The Bunker Market Beyond 2020

May 24, 2017

The Bunker Market Beyond 2020

At our European bunker fuel conference in Rotterdam last week, the one view you couldn’t escape hearing was that chaos is going to hit the shipping and marine fuel industries in 2020 – when the International Maritime Organization will cut global bunker sulfur limits from 3.5% to 0.5%.

We’ve put together a special report looking at the options shipowners have for adapting to the new regulations. We look in turn at the advantages and disadvantages of switching to a 0.5% sulfur fuel, fitting an emissions-cleaning scrubber to each vessel, switching to alternatives like LNG, and ignoring the new rules altogether.

Bluntly, none of them are attractive possibilities for most shipowners. The IMO has left them with three years to choose between a sharp rise in fuel bills with no guarantee of consistent quality, a huge up-front capital cost for a scrubber or a new ship that can burn LNG, or the legal risk of flouting the rules and hoping the law doesn’t catch up with them.

Shipowners will first need to have a clear view of their finances, to see if they can access the credit for a scrubber, or whether they’ll be an a position to take a cut in profits from higher fuel bills in 2020 – or pass the cost on to their customers. They’ll then need to assess the routes their vessels travel on, and talk to suppliers at their regular bunkering ports about the likely availability and price of their preferred fuel. They’ll need to take a view on whether non-compliance will be an option for them under certain circumstances, and think about the potential reaction from their investors, clients, regulators in their home country and the general public if they get caught. And they’ll need to look at what their competitors are doing – those who find the least painful method of coping with the sulfur cap will be able to offer the lowest freight rates, and take market share from rivals.

The fact that none of these issues has been resolved yet is lending an increasingly nervous atmosphere to bunker industry events. It’s not just shipowners that have a decision to make — refineries need to start looking at their configurations and feedstocks if they want to meet the new marine demand in 2020.

Terminal owners will need to figure out how many large fuel oil storage facilities they’ll need. Port authorities will be deciding how to accomodate a more fragmented bunker market, as well as seeing whether they might have fewer vessels visiting them if they can no longer offer cheap fuel. And regulators will need to come up with an enforcement system that works in the high seas as well as their territorial waters.

The IMO’s Marine Environment Protection Committee is meeting again at the start of July, and may seek to give more guidance on some of these questions. But it’s been clear on one thing — there’s no delaying the change in 2020.

Source: Platts (By Surabhi Sahu, Editor, Bunkers)

Source from : International Shipping News