Recently, the Baltic Dry Freight Index, the main measure of bulk carrier market health, has been hovering around 11-year highs. Demand has been sustained by fundamentals, such as an increase in Chinese demand and tightness in supply of tonnage and how long the good times will keep rolling is a matter of debate.
Meantime, let’s remind ourselves of some bulker fundamentals. According to Stamford, Conn., headquartered Eagle Bulk Shipping, which owns one of the world’s largest fleets of mid-size buyers, carriage of dry bulk commodities accounts for around 54% of world seaborne trade equating to over 5 billion tons per year or 70,000 voyages per year. The major bulk commodities are coal (24%), grain (9%) and iron ore (27%).
Looking away from the ups and downs of the Baltic Dry Index, most newbuilding activity in the sector is being backed by long-term charters from producers or end users of these commodities who are increasingly concerned with reducing the carbon footprint of their supply chains. One example of how this is translating into newbuilding designs is a landmark award made to Singapore’s Eastern Pacific Shipping last year by Australian mining giant BHP. The world’s first LNG dual fuel Newcastlemax bulk carrier contract, it will see five LNG-fueled 209,000 dwt vessels delivered next year to carrying iron ore between Western Australia and China.
Ammonia, Bubbles and Rotors
Another mining giant looking to cut its greenhouse gas (GHG) emissions is Brazil’s Vale. In June, it became one of 23 companies signing on for a joint industry on the potential of ammonia as a marine fuel. Meantime, the company recently took delivery of the world’s first ore carrier to be equipped with an air bubble hull lubrication. The Sea Victoria, a 325,000 dwt Guaibamax, has been equipped with a system developed by U.K.-based Silverstream Technologies. Ten compressors installed on the ship’s deck send air to 20 devices positioned under the ship to produce a carpet of bubbles that reduce the friction between the hull and the water, reducing fuel consumption and, consequently, emissions.
Vale’s navigation team estimates that, if the test is successful, the technology could be replicated on the remainder of the contracted fleet dedicated to transporting the company’s ore. “Conservative estimates point to a fuel reduction of around 5 to 8%, with a potential reduction of 4.4% in annual emissions from Vale´s maritime transport of iron ore,” explains Vale’s technical manager for navigation, Rodrigo Bermelho.
In another fuel savings development, Vale recently took delivery of the world’s first ore carrier equipped with rotor sails. Another Guaibamax, the Sea Zhoushan has five Norsepower sails distributed along the vessel that, according to Vale, allow an efficiency gain of up to 8% and a consequent reduction of up to 3.4 thousand tons of CO2 equivalent per ship per year. If the pilot project proves to be efficient, it is estimated that at least 40% of the fleet will be able to use the technology, which would result in a reduction of almost 1.5% in annual emissions from Vale’s maritime transport of iron ore. The rotor sails are cylindrical rotors, four meters in diameter and 24 meters high—equivalent to the height of a seven-story building. In a significant development in rotor sails technology, they can tilt so as not to interfere with cargo operations.
Rotor sails are not the only type of sail under consideration by major dry bulk commodity shippers seeking to decarbonize their overall supply chains. Last year agribusiness giant Cargill, one of the world’s top charterers of bulkers, announced that it has partnered with BAR Technologies of the U.K. and Finnish naval architect firm Deltamarin to bring cutting edge wind propulsion technology derived from America’s Cup yacht racing to commercial shipping. The project will see BAR Technologies’’ WindWings—large, solid wing sails that measure up to 45 meters in height—fitted to the deck of bulk cargo ships to harness the power of the wind and reduce CO2 emissions by as much as 30%.
The number of wing sails can be tailored to the size of the vessel and the route it will take. Its future moves on this will be to start a tendering process for constructing WindWings assisted vessels; bring customers onboard to join the WindWings consortium. This initiative is just a small part of what Cargill is doing on the emissions-reduction front.
In its most recent sustainability report for 2020, it says that it has continually reduced the carbon intensity across all vessel sizes over the last four years by selecting more efficient vessels, by using digital tools to optimize vessel operations and by retrofitting energy saving devices to reduce CO2 emissions.
India’s Tata Steel is another charterer looking to adopt wind assistance to lower emissions. It has recently signed a memorandum of understanding with MOL Drybulk, a subsidiary of Japan’s Mitsui O.S.K. Lines Ltd. (MOL) to develop and deploy an environment friendly bulk carrier.
Peeyush Gupta, vice president-supply chain for Tata Steel, said that the various technologies considered will include the Wind Challenger, a telescoping hard sail, which would reduce emissions by harnessing wind energy. MOL has been jointly studying the technology with cross-industrial partners and the first vessel to be equipped with the Wind Challenger is slated to start operation in 2022. That ship is a 99,000-dwt coal carrier under construction at Oshima Shipbuilding Co. Ltd. It is set to enter service in 2022 and will be operated by MOL under a charter with Tohoku Electric Power Co. Inc. It is expected to reduce emissions of GHGs by about 5% on the Japan-Australia route or about 8% on the Japan-North America West Coast route, in comparison with a conventional vessel of the same class.
Tohoku Electric Power is also involved in another cutting edge Japanese emissions reduction plan. K Line has been conducting a joint project with Mitsubishi Shipbuilding Co. and ClassNK to install a carbon capture plant onboard a vessel as part of a long-term plan aimed at cutting vessel GHG emissions by 50% (compared with the baseline year of 2008) by 2050. A first, small scale, CO2 capture plant was installed last month on the Corona Utility, a coal carrier operated by K-Line for Tohoku Electric Power.
The Conversation Changes
Whether a rotor sail or a hard sail is the better way to harness wind power as an auxiliary mode of propulsion is a matter likely to arouse impassioned debate in some circles. No clear answers will emerge until some meaningful numbers of ships have been at sea with the two technologies. Meantime, the debate around green fuels also continues to intensify, with some presently available candidates looking less green than supposed. What’s worth noticing, though, is that nobody is talking much now about the pay back time needed to repay the investments in these technologies out of fuel savings. Now the conversation is simply about the extent which they will reduce GHG emissions. The take away is that leading charterers are increasingly willing to pay a premium for greener tonnage.
All of this, of course, is a world away from the short term situation in which spot market operators have pushed up the price of existing, not that green, bulkers on the S&P market as they bet on the Baltic Dry Index sailing even higher.