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There has been some discussion on the consistent variation of
sailing speed during major Brazilian round routes to find a
solution to save fuel and reduce emissions by understanding speed
patterns.
According to Bulkers at Sea Fleet metrics, the speed of all size
classes (VLOC to Handysize) in the past four years by quarter
(different market condition) and region (position) shows a
consistent increase in speed in the second half of the year, which
is in line with a higher earning season (see chart 2), and also a
repeated drop in speed around the Cape of Good Hope. It seems that
there are current (Brazilian/Agulhas) and weather issues. Bunkering
operation around Port Elizabeth and Durban could also be another
reason. (see chart 1).
Chart 1: Regional sailing speed on Brazil round route by
size class
From a commercial point of view, since freight fixture needs to
be done before passing the Cape of Good Hope—a deviation
point— sometimes shipowners or operators are trying to idle (we
have observed a large number of idled Capesize vessels in the
second quarter of 2021) around the Cape of Good Hope to fix higher
rates—it makes sense that the Brazilian voyage is usually
longer. Taking into consideration of idle days, fuel tonnes per
shipments/voyage may increase even with an overall reduction in
average speed.
Chart 2: Higher speed was observed in the third and
fourth quarters, in line with a higher earning season; recently
laden speed for Capesize has increased, while ballast speed remains
stable
To better understand this, speed level is actually about
relevant freight or TC rates and profitability against the
additional cost and future earning expectation. Higher profit
(freight or TC savings minus additional bunker cost with additional
engine power) equals higher speed. Therefore, along with the
developments in technology, a reduction in emissions is determined
by its commercial benefits in our view. The recent CII Rating and
EEXI is a major commercial approach to reduce fuel consumption by
increasing commercial cost.
Meanwhile, recent higher laden voyage speed of capesize
indicates a strong demand for iron ore tonnage. Laden speed usually
increases when more fixtures are required to cover forward demand,
which leads to higher capesize rates. Freight models have predicted
C5TC to increase further in August and September to beyond
$40,000/day.
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