With the International Maritime Organization’s global sulfur cap deadline looming, low sulfur fuel oil appears to be the most ‘palatable’ solution, according to Thailand’s Precious Shipping Company Limited (PSL).
“Scrubbers, an out dated technology are being thrust on ship owners as a costly solution when the option to burn low sulfur fuel oil is on the table,” the dry bulk shipping company said in its quarterly report.
Of the 95,000 plus vessels that need to comply with the new legislation, less than 0.30% of ships were scrubber fitted/ready at the end of March, the company said, adding that “even if the scrubber fitted/ready ships figure trebles by the time we reach January 1, 2020, it will be just 1% of the existing world fleet of about 95,000+ ships.”
With such a low number of potential clients, oil majors are not likely to continue to produce high sulfur fuel oil when the prospects for sales of the same are going to be so limited, PSL said.
The oil majors would have to invest in dedicated pipelines, storage tanks and bunker delivery vehicles like tankers that would be solely dedicated/doing the dirty high sulfur fuel oil trade should they chose to produce and sell HSFO, it said.
“This looks like a classic case of too much investment for too little, and very uncertain, returns,” the company said.
SLOW STEAMING, SCRAPPING AHEAD
Ship scrapping has been very disappointing with just 1.71 million deadweight tons of ships being scrapped during Q1 2018 across all sectors in the dry bulk market as compared to 4.99 million dwt in Q1 last year, the company said.
“The existing age profile of the world fleet together with regulatory pressures (ballast water management and clean oil) should result in the world dry bulk fleet growing at a slower pace which will help redress the imbalance between supply and demand,” it said.
While LSFO is likely to be the predominant fuel of choice, it is expected to cost much more than the current cost of HSFO, the company said.
The simplest way to curtail costs would be to reduce consumption via reducing speed, it said.
“Reducing speed from 12 knots to 10 knots would effectively remove 17% of dry bulk shipping supply overnight,” it said.
Ships older than 15 years of age, comprising about 142 million dwt or 17% of the existing fleet would come under maximum pressure and would become ideal candidates for scrapping, as their older engines are not able to burn LSFO.
“In 2020, you are going to have a supply shock either through slow steaming of the entire fleet or a combination of scrapping of some of the older ships and the balance of the existing fleet slow steaming,” it said.
PSL posted a net profit of $3.43 million for Q1 2018. The dry bulk shipper had 36 ships on the water as of December 31, with an aggregate capacity of 1,585,805 dwt.
Source: PlattsPrevious Next
There Is a Steady Growth in the Number of Indian Seafarers Employed: Dr. Malini V. Shankar, (IAS), Director General of Shipping
India Shipping and Offshore Summit