16-12-2017

China’s bunker fuel suppliers still weighing response to 0.5% sulfur cap

China’s bunker fuel suppliers said Thursday the likely impact of the International Maritime Organization’s 2020 Global 0.5% sulfur cap on January 1, 2020, was proving difficult to gauge, despite it being just over two years away.

“Come 2020, everyone in the market will definitely need to shift over to 0.5% sulfur products… this will either be done by installing scrubbers in ships, or refineries will have to be equipped to produce lower sulfur products,” a Shanghai-based supplier said Thursday. Both options were deemed expensive for end-users, and market sources said it was not yet clear which option would prove the more viable in China.

Some shipping companies were heard to have already equipped newer ships with scrubbers, while others were waiting for clearer direction to emerge.

In Taiwan, Evergreen Marine Corporation confirmed Thursday that new its ships were equipped with scrubbers. “The new ships are equipped to burn fuel oil but are not equipped to run on LNG, as the market has yet to develop to that stage,” a company source said.

Refineries in China have yet to announce their intentions on producing low sulfur fuel oil, sources said.

“For the existing refineries that are quite old, it could be difficult to meet these requirements,” a bunker fuel trader said.

However, another bunker fuel trader in China said upgrading refineries to produce low sulfur oil products could prove highly profitable.

A few shipping market participants in China were more inclined towards adopting the use of low sulfur marine gasoil than installing scrubbers.

“Some ships already have the ability to burn both fuel oil and LSMGO,” a Beijing-based trader said, adding that LSMGO was already readily available in the market and, while it was $150-$180/mt more expensive than 380 CST bunker fuel, could still be a better option than new low sulfur products.

“LSMGO makes sense, as low sulfur alternatives would be more expensive,” another trader said.

Source: Platts

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