In just nine weeks, IMO 2023 will require containers ships to comply with new environmental efficiency and carbon intensity regulations, that will impact the supply of vessels in the container shipping market, reducing capacity and the availability of services on many routes.

Global shipping currently accounts for 2.3% of global CO2 emissions and the International Maritime Organisation (IMO), has committed to at least 70% reduction in carbon intensity by 2050.

IMO 2020 regulated the largest reduction in the sulphur content of a transportation fuel undertaken at one time, with the cost of ocean freight increasing as the marine sector adopted more costly low-sulphur fuels, or fitted scrubbers.

On the 1st January 2023, IMO 2023 comes into force and containers ships will need to comply with three specific requirements, that could reduce effective ocean carrier capacity by up to 15% between 2023 and 2024.

The Energy Efficiency Existing Ship Index (EEXI), is calculated for the vessel in accordance with type and size and indicates the energy efficiency of the vessel compared to a baseline.

The enhanced Ship Energy Efficiency Management Plan (SEEMP) is a mandatory, ship-specific document that lays out the vessel’s energy efficiency improvement steps.

The vessel Carbon Intensity Indicator (CII) rating scheme links greenhouse gas emissions to a ratio of the amount of cargo carried and the distance travelled in a year, to determine an annual efficiency ratio (AER).

The AER is used to grade the ship A, B, C, D, or E and any ship rated D or E for three consecutive years must implement a corrective action plan to reach C or above and if the shipping cannot comply, the vessel will have to be removed from service.

The grading criteria will become tougher every year.

The CEO of a leading carrier has stated that to improve the energy ratings of older vessels they need to either use biofuel, or slow down and calculated that his line would lose between 5 and 15% capacity to comply by lowering speed.

The challenge for shipping lines, is that vessels are already running at reduced speeds, and should they slow down by just 10%, the lines will need 10% more ships just to keep up.

Older tonnage that struggles to comply with the new standards will be forced to refit or retire and the new container ship order book has never been fuller, with vessels, that are being fitted to run dual-fuel, LNG, and ‘carbon neutral’ methanol.

These large vessels are most likely to be deployed on high-volume trade lanes where these expensive assets will achieve more revenue paying traffic and the longer term danger is that direct routes will be reduced, as these mega-vessels may make fewer port calls, with less-frequent services, designed to maximise the capacity utilisation of every vessel.

Global supply chains continue to be challenging and are going to be under pressure for a while yet, which is why share important news and developments, like IMO 2023, so that you are informed and prepared to make critical decisions.