Pacific Basin expects limited dual-fuel methanol bulker orders for 2024

Hong Kong-based dry bulk shipping company Pacific Basin anticipates limited orders for dual-fuel methanol-enabled mid-size dry bulk vessels in 2024.

As explained, these vessels are expected to primarily consume conventional fuel oil in the foreseeable future due to the limited availability and high cost of green methanol.

Pacific Basin has been actively collaborating with Nihon Shipyard Co. and Mitsui & Co. in the design of efficient dual-fuel vessels that can run on both fuel oil and sustainable methanol. However, the company remains cautious in its approach to investment in newbuildings due to the current high prices.

“We continue to believe that the high cost of newbuildings, uncertainty over new environmental regulations, and the higher interest rate environment will continue to discourage any significant new dry bulk vessel ordering. The low orderbook and efforts to reduce carbon intensity will likely lead to lower speeds and increased scrapping in the coming few years, which could create a shortage of vessels and provide long-term structural undersupply to the market,” the company said.

Pacific Basin remains enthusiastic about the long-term prospects of dry bulk shipping. The company is confident that strong supply-side fundamentals and the continued implementation of existing and new decarbonization rules will support its growth.

The company said it would continue its strategy of fleet modernization through second-hand acquisitions and disposing of older tonnage.

To ensure growth and the renewal of its core fleet, Pacific Basin has signed agreements for the long-term inward charter of both Handysize and Ultramax vessels. The company has already taken delivery of one long-term time-chartered Japanese-built 39,650 dwt Handysize newbuilding in July and expects the delivery of two Japanese-built 40,000 dwt Handysize newbuildings in November and December 2023.

Furthermore, Pacific Basin has secured additional long-term charter agreements for four Japanese-built 40,000 dwt Handysize newbuildings with scrubbers, scheduled for delivery in the first quarter of 2025.

Additionally, there are long-term time-charters for one 64,000 dwt Ultramax newbuilding set to be delivered in 2024, and two 64,000 dwt Ultramax newbuildings to be delivered in 2025.

Each of these time-charters includes an option to extend the charter agreement at a fixed rate, as well as the option to purchase the vessels at a fixed price, providing Pacific Basin with increased flexibility.

Meanwhile, the company has sold six vessels year to date, consisting of five Handysize and one Supramax vessel with an average age of 19 years.

With all currently agreed sales and purchases, Pacific Basin’s Core fleet now comprises 135 Handysize and Supramax vessels. When including chartered vessels in the operating business, the company has approximately 280 vessels on the water overall.

“From 1 January 2024, shipping will be included in the European Union Emissions Trading System (EU ETS), which requires shipping companies to buy and surrender EU Allowances for carbon emissions from voyages to, from and within the EU. This entails a three-year phase-in period, increasing in scope
from 40% of emissions in 2024 to 70% in 2025 and 100% in 2026,” Pacific Basin said.

“We expect that further decarbonisation regulations such as Fuel EU, US Clean Shipping Act, International Marine Pollution Accountability Act and an IMO carbon pricing measure will slow global average vessel speeds, increase scrapping and limit the appeal of conventionally-fuelled newbuilding vessels and further incentivise vessel owners over time to transition to green fuels.”

The company expects the dry bulk market to be bolstered by the continued demand for coal and grain. Seasonality, evolving trade flows, and global concerns regarding food and energy security are anticipated to play pivotal roles in sustaining this demand throughout the year.

Furthermore, a significant contributor to the industry’s prosperity is expected to be iron ore demand. Growth in emerging market economies, increased investment in infrastructure, and a surge in steel production are set to drive the demand for iron ore.