DECISIONS BASED ON REALITIES

oil-refinery

There are a host of surveys doing the rounds and almost all of them refer to the availability of new low sulphur fuels before the IMO global sulphur cap comes into force in January 2020. As we have been saying for many months now, the real issues at this stage are about the availability of the new fuels, the prices to be charged and the bunkering. These were some of the issues raised at meetings at Posidonia 2018 and by a couple of maritime publications over the past month.

Essben Poulson, newly re-elected chairman of the International Chamber of Shipping said in May that serious issues were in danger of impeding the smooth flow of maritime trade. He said it was still far from certain that sufficient quantities of compliant fuels would be available in ports worldwide by the start date of January 1 2020. With ship owners still not sure where and when the new fuels would be available from and importantly, at what prices, there is still more work to be done before the global sulphur cap becomes a smooth reality.

The suggestions of ships having to use non-compliant fuels have been mentioned and these concerns will only add to a sense of confusion until strong decisions and announcements are made. Then there are the costs to be added into this mixture of uncertainty: with scrubbers being touted at between $3-6 million dollars each and their size large enough to worry some ship owners about retrofitting, there have been many choosing to go down less expensive routes.

Ship owners and managers remain to be convinced about scrubbers but what other solutions are viable? According to an article in The Loadstar:  Less than 18 months before the IMO’s 0.5% sulphur cap regulations come into force for merchant shipping, container lines are worried that the estimated $50bn extra cost of the greener fuel could tip them into bankruptcy. “We’re all going to go bust,” MOL’s president and chief executive Junichiro Ikeda told the Financial Times. He expressed his concern that ocean carriers would be unable to recover sufficient amounts from shippers to mitigate the impact of the $300 a tonne extra cost of low-sulphur fuel oil (LSFO).

This idea about severe financial implications have been making the rounds in the past few months and yet the refiners are only now starting to calm some fears with announcements about low sulphur fuel oil (LSFO) and its availability. Whatever the issues they are all viewed as having the potential to negatively impact fuel and machinery systems and this is where alternative solutions such as fuel treatments enter the picture. There is still time for owners to make final decisions before everyone starts with tank cleaning and looks forward to an LSFO future. What there is no time for though is indecision and keeping anyone in the dark.

WHEN WILL THE DEMAND FOR HSFO DROP OFF?

The global sulphur cap comes with so many side issues – scrubbers, insurance and compliance – that ship owners and operators will need to be on their toes well before the regulations actually come into force on 1 January 2020. The lack of compliant fuel has always been seen as a major stumbling block in the short-term; where will the bunkers be that can offer this fuel and when will it be widely available? We have looked at this issue before: ships being stranded because lack of compliant fuel and concerns that some ships might have to use non-compliant fuel if there is an initial shortage – all these are worries ship owners and operators will face in the early stages of the compliance changeover.

One pressing thought: when will the demand for HSFO drop off? This will happen at some stage in 2019 and then the other question is – when do you start cleaning your tanks ready to accept the new fuel? Bunkering is the issue and so is the refining process. The demand for new fuel will almost certainly be high in the latter part of 2019 and the first month of 2020. The refining process and production of low sulphur fuel is placing demands on both sides of the industry. The trick for ship owners and operators is making the date for transition work in terms of cost and operational supply.

Recent report have suggested African bunker fuel markets could struggle to implement the IMO sulphur cap and the suggestion is this could be down to extensive competition from Mediterranean ports and the question of marine fuel quality. Once again the question of quality of the product rather than the initial price is the issue. Availability and compliance are not always natural bedfellows in any industry but when it comes to the 326 million cubic miles of ocean, the world’s ships are expecting more than a sign saying “No Fuel Today!”

2020 compliant marine fuel costs a source of headache for ship owners

Not only will the implementation of a sulphur limit starting in 2020 change the fuel quality and availability but also the economics of shipping and particularly on bunker prices. In total 3 million barrels per day of high sulphur fuel oil Bunkers will need to switch to 0.5% sulphur fuel through blending or hydrocracking leading to higher production costs and thus driving up the fuel cost.

Read more here: Hellenic Shipping News

Weekly summary CW42

As last week’s news mostly covered the uncertainty among the shipping industry concerning the 2020 sulphur cap revealed by ExxonMobil’s survey, this week focused on ways to comply with the regulations including their enforcement.

Earlier this week CEO of Hyundai Merchant Marine C. K. Yoo stated that the technical solutions for meeting the requirements “ought to be shared with all stakeholders by the parties, whoever may find them.” In Russia the Omsk Refinery has implemented a technology for producing low-sulphur marine fuel, enabling ship owners and operators compliance with the sulphur limit regulations. The Omsk Refinery said it plans to ship as much as 50,000 tonnes of the low-sulphur marine fuel by the end of 2017, estimating the total market potential for the product at 158,000 tonnes per year.

Calls this week have not only covered the options for compliance but also the ways to enforce the new regulations. Last week Norway presented an IMO proposal introducing a prohibition to carry bunkers exceeding 0.5% sulphur right away. The relevant IMO sub-committee will meet in February 2018 to discuss how the sulphur cap can be implemented. A carriage ban on high sulphur fuel oil bunkers for ships without valid exemptions could make it easier to enforce the global sulphur cap as this can be detected in port, either by document check or by sampling and analysis of the fuel oil.

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