Bulk carriers (bulkers) worldwide are currently operating at the slowest speeds on record. While shipping companies traditionally reduce speeds to combat falling freight rates, this trend has persisted even during a recent period of booming maritime freight rates. Increasingly stringent environmental regulations are cited as the primary reason for this reduction in vessel speed. Slowing down decreases fuel consumption and reduces pollutant emissions.
According to Greek shipbroker Intermodal, in the first half of this year, the average operating speed of Supramax bulk carriers (50,000-60,000 DWT) was 10.87 knots (20.13 km/h) for diesel-powered ships and 11.19 knots (20.72 km/h) for dual-fueled ships, such as those using liquefied natural gas (LNG). This represents a decrease of 1.23% and 1.45%, respectively, compared to the previous year. Intermodal noted that this operating speed is even lower than last year’s record low.
When cargo ships reduce their operating speed, the total capacity to transport goods decreases, leading to higher freight rates. However, current maritime freight rates remain at an all-time high. The Baltic Dry Index (BDI), which reflects bulk carrier freight rates, was 1821 in the first half of this year, a 157% increase from the same period last year.
The shipping industry attributes the reduced vessel speed to environmental regulations. The International Maritime Organization (IMO) is enforcing measures such as the Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII) to curb greenhouse gas emissions. The European Union (EU) is also implementing environmental regulations for shipping, including the European Union Emissions Trading System (EU ETS).
To comply with these regulations, ships are increasingly using fuels with lower carbon content, such as LNG and liquefied petroleum gas (LPG), and introducing methanol-powered ships that do not emit carbon. Nevertheless, 80% of operational ships still run on diesel. Thus, they are reducing greenhouse gas or carbon emissions by slowing down.
According to the shipping industry, reducing a ship’s operating speed by 1 knot (1.85 km/h) can decrease fuel consumption by approximately 10%, thereby reducing pollutant emissions.
Yiannis Parganas, head of Intermodal’s research division, stated, “Generally, during periods of high operating income (when freight rates rise), the average speed tends to increase, and during periods of economic downturn (when freight rates fall), the speed tends to decrease.” He added, “The current slow operation is greatly influenced by environmental regulations. These regulations are expected to continue strengthening over the next few years, maintaining the trend of slow operations.”
While slow operations can drive up maritime freight rates, the shipbuilding industry views this trend favorably. It increases the need to retrofit ship engines or install energy-saving devices for slow operations. HD Hyundai Marine Solution, which specializes in this area, reported sales of 437.9 billion won (approximately $317 million) and an operating profit of 71 billion won ($51.4 million) in the second quarter of this year. This represents an increase of 20.2% and 29.6%, respectively, compared to the previous year.
