In exactly 12 months’ time the shipping industry may regret the lack of engagement with refiners
It is 12 months to the day that I took over the controls of the good ship Tanker Shipping & Trade. The outlook was very different then. I had just been to a ship finance conference in snowy London and the concerns centred, as they nearly always do at a shipping finance conference, on how to raise funds and when the market recovery was going to take place.
Those perennial concerns quickly fell away when President Trump declared a trade war on China. For a while, this looked like weakening any growth in the tanker markets, but as we were to find out as the year progressed, China simply switched from importing US crude oil to other sources.
Nonetheless, later in a freezing cold New York, those Trump trade wars were still the main concern. There was some talk of the IMO 2020 global marine fuel sulphur cap, but this was mainly in the context of the opportunities it might bring. I, too, jumped on that bandwagon with a proposal for an IPO for a fleet of scrubber-equipped VLCCs although it seems some investors were already quite far down that road.
I think at this point, it was widely assumed that under the lobbying that was taking place, IMO would delay the implementation of IMO 2020. This was a theme at a gathering in sunny Rome. That IMO agreed in April to a milestone framework to reduce total annual global shipping emissions by at least 50% over 2008 levels by the middle of the 21st century sent the message that a delay was not an option.
By Posidonia, IMO 2020 was front and centre of most debates at any shipping conference, and schisms developed between those that advocated scrubbers as an alternative, and those looking to compliant fuel. But there was no indication from the refiners as to the availability of compliant fuel – a situation that still exists today.
This was reiterated at the 2018 Tanker Shipping & Trade conference in London where the outgoing (pun intended) Euronav chief executive Paddy Rodgers gave a detailed explanation of the main issue facing larger tanker operators. It is not so much the scrubber issue but the skewed relationship the larger tanker operators have with refiners. The demand for large tankers is largely driven by the oil majors and their ilk who are also the source, via the refineries they operate, of the fuel.
And so, to this year and snowy London again, where Citigoup’s global industry head for the shipping, logistics and offshore industries Michael Parker spoke for many during a heated debate on IMO 2020.
Essentially, he asked: what is the point of a room full of bankers and shipowners discussing IMO 2020 when the people with the answers, the refiners, are not present?
Hence the reason for this comment: it is a point of reference. By mid-February 2020 we will have attended more conferences (including the Tanker Shipping & Trade event below) and we will be six weeks into the new fuel regime.
That is long enough for any pre-2020 voyage to have been completed, bunker tanks and fuel lines to be inspected and for port state control to take punitive action (if indeed it does). Then, for good or bad, we will know the answer to compliant fuel availability.
Book now for the Asian Tanker Conference in Singapore on 26 and 27 February.