"Rapid Expansion of Global Ship Replacement Demand Due to IMO Regulations"

SK Securities forecasted on the 14th that the demand for global eco-friendly ship replacement will expand due to the International Maritime Organization (IMO)'s regulations on reducing greenhouse gas emissions in shipping.

Cargo is stacked on a container ship docked at Busan Port. Photo by Jinhyung Kang aymsdream@

Han Seung-han, a researcher at SK Securities, explained in the report titled "This IMO Environmental Regulation is Real" that "the demand for global eco-friendly ship replacement will rapidly expand through this regulation," and "it is expected to act as a factor accelerating the replacement cycle of aging fleets, which traditionally occurs every 25 to 30 years."

On the 11th, the IMO approved a Mid-Term Measure to reduce greenhouse gas emissions from ships at the 83rd Marine Environment Protection Committee (MEPC). According to this measure, from 2027, ships over 5,000 tons engaged in international voyages must comply with strengthened standards applied to the greenhouse gas intensity of ship fuel oil.

Ships that fail to comply must pay costs proportional to their greenhouse gas emissions to the IMO in order to operate. This measure was adopted by the IMO in October this year and is scheduled to be implemented from the first half of 2027.

The researcher said, "Unlike the actual application timing, the demand for eco-friendly replacement orders will inevitably arise more quickly," adding, "Currently, the global order backlog level is about 3.8 years, meaning shipowners and shipping companies placing new orders now will only receive their ships at least three years later."

He emphasized, "Unlike past environmental regulations by the IMO, which were used as momentum for an upswing at the end of a downturn cycle but quickly disappeared causing disappointment, this mid-term measure, the carbon tax, is a regulation that can deliver a real impact," calling it "the 'real' momentum that will drive the global ship replacement cycle."

He also stated, "It is expected that not only domestic shipbuilders but also ship equipment and AM businesses, as well as most of the supply chain, will benefit."