Long-Term CII Strategy for Small Fleets: Vessel Modifications and Alternative Fuels

Quick wins will only take you so far. For sustained CII improvement—and to prepare for tightening regulations—you need a longer-term strategy. Here's how small fleets can think years ahead.

The about the Regulatory Trajectory

CII isn't staying as-is. Expect:

• Stricter boundaries — Each revision makes A/B ratings harder to achieve
• More vessel types — Currently applies to cargo and passenger ships over 5,000 GT
• Scope expansion — Potentially including more emissions (lifecycle GHG)

If you're at C today, you'll likely be at D in 2028 without changes.

Strategic Options

Option 1: Fleet Renewal (Newbuilds)

The ultimate solution but expensive:

Pros:

• New vessels designed for low CII
• Better fuel efficiency (20-40% improvement)
• Modern technology integration

Cons:

• Capital intensive ($$$)
• Long delivery times
• May not fit current trade patterns

For small fleets: Challenging unless you have strong cash flow or financing.

Option 2: Vessel Modifications (Retrofits)

Retrofitting existing vessels:

Common retrofits:

• Propeller upgrades — 3-5% fuel savings
• Bulbous bow modifications — 2-4% savings
• ** hull coating** — 2-5% savings (friction reduction)
• Engine upgrades — Variable pitch props, waste heat recovery

Cost range: €50,000 - €500,000 depending on modifications Payback: 2-5 years typically

Option 3: Alternative Fuels

The big question: which fuel pathway?

LNG:

• Availability: Good
• Cost: Moderate premium over MGO
• CII benefit: 10-20% improvement (depending on methane slip)
• Infrastructure: Growing bunkering network
• Risk: Methane slip concerns could affect future ratings

Methanol:

• Availability: Expanding rapidly
• Cost: Higher than MGO
• CII benefit: 10-15% improvement (green methanol)
• Infrastructure: Growing (ports adding methanol capability)
• Risk: Price volatility, supply constraints

Ammonia:

• Availability: Limited now, growing
• Cost: Highest uncertainty
• CII benefit: Potential for zero-carbon
• Infrastructure: Early stage
• Risk: Safety concerns, limited bunkering

Biofuels:

• Availability: Moderate
• Cost: Significant premium (50-200% over MGO)
• CII benefit: 5-15% improvement (depending on feedstock)
• Risk: ISCC certification complexity, supply

Option 4: Operational Excellence (Continued)

Keep optimizing operations:

• Fleet management systems (even basic ones help)
• Performance monitoring
• Charterer coordination
• Continuous improvement culture

This is the lowest-cost option but has diminishing returns.

Building Your Strategy

Questions to answer:

1. Fleet age profile — How long will your vessels operate?
2. Trade patterns — What fuels work for your routes?
3. Capital access — What's your investment capacity?
4. Charterer requirements — What are your customers demanding?
5. Regulatory timeline — When do you need to act?

The Small Fleet Advantage

Here's something counterintuitive: small fleets can move faster than large ones.

• Faster decisions — No committee approval for retrofits
• Flexible contracts — Can pivot to new trades/fuels easier
• Lower overhead — Fewer vessels to coordinate

Large shipping companies are locked into fleet-wide strategies. You can optimize vessel-by-vessel.

Investment Priorities

For a typical small fleet (5-15 vessels), recommended priority:

1. Now: Operational quick wins (Parts 1 & 2)
2. Next 12 months: Identify retrofit candidates, explore fuel options
3. 12-36 months: Execute priority retrofits, lock in fuel contracts
4. 36+ months: Fleet renewal planning

Compliance as Competitive Advantage

Here's the opportunity: most small fleet operators aren't doing any of this. They're waiting, hoping the regulations go away.

They won't.

Operators who act now will:

• Win charters that require A/B ratings
• Have lower compliance costs long-term
• Be better positioned for future regulations
• Attract quality seafarers who want modern vessels

Conclusion

CII isn't a problem to solve—it's a market signal. The shipping industry is decarbonizing, whether any individual operator wants it or not.

Small fleets can compete. It requires:

• Acknowledging the problem exists
• Starting with quick wins
• Building a multi-year strategy
• Executing systematically

The alternative—waiting until you get a D rating and scramble—costs more and limits your options.

This completes our 3-part CII series. Questions? Reach out to discuss your fleet's specific situation.

Series Index:

• Part 1: Understanding CII
• Part 2: Quick Wins
• Part 3: Long-Term Strategy