b'THE UNCONTAINEDBeach. The tricky part moving forward is the container carriersIMO and MPV Sector Challengesability to manage capacity with freight demand in order toMany owners and operators in the sector still have remain profitable. In the meantime, pent up demand for importsconcerns about inflationary pressures, rising interest rates, the is slowing and allowing excess inventories to be worked off. Itwar in Ukraine and Chinas continued struggles with COVID and will be interesting to see just how 2023 takes shape with theits zero tolerance policy. These all could result in some form US consumer. More of a familys disposable income may beof global recession next year. However, freight demand in the redirected as a result of higher food prices and energy relatedproject sector is forecast to be strong in the coming year. The expenses. energy sector remains the foundation of the MPV sector with Multi-Purpose Vessels Sector Correction wind, oil and gas segments all expected to perform well in the While the Multi-Purpose Vessels (MPV)/Heavy Lift (HL)coming year. This, along with the tight supply of tonnage should sector has seen great results over the past few years therekeep rate levels in a profitable range. One energy source we are a few storm clouds on the horizon. During the pandemicdont hear much about in the mainstream news is nuclear power. period we saw a huge shift of product from containers toAccording to the World Nuclear Association there are currently breakbulk carriage. This would include bagged goods such as100 new plants scheduled for construction globally over the next coffee. Steel, forest products and chemicals to name a few. Asfive years. The majority of these plants will be located in China container rates pull back to more historical norms it is likely thatand Eastern Europe. The U.S. only has 2 plants currently under some of these cargos will find their way back into containers.construction, Vogtl #3 and #4 which were scheduled to start However, the poor performance of container lines over the pastoperating in 2016 and are now only scheduled to open next year 18 months may have changed how shippers approach oceanat a cost overrun of double the original construction estimate. transport in the future. Those who thought outside the box mayWhat the MPV/HL is unable to forecast is the true impact have been convinced that multipurpose shipping can play a rolethat further regulatory actions on the part of the IMO will have in their supply chain. on the sector. Starting in 2023 there will be two new metrics The MPV/HL sector has recently begun a correctionintroduced requiring owners to measure a vessels overall energy of its own albeit much milder than the container sector hasefficiency and actual carbon dioxide emissions. This will result experienced. Based on Toepfers Multipurpose Index (TMI) forin some vessel owners needing to make modifications to their November 2022 has fallen below the $20,000 mark for thevessels in order to meet the new standards. In all likelihood, first time in 10 months. This correction was not unexpectedsome owners will find it more prudent to scrap the vessel than and in fact could provide incentive for owners to considerto bring the vessel into compliance. additional newbuild investments and fleet replacement. TheThe financing community is already focused on carbon global MPV fleet has continued to age and is now in dire need ofemissions of a vessel being financed. As the EEXI (Energy replacement tonnage. New IMO regulations coming into effectEfficiency Existing Shipping Index) and the CII (Carbon Intensity in 2023 will cull out older tonnage that is unable to complyIndicator) requirements come into effect, there will be a renewed with the new regulations. It is forecast that the MPV sector willfocus by lenders on how financing is structured moving forward. experience a shortage of tonnage to support freight demand inThe true impact to the current MPV/HL fleet will not be known the next few years. This scenario is not likely to change anytimeuntil we see how many vessels are willing and/or able to comply soon as newbuilding activity is expected to remain at modestwith these new standards. levels through 2023.25'