate difference between Phase 3 vessels and conventional ships.

“This is a meaningful return on the additional investment, not to mention that you need to renew your fleet,” he concluded.