Danaos: Liners slowing down their ships to meet CII

Liner companies are redesigning their operating loops with lower speeds to meet environmental regulations, particularly the Carbon Intensity Indicator (CII) requirements, Danaos’ CEO John Coustas says.

Illustration; Image by Offshore Energy

Specifically, ships would need to measure and document their actual annual operational CII against the required annual operational CII, to ensure their continuous progress on the decarbonization path.

A further reduction in sailing speed is expected in the second quarter of 2023 onwards as Energy Efficiency Existing Ship Index (EEXI) requirements kick into gear.

The increase in fuel costs, especially of alternative marine fuels, amid higher demand and limited availability is set to accelerate the trend.

This has already been the case with the price of LNG triggered by disruptions to global supply chains amid brewing conflict in Eastern Europe as well as a slowdown in drilling in the US.

According to Coustas, a number of factors are pushing rates much higher than pre-pandemic levels while trade volumes are likely to go down due to inflation, high energy prices and slow economic growth.

For the time being charter rates are holding firm as the available tonnage is very scarce,” he pointed out.

Danaos reported an adjusted net income of $157.1 million for the three months ended June 30, 2022 compared to $68.9 million for the same period last year, an increase of 128.0%. The adjusted net income was $392.4 million for the six months ended June 30, 2022, an increase of 209.2%.

The strong container market has seen Maersk raise its profit forecast for the second quarter of 2022 with expected revenue of $21.7bn, an underlying EBITDA of $ 10.3bn, and an underlying EBIT of $8.9bn. Maersk also raised its full-year guidance with underlying EBITDA set to reach around $37bn, $7 billion higher than originally estimated.

“Danaos business model continued to generate strong results in the second quarter, more than doubling our adjusted net income compared with a year ago. Given our fixed charter coverage over the next 12 months, we expect these metrics to improve further. At the same time, however, we are closely following macroeconomic conditions and the potential impacts to our industry,” Coustas said.

Greek containership owner said it was planning to use its balance sheet ‘opportunistically’, with a continued focus on state-of-the-art newbuildings with environmental profiles.

As informed, there is a strong push from liner customers for environment vessels which gives the company confidence about the future of its six methanol-ready newbuildings on order.

To remind, back in April the company placed orders for additional four methanol-ready 7,200 TEU containerships at Daehan Shipbuilding in South Korea, set for delivery in the first half of 2024.

 The ships will be methanol fuel ready, fitted with open-loop scrubbers, and will be built in accordance with the latest IMO requirements in relation to Tier III emission standards and EEDI Phase III.

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