The Baltic Exchange is facing calls to to update its time charter equivalent (TCE) methodology to better reflect the raft of environmental kit being installed on tankers today.
The Baltic Exchange bases its TCE calculations on non-eco, non-scrubber equipped tankers. According to the Baltic Exchange’s latest methodology, the laden IFO fuel consumption of a VLCC travelling at 13 knots is 70 tonnes a day. However, an eco VLCC travelling at the same speed consumes around 55 tonnes a day, according to Alphatanker, part of AXS Marine. Similarly, the Baltic TCE assumes a laden consumption of 28 tonnes a day at 13 knots for an MR2 while an eco MR2 would have fuel consumption of approximately 23 tonnes a day.
The spread in earnings has already fed into higher time charter rates for both scrubber-fitted and eco-ships. For example, current broker information cited in the most recent monthly report from Alphatanker suggests that a scrubber-fitted, eco VLCC would command an approximate $9,000 a day – or 27% – premium compared with a non-eco, non-scrubber-equipped unit for a one-year time charter.
TCE assessments are set to become more complex as shipping goes further down the alternative fuel route in its path to decarbonisation.
“Bearing in mind the penetration of alternative fuels, especially LNG, in the tanker sector, with 25% of the tanker orderbook assessed as being dual fuelled, soon there will be an extra layer of complexity added to TCE assessments,” Alphatanker predicted.
A similar impact will likely come from tankers installing fuel-efficiency-boosting technology such as sails in an effort to comply with future IMO energy efficiency legislation.
“These developments call into question the robustness of the Baltic Exchange tanker earnings assessments,” Alphtanker posited.