CII poses compliance and commercial risks for bulk carriers

Risk of CII

CII presents an even larger hurdle for the bulk carrier fleet. CII is an operational measure of how efficiently a ship transports goods or people. CII measures the grams of CO₂ emitted by cargo-carrying capacity and nautical mile. Based on a formula, the ship is then given an annual rating, ranging from A to E (highest to lowest), whereby the rating thresholds will become increasingly stringent towards 2030.

“Beyond 2026, when the CII is getting stricter, the risk introduction may be even more profound, even for new vessels,” said Mr Løvstad. “Then again, for the older vessels – more than five-years old – the speed reduction may be rather significant. We have seen examples of 10-year-old supramaxes where the speed may need to be reduced down to eight knots, which may not be too attractive in the commercial market.”

“Emission metrics are increasingly important in several areas”

Joining Mr Løvstad on the panel were Martin Crawford-Brunt, chief executive of maritime consultancy Lookout Maritime, Kjeld Aabo, senior principal specialist new technologies at engine designer MAN Energy Solutions and Capt Rahul Khanna, global head of marine risk consulting for insurer Allianz Global Corporate & Specialty.

Produced as part of Bulk Carrier Webinar Week, the webinar was sponsored by Marine Propulsion with support from Intercargo. It explored the requirements of the bulk carrier sector to invest in power and propulsion options that can carry their operations through to 2030 and beyond.

EPL not enough

“Generally, the bulk carrier fleet is not very well positioned, without additional measures, to comply with the CII and EPL is not enough,” Mr Crawford-Brunt said.

He warned that the CII rating of a ship goes beyond compliance. “I think that beyond the compliance aspects … it’s important to understand your rating in terms of your marketability and tradability ownerships,” he said. Shipowners will have to be prepared to meet the emission reduction expectations of charterers, cargo receivers and end users.

“I advise people to build an action plan to make decisions against the timings for likely scenarios. If anything, the scrubber experience that we had is an example of where waiting to take action does not necessarily remove the risk or reduce the cost,” said Mr Crawford-Brunt.

“Everything is going to be benchmarked and ranked in the future,” he added. “Emission metrics are increasingly important in several areas, including vessel selection, sale and purchase decisions, vetting and finance. It’s important to know your score and sensitivities to changes in that score, regarding the technical and regulatory options, including commercial and carbon risk-management procedures,” he said.

Moving the goalposts

While they are scrambling to develop strategies to halve their CO₂ emissions by 2050, shipowners should be prepared for the goal posts to be moved, warned Captain Khanna. Noting the increasing focus on shipping and the transportation sector to reduce its emissions, Captain Khanna said IMO will come under increasing pressure to revise its targets.

“Be prepared for the targets to be changed to midway,” he said, adding shipowners need to have not just plans, “but agile plans which can be changed and morphed as things unfold.”

IMO has set a target of 2030 for cutting the carbon intensity of all ships – newbuilds and existing ships alike – by at least 40% as compared to 2008. By 2050, IMO has set ambitions of cutting total greenhouse gas emissions (GHG) by 50% and a 70% reduction in CO₂ emissions per transport work, compared to 2008.

Providing context for the how much CO₂ is emitted by shipping, Mr Løvstad said it was equivalent to the total emissions emitted by Germany each year. “The bulk carrier fleet alone emits 200 to 250M tonnes of CO₂ per year,” he said. “So, you could say it’s a lot of CO₂ emitted from shipping; but, at the same time, shipping is also part of the solution because 80 to 90% of the world’s goods are transported by sea. Moving more transportation by sea instead of by land … is also part of the solution,” he noted.

Captain Khanna made the point that shipping still has not reached peak emissions. “If we do not do things urgently that would mean that the amount of emissions that we collectively produce until the time we reach our goals are going to be a lot higher,” he said.

Solutions for compliance

Among the “viable solutions” for compliance with CII discussed by Mr Løvstad was the blending of biofuels and low-carbon fuels. “Irrespective, we think that each owner, operator, and even the charterers may need to prepare for a roadmap for the future,” he said. This roadmap should be combined with drydocking schedules to assess the kinds of upgrades required at given intervals. “So, you can do something about speed reduction,” said Mr Løvstad. “You can do a lot with operational measures, but you may also need them to consider technical measures, like in wind-assisted propulsion, energy-saving devices and eventually, also alternative fuels,” he said.

“The bulk carrier fleet alone emits 200 to 250M tonnes of CO₂ per year”

LNG for newbuilds

For newbuildings, one alternative for the roadmap to decarbonisation is to build a vessel that will initially operate on conventional fuel, but can be prepared for conversion to biofuel or low-carbon fuel in the future. “Alternatively, you can build a vessel which is either, from day one or in the future, using

low-carbon fuels like LNG, LPG, methanol or ammonia,” said Mr Løvstad. “These we see as the kind of main options that you have on a newbuilding.” He said LNG is in a short- to medium-term solution that is “gaining a lot of interest for dry bulk. We see that almost 50% of the big vessels – Capesizes, Newcastlemaxes – ordered last year were ordered as dual-fuel vessels with the possibility to burn LNG.”

Mr Løvstad said DNV believes this trend will continue and is eager to see how much the LNG uptake will be in the next five years. “Methanol and ammonia are interesting fuels for the future, but maybe a little bit longer in the time horizon,” he said.

Mr Aabo agreed with Mr Løvstad’s assessment. “About 15% of dry bulk carriers were ordered with dual-fuel propulsion in 2021,” said Mr Aabo. This covered orders for 29 vessels, totaling 540 MW of installed power. These included dry bulk carriers contracted by Himalaya Shipping, Eastern Pacific Shipping and H-Line.

Among the notable deliveries in 2022 was Mount Tourmaline, the first of five LNG-fuelled, Newcastlemax dry bulk carriers for BHP. Each of the ships has a two-stroke 6G70ME-GI Mk 10.5 dual-fuel engine.

Mr Aabo said there are approximately 12,400 bulk carriers, noting, “92% of the dry bulk fleet above 2,000 deadweight tonnes are two-stroke propulsion.” He reviewed the two-stroke engine portfolio of MAN Energy Solutions, which includes dual-fuel, high-pressure Diesel-cycle and low-pressure Otto-cycle units for burning traditional marine fuels and alternative fuels. While its Otto-cycle engines are currently limited to burning methane (LNG), MAN Energy Solutions has sold its electronically controlled, Diesel-cycle ME-GI series for LNG, LPG, methanol and ethane. The first two-stroke, dual-fuel engine capable of burning ammonia will be ready to deliver to the yard in 2024.

Based on MAN Energy Solutions’ forecasts, 50% of bulk carriers will be ordered with dual-fuel propulsion by 2030.  

You can watch the webinar in full at: www.rivieramm.com/webinar-library/bulk-carriers/bulk-carrier-powering-and-propulsion-options-for-2030-and-beyond