Taiwan's U-Ming advances low-carbon shipping, retains healthy dry bulk outlook

Taiwan's U-Ming Marine Transport Corporation is advancing its fleet renewal plan, with dry bulk carriers opting for energy-saving and environmentally friendly features as emissions reduction goals loom in international shipping.

The company aims to reduce 30% CO2 emissions in 2025 compared with 2013 and is determined to provide sustainable low-carbon green transport services to its customers in the future, it said June 8.

"At the end of 2020, before the rebounding of the dry bulk market and the surge in new building prices, U-Ming had foreseen that the demand for dry bulk transportation would continue to grow, compounded by the limited future supply growth of dry bulk vessels," it said.

"Hence, the company had seized the opportunity then to order 12 new energy-saving and environmental-friendly bulk carriers and one cement carrier, which incurred a total capital expenditure of $650 million, but with at least 20% total savings achieved as compared with the current market price," it added.

The company will also continue to collaborate with its major customers to expand its low-carbon energy fleets, such as LNG/ammonia/methanol, in line with Taiwan's energy transition and security policies, including the formation of a national LNG-powered fleet to achieve sustainable shipping, it said.

U-Ming currently owns a fleet of 71 vessels, comprising Capesize, Panamax, Post Panamax, Supramax and Ultramax bulk carriers, Cement Carriers, Very Large Crude Carriers, Very Large Ore Carriers and Crew Transfer Vessels. This includes vessels that are in operation, under construction, joint ventures, and ship management services, totaling 8.7 dwmt.

Dry bulk freight market to stay "healthy"

In the same announcement, U-Ming Chairman Douglas Hsu noted that the effectiveness of the anti-COVID-19 measures in various countries resulted in pent-up demand, favoring the dry bulk shipping market.

As the Russia-Ukraine war continues, the industry is seeing a lengthening of ton-miles on trade routes, he said.

"We are seeing more volumes to longer distances, which helps push up freight rates. For the sake of food security, many countries are looking for alternate sources, which have resulted in increased seaborne trade," Hsu added.

On the ship supply side, currently, global shipyard capacity is full up to 2025, with large number of new building orders mainly for gas carriers and container ships, he said.

As the order for dry bulk carriers only accounts for 6.6% of the existing fleet, hitting a historic low, the delivery of new dry bulk carriers in the next two to three years is expected to be minimal, Hsu said, adding that uncertainty relating to emissions regulations and technologies to decarbonize the industry will also continue to hinder ordering.

Ongoing high oil prices that prompted slow steaming and port congestions should continue to compound the reduced tonnage capacity situation, he said.

Meanwhile, the Energy Efficiency Existing Ship Index and the Carbon Intensity Indicator regulations will take effect in January 2023.

Those ships that do not meet the emission standards will have to carry out engine power limitation or will be forced into slow steaming, accelerating the decommissioning of older ships, which is good for the overall market fundamentals, Hsu said, adding that the overall dry bulk freight market should stay "healthy" for the rest of the year.

A similar sentiment was echoed in a statement posted by BIMCO June 7, with its chief shipping analyst, Niels Rasmussen noting that a slow supply growth was set to support the dry bulk segment as risks to demand mount.

"We expect that contracting will remain low for the rest of 2022 and during 2023, as high newbuilding prices are discouraging owners. Meanwhile, the yards have very large order books, and in any case, any ship contracted now would not be delivered before 2024 at the earliest," Rasmussen said.

"All in all, we estimate that fleet growth will slow to 2.6% and 2.5% on the year for 2022 and 2023 respectively," he added.

Dry bulkers adopt LNG-powered ships

Many large dry bulk freight market participants are trying to cut carbon emissions by embracing dual fuel LNG-fired Newcastlemax class ships.

Since February, mining major BHP has been operating the 209,000-dwt dual fuel LNG-fired Mount Tourmaline.

Platts from S&P Global Commodity Insights assessed its Newcastlemax – NMAX GT4 Index – basis LNG bunker fuel June 7 at $31,461/day. The index was at at minus $44,928/day March 7 when LNG bunker prices had skyrocketed.