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Home » Looking Ahead: The Bunkering Market After 2020

Looking Ahead: The Bunkering Market After 2020

August 29, 2017
The Maritime Executive

Q: How do you expect that the 2020 sulfur regulations will affect shipping?

The sulfur regulations will create a significant, disruptive change in the demand pattern almost overnight. You can expect shortages, and you can expect that the right type of fuel product is not always going to be available at the right place and the right time. 

The shipping industry consumes about 2.5 million barrels per day of fuel oil, and that will have to shift to either MGO or ultra-low-sulfur fuel oil. Today there's a $200 gap between heavy fuel oil and gas oil. If I'm a shipowner and I don't make any changes, I'm going to pay $200-per-ton more. That's a material cost to my operation. Fuel represents half the cost of vessel operations, and at current prices, a $200-per-ton increase means an increase in total operating costs of at least 20 percent. If I'm just barely surviving in a sluggish market and I have an additional 20-25 percent cost, that's scary stuff — and I can't expect to pass this expense on to the shipper.

Q: How much of a role will scrubbers have in this market?

The vessel operators face a high cost no matter what they do. If you put scrubbers on board, you pay a capital expense of $2m to $3m. And it may not even be an option, depending on the type of ship you have and the availability of the equipment. There are about 1,000 ships with scrubbers fitted today, and the scrubber manufacturers could probably fit another 200-300 per year if they had full order books. We have about 2.5 years left to get ready, and there are about 50,000 deep sea vessels. This means that scrubbers are just not a mainstream option — they are a niche option to use if you're in a particular trade area or a particular business.

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KEYWORDS Chemicals & Energy Global Logistics Global Supply Chain Management Logistics Logistics Outsourcing Ocean Transportation Regulation & Compliance SC Security & Risk Mgmt sustainability Transportation & Distribution
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