Has IMO 2020 changed bulk shipping? An empirical study on how vessel speeds, trading patterns, charter types and freight rates for individual fixtures have been affected by IMO 2020

Abstract

This thesis examines how the IMO 2020 low-sulphur regulation has affected drybulk shipping. Firstly, we examine which routes scrubber vessels sail compared to what maritime economic theory would suggest. Secondly, we determine if scrubber vessels increase speeds compared to non-scrubber vessels after IMO 2020. Thirdly, we analyze whether scrubber vessels are less likely to be used for short-term time charter fixtures (trip charter) than voyage charter fixtures. Lastly, we examine if IMO 2020 has caused scrubber vessels to trade at lower $/tonne rates relative to non-scrubber vessels. We use the difference-in-differences methodology to estimate the effects of the policy change on the Capesize fleet. We include two-way fixed effects to control for both time differences and vessel heterogeneity. 30,806 individual voyages and 120,047 weekly speed observations are calculated from 36,767,462 Automatic Identification System (AIS) positions in 2019-2020. Further, 1,016 individual fixture contracts are extracted from Clarksons Shipping Intelligence Network to analyze the effects on the freight market. We find that scrubber vessels sail on longer voyages than non-scrubber vessels. However, the difference in voyage distance does not increase between the two groups as a result of IMO 2020. Our analysis further suggests that the difference in speeds increases for scrubber vessels compared to non-scrubber vessels after IMO 2020. In addition, scrubber vessels are less likely to be offered on a trip charter than a voyage charter after IMO 2020. Lastly, our results indicate that scrubber vessels on average trade at similar $/tonne rates as non-scrubber vessels, suggesting that shipowners investing in scrubbers are gaining the potential savings from the lower fuel costs.