INTERVIEW: Drybulk carrier Seanergy sees limited scope for alternative fuels, favors efficiency

Further measures to reduce fuel consumption -- rather than switching to new, more sustainable fuels -- is the preferred course for dry bulk carrier Seanergy Maritime Holdings Corp, as the options afforded by the current range of alternative power sources available are limited, the company’s CEO Stamatis Tsantanis said in an interview.

This comes amid slow take-up across the shipping sector; analysts at S&P Global Commodity Insights expect alternative fuels' share of the overall bunker demand mix, excluding LNG and LPG, to inch up from 0.6% in 2022 to 7.8% by 2030.

“We strongly believe that there's no real viable innovative idea on the table right now for the vast majority of the existing fleet which is sustainable, and most importantly, that is risk-free,” Stamatis Tsantanis, CEO of Seanergy told Commodity Insights.

The company decided in 2015 that it would try and run its ships more economically and will focus on ideas and solutions that have been tested and which it knows work, such as silicon paint.

Of the different shipping sectors, bulkers and container vessels will have the most difficulty in reconciling cargo space with combustion equipment, according to market observers.

Seanergy is doing what it can when it can. “Whenever any of our ships got into the dry dock, we started to install energy saving devices in cooperation with the charterers, that either pay the cost and they get the benefit or we pay the cost and we share the benefit,” Tsantanis said.

This exposes the Greek company to higher costs when operating in European Union waters, under the terms of the bloc’s Emissions Trading System, which is now an operating cost. “We have already embedded that in all of our time charters, and we're just going to live with that as a tax,” Tsantanis said.

On conventional fuels, the Platts Capesize Scrubber Premium Index, which reflects the average of the difference between the TCE returns for scrubber-fitted and non-scrubber ships, was over a third lower on the year. Platts is part of S&P Global Commodity Insights.

While Seanergy is largely steering clear of fuels that require new engines, it is leaning into biofuels. It was the first Capesize company, in the summer of 2021, to test biofuels.

Biofuels are, at least for now, a relatively expensive option. Platts assessed B30 Bio-Bunkers based on used cooking oil methyl ester at Rotterdam at $786.57/metric ton on Oct. 18 and its FAME-based equivalent at $701/mt, compared to $545/mt for delivered 0.5% sulfur fuel oil.

Maintaining the age profile

Seanergy's fleet of 19 vessels currently has an average age of 13.4 years, a fairly senior age profile that may not change soon.

While in the aviation sector bigger, more fuel-efficient planes are being built with lighter materials that reduce fuel burn, for shipping, newer engines are not materially more efficient than the previous generations. Even some of Seanergy’s older vessels from 2004 perform quite well on fuel efficiency, Tsantanis said.

Amortizing the carbon cost of building a new ship, including the impact of emissions from the steel and energy used to build it, may not make the mine-to-wake process worth the emissions, compared to burning slightly more fuel, Tsantanis said.

In any case, it can be hard to get in orders at shipyards: “There are not so many shipyards in the world that have the capacity to build Capesize vessels and those that do, they tend to choose vessels that have bigger profit margins,” he said.

Market boosts

Russia’s invasion of Ukraine and the resulting slew of international sanctions has forced Europe to import more commodities from other, further-flung sources.

This has been visibly the case for refined oil products, although it has been less pronounced in the case of coal. In 2021, before the invasion, Europe imported 3.9 million mt of coal, dropping to 3.1 million mt in 2022, before roughly halving to 1.7 million mt/year in both 2023 and in 2024 to date, according to S&P Global Commodities at Sea data. The hope within the dry bulk sector was that the Russian volumes that were displaced would come from more distant sources.

“Initially, that didn’t happen and the reason it didn’t happen is because we had one of the mildest winters in history,” Tsantanis said. He added that coal inventories are depleting and that more coal is starting to come from further afield, such as from Australia.

One consistently bullish factor for Capesizes has been demand for iron ore and bauxite, besides coal, Tsantanis said.

China, despite current economic headwinds, still produces over half of global steel supply, and these exports bode well for the dry bulk sector, he said. “You have trillions of dollars of infrastructure projects globally that need steel [across different regions],” he said.

China produced 1.013 billion mt or 55% of global crude steel in 2023, according to the World Steel Association.

Rates to carry dry freight have been strong in 2024. Platts assessed its Cape T4 Index, a daily weighted average Capesize Time Charter Equivalent (TCE) rate reflecting ton mile demand on four key TCE assessments, 14% higher on the year in mid-October and 83% above the equivalent period in 2022.