No future for scrubber technology?

Maersk has stated that they do not see the business case for investing in scrubbers as a long-term solution. Besides the costs, scrubber open-loop systems come with a regulatory risk as they are not designed to cope with all of the environmental regulations likely to be imposed on shipping over the next decade.

Read more here on page 5:

What do you think about scrubbers not being a long-term solution? Would you still consider scrubbers as a solution to ensure compliance with the global sulphur cap?


A sense of anxiety is gripping the shipping industry as it looks toward the imposition of more stringent sulfur restrictions on marine fuel on January 1, 2020. But why?

Many shipowners have yet to make up their minds on what fuel to use: will they pay more for diesel fuel? Burn hi-sulfur fuel and invest in expensive scrubbers? How about LNG? Ultimately it will be a mix of approaches, but with most players likely to choose diesel in the short run. As a result, many foresee a spike in diesel prices as the IMO’s 2020 deadline nears.



How will the IMO’s 2020 global sulfur cap reshape the oil industry?

On October 27 the International Maritime Organization announced a sharply lower sulfur cap on shipping fuel globally from 2020. But what are the implications for shipping lines, refineries and crude producers? Ned Molloy, managing editor for European fuel oil, reports.


Special report:








Not Just A Shipping Problem

There are quite few options available to shipowners to reach compliance with the new sulfur cap. All of those have two things in common – high costs and uncertainty. Whichever way shipping companies decide to go, each one of them will have to make long-term expensive bets in an already troubled market. These decisions, like ripples in the water will affect their business strategies and investment decisions, like sale and purchase of tonnage for years to come.

In the meantime, what seems inevitable is the upcoming dramatic increase in freight rates across all the shipping sectors. Bunker costs may take up 70 – 80 % of total voyage expenses. So, as their costs rise, shipowners will do the most natural thing – try to pass those on to their customers. Of course, in the currently weak freight market shipowners do not have enough clout to make clients take up the whole bill, but the lion’s share will still have their to be absorbed by those who pay for the transportation of goods. And numbers here can be quite substantial.

If we take an example from the dry bulk market, a delivery of 50,000 mt of sugar on a modern Supramax vessel from Brazil to North China, using MGO instead of the standard 380 CST fuel oil may cost around $225,000 extra in bunker costs, considering the current bunker price spread in the port of Singapore. As this spread by some estimates could get two to four times wider in 2020, the added expenses may easily go over half a million dollars. This is just for one voyage.

If we assume that China imports 2.5 million mt of Sugar from Brazil and does it all on Supramax vessels, the total extra bunker costs on just this single arbitrage may easily reach $25 million. A sum that would have to be absorbed by higher freight rates.

While this is an extra pain for shipowners, considering the weakness in the freight market, it can be both a problem and a blessing for traders. Depending on which side of the fence they are sitting on. High freight is an issue for long-haul suppliers as it makes their CIF price less competitive. For example, it can make Brazilian sugar less attractive for Chinese buyers. China might instead pay more attention to closer suppliers like Australia or Guatemala and those countries might find higher bunker prices to be a blessing.

Such examples are easily found in pretty much every commodity market across every shipping sector. So at the end of the day, one thing is for certain: as shipping tries to adjust to the new sulfur cap, it will not be an isolated battle. Anyone with the skin in the game of seaborne trade will feel this one way or another.


Alex Younevitch, managing editor, freight markets, S&P Global Platts