Thread by @ManihiB

1/8
As we move closer to EEXI and other regulations we will see different narratives emerge. Many think non-eco ships will be useless overnight.
So what are the risks when buying a non-eco 2010 blt Kamsarmax today?
Let's take a look at the fleet in more depth.

#drybulk #EEXI

2/8
Capesize/Newcastlemax/VLOC:

The total number of Capesize+ vessels in the world is 1860.
177 are built 2005 or older. = 9.5% of the fleet.
1124 are built before 2013 = 60% of the fleet.

After 2013 we saw improved energy efficiency and they are often referred to as Eco.

3/8
Panamax/Kamsarmax:

The totalt number of Panamax/Kamsarmax vessels in the world is 2855.
626 are built 2005 or older = 22% of the fleet
1727 are built before 2013 = 60% of the fleet

4/8
As we see, it's completely unrealistic to think that all non-eco vessels will be removed anytime soon. Even if you removed ships built 2005 and older we would see a supply shock that would send rates to all time high.

5/8
Eventually fleet renewal will happen, but not by removing all non-eco ships overnight.
This is how I think it will go down:
- EEXI and other regulations reduces speed at a time when the market is already hot.
- Rates go to all time high
- New build orders goes ballistic

6/8
-Market corrects lower when deliveries hit the water.
-Spread in earnings between older and newer assets force scrapping.
-The fleet has now gone through a renewal prosess.

This can easily take 5-7 years.

7/8
So we have arrived in 2026 and that 2010 blt Kamsarmax you bought in 2021 for $19m is being scrapped at only 16yrs. Sounds like you should have bought a eco vessel right?

Well during the markets "fleet renewal" process rates have been skyrocketing.

8/8
The Kamsarmax vessel had 50k rates and made a net profit of $75m during the period.

You might think this is an unrealistic scenario, I don't.

Conclusion: There will be a renewal period, but don't underestimate the earnings potential of non-eco vessels during that period.