Clock’s Ticking On IMO 2020

Carrier and EPC panelists at a Breakbulk Americas session referred to the haunting creep towards the International Maritime Organization 2020 sulfur regulations as though time was being kept on a doomsday clock.

“We’re at 15 months. I think there is time to figure this out,” said Brent Berg, vice president of business development at Thorco Projects.

It’s a vessel-by-vessel decision of whether to install scrubbers, burn low-sulfur fuel, or park the vessel. From each direction the issues play out.

If you install scrubbers — and many vessels are not designed to handle scrubbers — “you have a vessel in drydock, you have off-hire, you have issues of whether it will break down or is it a reliable piece of equipment,” Berg said. All of these costs are also hitting carriers as they try to crawl out of a historic downturn.

Burning low-sulfur raises issues of quantity and quality of supply, carriers and EPCs agreed.

“We saw this summer where we had bad bunkers in Houston, Panama and over in Asia. That’s a huge cost to carriers,” Berg said.

David Lloreda Calero, chartering manager/special projects at BBC Chartering, said five of the carrier’s ships were affected by bad bunkers, costing more than US$1 million on cleaning, drydocking, spare parts and damaged machinery. “And we still don’t know who produced it or where it came from.”

With the shift to low-sulfur bunkers ships around the world, which are set up primarily to handle high-sulfur fuels, will have to carry both, meaning lower inventories.

Justin Archard, corporate director for commercial at SAL Heavy Lift, questioned whether refineries will provide the low-sulfur fuels in quantities carriers need throughout the world.

“Of global fuel consumption, transportation was 53 percent. Of that, only 6 percent is for shipping, and heavy fuel oil is only 3.5 percent of that. Revenue is about 4 percent. So the actual amount of fuel for shipping is really low on the radar of major refineries,” Archard said. “So convincing them and incentivizing them to create supply for us in this changing environment is going to be as challenging as figuring where to place our ships to actually get the fuel to keep them moving.”

While some panelists questioned whether the IMO might delay the regulations to give the industry time to adjust, Archard believes there’s no changing the course.

“The big liner carriers … are adopting the rules and figuring out their strategies and making capital investments, in the millions,” he said. “Considering our day rates are considerably less than a container vessel, if you’ve made the investment already and somebody says, ‘we’re going to kick this can down the road five years,’ there are people on the other side that are terribly upset.”

Photo credit: Shutterstock

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