Hellenic Shipping News
The International Maritime Organisation (IMO) has directed that starting January 2020, the global cap of sulphur content in shipping fuel is to be reduced to 0.5% (from the current 3.5%). This decision has been triggered because there is a huge amount of damage taking place in the marine environment due to high sulphur emissions, especially in Northern European countries, UK being the highest sufferer.
Essar Shipping which is India’s second largest private sector shipping company is in support of this decision and is in the process of adapting to be more environment-friendly and implementing processes that will reduce the harm caused to maritime environment due to sulphur in the fuel.
Essar Shipping is undertaking the change by installing scrubbers in some of its vessels and simultaneously switching over to the use of compliant (low sulphur) fuel in the rest if its vessels. The company will make capital investments in four out of the 12 owned vessels. The four vessels consist of three minicapes (bulk carriers) and one VLCC.
The company estimates the installation of the scrubber to be completed by April/May 2020. With the installation of scrubbers, the capital expenditure recovery (payback period) may be 18 to 24 months depending on differential of prices between HSHFO and LSHFO.
However, there are some challenges that need to be taken into account. While forecasting in this business, there are numerous variables that come into play, such as, demand and supply of tonnage, number of ships that are currently trading, the number of ships that will be scrapped, the number of ships that would be installed with scrubbers, the number of ships that are being ordered, the commodity cycle of a particular vessel, etc.
It is estimated that present requirement of approx. 400 million ton of HSHFO will have to be either replaced with compliant fuel (Low sulphur compliant fuel, Marine gas oil). It is estimated that approx. 15~20% of 400 Million tons will be handled by vessels fitted with scrubber.
The imminent recession is also a factor at play. During a period of recession, the demand for commodities is low, which leads manufacturers to cut down on production, which in turn leads to a lesser demand of dead weight tonnage (DWT) from the shipping industry.
Source: TradeWinds News