Incoming regulations to cut sulphur emissions from 2020 have the potential to lift freight rates, raise fuel costs, and reduce trading opportunities for less fuel-efficient vessels, according to shipbroker Simpson Spence Young (SSY).
Speaking at a London International Shipping Week event jointly hosted by SSY, bunker supplier Peninsula Petroleum and Bloomberg, SSY consultancy & research senior director Derek Langston said the already significant earnings spread between modern “eco” ship designs and older units will likely widen with the advent of 2020.
Langston said this could spill over to affect vessel values, accentuating the differences with the less competitive ships and accelerating demolition.
The panel outlined the bewildering array of choices facing shipowners to meet the new SOx regulations.
Peninsula bunker fuels head of credit & market analysis Will Bathurst listed five comprising new low sulphur compliant fuels, marine distillates, exhaust gas emissions scrubbers, LNG and methanol.
Bathurst said industry does not know what is available in terms of fuels, their cost, and availability. There are also questions on compliance and how the new regulations will be enforced.
The Peninsula analyst said: “Overall the compliance cost is going to push up the cost of transport, with seabourne rates, especially for long haul voyages, under pressure and that could potentially change trade flows and markets.”
He added that the industry is also going to see an increased call on bunker credit lines. "I see a big problem for the industry moving forward on that."
“Given the expense of compliance, the new regulations are going to prompt demolition, Bathurst said. “People are not going to invest in the older ships to make the changes because you are not going to get payback on your investment.”
Bathurst said owners making decisions need to think about the period beyond 2020 when regulators are also likely to start focussing on NOx, CO2 and particulates.
