China’s recent move to ban the discharge of wash water from open-loop scrubber systems from January 1, when implemented on a wider scale, is likely to prop up demand for low sulfur fuel oil and low sulfur marine gasoil further, industry sources told S&P Global Platts.

The ban means that shipowners will either have to switch to closed or hybrid loop scrubbers or low sulfur bunker fuels in designated areas, with some sources saying that LSFO or LSMGO are likely to be the main marine fuel choice.

China’s ban already affects the country’s emission control areas covering inland waters and most of its coastline, including the Bohai Bay waters.

While the prohibition does not currently apply to its territorial waters, a full ban on open-loop scrubbers could be adopted soon, industry sources said.

An open-loop scrubber uses seawater to remove sulfur oxides from the engine exhaust. The sulfur oxide in the exhaust reacts with the water to form sulfuric acid, which is then washed back into the sea after neutralization.

Some industry sources said such scrubbers don’t address environmental issues as they simply take sulfur out of the air and put it into the ocean.

“The impact on HSFO demand will be small currently as China’s ban [on open-loop scrubber fitted vessels] only applies to vessels sailing within 12 nautical miles of the coast,” a source said.

Many ships are already using LSFO or LSMGO there, he added.

“In future, less HSFO will be consumed,” a China-based trader said.

China’s prohibition mirrors a similar step by Singapore, which is however set to impose the ban from 2020.

The steps taken by both countries, meant to protect the marine environment and keep the port waters clean, come as the International Maritime Organization’s global sulfur limit rule for marine fuels looms.

The IMO will cap global sulfur content in marine fuels at 0.5% starting January 1, 2020, from 3.5% currently. This applies outside the designated ECAs where the limit is already 0.1%.

The ban on the discharge of wash water from open-loop scrubbers comes at a time when China has already implemented other stricter emission control regulations.

China’s Ministry of Transport announced early December the expansion of the ECAs to China’s entire coastline from January 1 compared to the initial area covering Yangtze Delta, Pearl River Delta and Bohai Rim applied to vessels sailing within 12 nautical miles of the coast.

Large vessels are now required to burn 0.5% sulfur bunker fuels while the smaller ones have to consume 10 ppm sulfur bunkers, in line with the National Phase 5 & 6 emissions, when they are in inland waterways, according to the ministry’s announcement in early December 2018.

The new policy also requires all ocean-going vessels to use bunker fuel with 0.1% sulfur when they are entering inland waterways areas in China, starting January 1, 2020.

According to Wang Zhuwei, senior analyst with Platts Analytics , China’s apparent demand for LSMGO is expected to rise 32% year on year to 8.09 million mt/year in 2019, while demand for LSFO and blended distillates would grow 44% on year to 5.12 million mt/year, Platts reported in December.

LSFO and LSMGO demand is likely to accelerate as limitations around their widespread adoption wane, sources said.

Facility constraints are the main impediment to LSMGO supply currently, sources said, adding that larger storage tanks and barge capacity are required to meet any rise in demand.

“Barges used to carry 30-50 mt per order. Now orders range [from] 100-500 mt,” a source said.

Plans are underway by some players to upgrade barge capacity, sources said.

Meanwhile, LSFO demand is also hampered due to lack of adequate availability.

Currently, LSFO for bonded bunkering is not produced by China’s local refineries, but is imported in limited amounts from Singapore, Malaysia and the Middle East, and stored in tanks in China’s major ports such as Shanghai and Zhoushan.

Sources said LSFO demand will increase later this year, as supply becomes more widely available.

From August, for example, China’s Sinopec plans to start the first commercial supply of LSFO for the bunker fuel sector from its coastal refineries.

“So far, LSFO demand is not strong. However, it will go up,” a Hong Kong-based trader said.