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The global shipping industry is tightening because the sulfur limitation is coming

Views: 111     Author: Site Editor     Publish Time: 2019-10-21      Origin: world ship

Less than three months after the entry into force of the new IMO limit, it is expected that most ships in the global shipping industry will switch to low-sulphur fuels that meet the requirements, and operating costs will increase. However, the change in the price difference between high and low sulfur fuels is extremely difficult to predict. The choice of low-sulfur fuels and desulfurization devices has become an increasingly difficult problem for shipowners.


Standard & Poor's global Platts estimates that by 2020 most ships worldwide will use low-sulfur fuels, which means that about 3 million barrels of high-sulfur fuel will be replaced every day, and fuel prices are likely to rise. Standard & Poor's global Platts believes that by the next year, the average low sulfur combustion will be 240 US dollars per ton higher than that of high sulfur fuel. By 2023, the price difference between the two fuels will gradually drop to 80 US dollars per ton.


On the other hand, oil trading and brokerage firm KPI Bridge Oil forecasts that fuel prices will rise by $160 to $180 per metric ton next year. Delury expects that by 2020, compliant low-sulfur fuel will be $240 more per metric ton than high-sulfur fuel.


However, the price difference between high and low sulfur fuels varies greatly, and the cost and trend are difficult to predict. Data show that on September 6, 2019, the price of high-sulfur fuel was $338, and that of low-sulfur fuel was $553, with a spread of $215. However, on September 12, the price of high-sulfur fuel was raised to $380, while low-sulfur fuel was Down to $535, the spread narrowed to $155. According to oil companies, low-sulfur fuel production costs are more than $75 per ton higher than high-sulfur fuels. The oil price difference determines whether the shipowner is willing to install a desulfurization scrubber, which also affects the future cost recovery amortization time.


Alixpartners, a global consultancy, said the sulfur-restriction regulations may put risks on shipping companies on the East-Asian-America route and the Asia-Europe route. These routes together account for about 20% of global shipments, with only extra cost. 3 billion US dollars, and this cost is expected to be borne by the shipper and freight forwarder.


LarsJensen, CEO of Sea Intellingence Consulting, stressed in March that the bill should be paid by the owner and no one else is willing to pay for it. It is expected that the sulfur-restriction order will increase the cost of the entire container industry by about 10 billion to 15 billion US dollars per year. In the past 7 years, the total profit of the entire shipping industry is about 8 billion US dollars.


Some shipowners said that the price of low-sulfur oil market fluctuated too much, and the industry could hardly predict the result. Shipowners now also face the dilemma of whether ships should install scrubbers or low-sulfur oils. The price fluctuations of low-sulfur oil will not stabilize until the end of the first quarter of 2020, and the future operating cost will also increase.


Industry insiders estimate that about 200 of the 5,000 container ships by 2020 will install exhaust gas scrubbers, and the remaining 96% to 97% will use low-sulfur fuel or LNG. It is worth noting that the Panama Canal has also recently banned the use of open-loop scrubbers, and many regions and ports around the world have long banned the use of open-loop scrubbers.

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