The latest engine and hull designs for container ships are so fuel-efficient and save so much money that shipowners are willing to pay a hefty premium over the price for standard vessels for the so-called eco-ship, according to an analysis BIMCO developed for The Journal of Commerce.
“The fuel savings make an eco-container ship so profitable that the net present value of the investment goes up by $20.8 million,” said Peter Sand, chief shipping analyst of the Copenhagen-based shipowners association. “In other words, a shipowner will pay up to 51 percent more for an eco-container ship if a standard 4,000-TEU container ship can be purchased at $40.5 million.”
BIMCO originally published the analysis for eco-tankers, but re-ran its calculations for the JOC because container ships travel at a higher speed, meaning that the daily fuel consumption is higher than comparable bulk and tanker vessels.
Shipowners are willing to pay the premium because, in the example of a container ship with a capacity of 4,000 TEUs, an eco-container ship that burns 75 tons of bunker fuel per day at a service speed of 20 knots can save $2 million a year on fuel compared to a standard ship design.
“With a fuel price of $651 per ton, a 4,000-TEU ship will save $5,493 per day — or as much as $2 million per year,” Sand said. “This means that an eco-shipowner in the time-charter market will potentially be able to raise the rate by 59 percent (the full fuel-saving premium) as compared to a standard vessel at today’s market where a 4,000-TEU ship can be chartered for $10,500 per day.”
But BIMCO’s analysis comes with a caveat. “Even if you are able to acquire 4,000-TEU eco-container ships at a price of $40.5 million and if you are able to obtain the entire fuel-savings premium from charterers on top of a standard ship (non-eco) time-charter rate, an eco-container ship is not quite profitable in today’s market at a new-present-value loss of $7.8 million,” Sand said.
The math changes when charter rates rise. “However, should the non-eco time-charter rate go up to a level beyond $2,560 per day, an owner of an eco-vessel will make money under the assumptions of this model. At a time-charter rate of $10,500 per day, the fuel price needs to increase to $895 per ton before the eco-vessel is potentially able to charge a fuel-savings premium high enough to make the investment profitable,” Sand said in his analysis.