Capesize time charter equivalent optimization based on speed and environmental regulations

PurposeThis paper aims to identify the interplay of standard Capesize optimal speeds for time charter equivalent (TCE) maximization in the Australia–China iron ore route and the optimal speeds as an operational tool for compliance with the International Maritime Organization (IMO) carbon intensity indicator (CII).Design/methodology/approachThe TCE at different speeds have been calculated for four standard Capesize specifications: (1) standard Capesize with ecoelectronic engine; (2) standard Capesize with non-eco engine (3) Standard Capesize vessel with an eco-electronic engine fitted with scrubber and (4) Standard Capesize with non-eco engine and no scrubber fitted.FindingsCalculations imply that in a highly inflationary bunker price context, the dollar per ton freight rates equilibrates at levels that may push optimal speeds below the speeds required for minimum CII compliance (C Rating) in the Australia–China trade. The highest deviation of optimal speeds from those required for minimum CII compliance is observed for non-eco standard Capesize vessels without scrubbers. Increased non-eco Capesize deployment would see optimal speeds structurally lower at levels that could offer CII ratings improvements.Originality/valueWhile most of the studies have covered the use of speed as a tool to improve efficiency and emissions in the maritime sector, few have been identified in the literature to have examined the interplay between the commercial and operational performance in the dry bulk sector stemming from the freight market equilibrium. The originality of this paper lies in examining the above relation and the resulting optimal speed selection in the Capesize sector against mandatory environmental targets.