Freight rates in Asia may firm as some ports in the key China market have tightened regulations related to pollution emissions of ships in October.
But a slowdown in trading activity for liquid petrochemicals – the bulk of which are aromatics –amid plant turnarounds in the region could negate any upward pressure on shipping cost.
In the week ended 28 September, freight rates from any point of origin in Asia to mid-China ports inched up by $1/tonne week on week, according to ICIS data.
Ships docking at the ports of Shanghai; and of Ningbo and Zhoushan in Zhejiang province are being required to use fuel with sulphur content not exceeding 0.5% mass by mass (m/m), effective 1 October, based on separate notices issued by individual ports.
The low sulphur-content at the three Chinese ports applies to vessels entering the Yangtze River Delta emission control area.
The regulation is in line with the International Maritime Organisation’s (IMO) new global limit for sulphur in fuel oil used on board ships. The cap will be reduced to 0.5% m/m from 1 January 2020 from the current 3.50% m/m.
IMO’s global sulphur limit is aimed “to significantly reduce the amount of sulphur oxide emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts”, it stated on its website.
Adoption of low sulphur-content fuel is expected to increase operational costs of vessel owners, which are likely to result in firmer-than-usual freight rates to the major Chinese ports, according to shipping sources.
“Low-sulphur fuel usually costs more, so it’s definitely likely that shipowners have already raised their freight for these routes,” a shipping analyst said.
Strong crude futures markets due to supply concerns ahead of the US sanctions on Iran would also lead to higher costs of bunker fuel, which could nudge up freight rates.
Other market participants, however, noted that a heavy turnaround schedule at petrochemical plants in Asia in the fourth quarter would translate to slow traffic of spot shipments on most routes and stall any increase in freights.
“With petrochemical trade slower in the second half of the year compared with the first half of the year, tonnage space is likely to be readily available,” a shipbroker said.
Regional plants producing aromatics such as benzene, toluene, xylene and paraxylene (PX) are currently undergoing turnarounds.
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