Simpson Spence Young analysis reveals majority of tanker and bulk fleet do not currently meet the IMO requirements

By Carly Fields


Questions over the world fleet’s ability to meet fast-approaching 2023 emissions regulations have prompted Simpson Spence Young to undertake an analysis of the existing dry bulk and tanker fleet. 

The shipbroker took a detailed look at the compliance of the global fleet to the IMO’s Efficiency Existing Ship Index (EEXI) and Carbon Intensity Index (CII) and presented its findings at a joint Baltic Exchange and Institute of Chartered Shipbrokers webinar held this week. 

Alastair Stevenson, head of digital analytics at Simpson Spence Young, outlined the market implications coming out of the EEXI and the CII regulations, asking how big a problem this is for the fleet. 

Starting with the EEXI, Simpson Spence Young combined the IMO algorithms and data from IHS Markit/S&P Global Platts with its in-house data. Then, for every tanker and bulk carrier over 27,000 deadweight, Simpson Spence Young estimated the EEXI and compared that against the IMO design baseline as it will apply in 2023. 

Charting the results, Simpson Spence Young estimates that 76% of the tanker fleet over 27,000 dwt will be non-compliant in 2023 and 73% of the dry bulk fleet will also not make the grade. This equates to 4,218 tankers out of 5,545 on the tanker side and 7,771 out of 10,592 on the bulk carrier side. Stevenson noted, however, that Simpson Spence Young expects that some will undertake remedial work to attain or exceed the existing baseline by 2023.

“We're looking at about three in four vessels not being compliant with EEXI, in the first instance,” Stevenson said. “What I mean by first instance is that in the way that they're presented to the EEXI now. Some of these vessels have improved that EEXI rating over time, since they were launched.”

We're looking at about three in four vessels not being compliant with EEXI, in the first instance

Compliance pathway 

The findings prompted him to pose a follow-up question to attendees: “If we have three quarters of the fleet not compliant, how severe is that compliance pathway? It turns out that for many vessels, the compliance pathway is not severe. They are quite close to the IMO baseline, and they will be able to achieve EEXI compliance without a large effect on their operations.” 

However, there are also some ships that are severely affected by EEXI compliance and in some cases are so severely affected, that their only option will be to scrap. 

Simpson Spence Young has also considered the supply loss to the fleet as a result of EEXI. “We looked at the IMO EEXI formulation and then we compared that to actual operations of the vessels in previous years… to try and establish a supply loss,” Stevenson explained.

To comply with EEXI, the IMO expects that many vessels will look to introduce an overridable engine power limitation (EPL). Based on that assumption, Simpson Spence Young has looked at the V REF or the service design speed of vessels, and then calculated what level the power of the engine would need to be reduced to for compliance with EEXI. Simpson Spence Young then calculated the associated EPL for each of those vessels. 

“What we see when we look across the different fleets is that the supply change, or if you like the effective operations measured over 365 days, is actually quite small. The dry side, on average, is really only looking at perhaps changes of a magnitude of less than 1%, perhaps as little as 0.3% on average. 

“For the tankers, this is maybe just a little bit under 1% - that reflects different design parameters.” 

While those supply losses may seem small, they will be significant at certain times of the year, Stevenson said, particularly when historically charterers and owners have needed a vessel to run at higher speeds.


CII link

Turning to the CII, Stevenson noted that when EEXI compliance means a slowing down of the fleet, that also implies that the same fleet should receive an improved CII rating. “In fact, that's exactly what we see when we look at our estimates of the CII for the dry bulk fleet and for the tanker fleet. And we would see those numbers change as we move forward to an EEXI compliance rating.”

Overall, the findings note clustering of ships around IMO baselines and this could radically affect CII ratings. Also, in some instances the calculation of the CII does not necessarily reward the performance of the vessel as much as the performance of specific routes. “So, we often see A rated CII routes and C and E rated CII routes not necessarily connected to the performance of the vessel,” Stevenson said. 

You can rewatch the lecture here