We remain fully consistent with our strategy to continue investing in larger dry bulk ships that are between eight and 10 years old. Asset prices have softened recently, while supply fundamentals remain at historically low levels.

The $1bn question

This article is part of a series written by people across shipping in response to this question about how to deploy a hypothetical TradeWinds Sustainable Shipping Fund:

How, where and why would you invest $1bn for the best return in sustainable shipping, as the industry grapples with the need to cut carbon emissions, improve efficiency and keep cargoes moving in a world facing multiple economic and political challenges? The investment will be made now and ideally held for the next seven years to the end of the decade. As an added bonus, give one policy or regulation you would like to implement from 1 January 2023 to benefit shipping?

The inflated prices for younger ships are not justified by the financial returns. The newbuilding price of a capesize vessel, when compared to a 10-year one (both Japanese), is more than double. Both ships earn the same dollar per tonne on a voyage basis while the benefit from the reduced consumption would take decades to amortise.

Regarding the investment of $1bn, I would spend approximately $800m for about 30 capesize ships of 8 to 10 years old, preferably built in Japan. The break-even rate of a debt-free ship would surely be far below historical-low earnings. At the same time, the upside potential would be tremendous.

I would invest the remaining capital in upgrading these ships with various types of energy-saving devices. The upgrading would ensure that this fleet remains highly competitive until the end of the decade without being materially affected by the upcoming environmental regulations.

Given the uncertainty surrounding the “fuel of the future”, I believe that investing in mainstream and proven solutions is the most reasonable decision at the moment to warrant the sustainability of these investments.

The truth is that there are already plenty of regulations in the pipeline for our industry. A lot of the upcoming regulations are difficult to understand by many industry participants and, in some cases, may be conflicting with the greater scope of reducing the emissions and helping the environment. In my opinion, the best solution is imposing a simple slow-steaming policy for all vessel types.

The benefit would be two-fold. On the one hand, consumption and carbon emissions would reduce considerably, enhancing the effort for greener shipping. At the same time, the freight market would be boosted by the reduction of the effective vessel supply.

It is impossible to replace thousands of oceangoing ships, currently operating in all shipping sectors, over the next seven years. However, slow steaming could produce impressive results for our environment.

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