Results from a survey on the expected cost of fuel in 2020 are a welcome addition to rampant speculation surrounding the IMO 2020 global sulphur cap
In 12 months’ time, with just a a few weeks to go before IMO's global cap on sulphur in fuel is implemented, we might have a clearer indication of the pricing of low sulphur fuel versus high sulphur fuel in the major bunkering ports.
In the here and now, however, we can only speculate on what the price differential could be. It can be an enjoyable exercise, and it makes for interesting reading in reports like the latest Moore Stephens Shipping Confidence Index.
The last iteration of the Shipping Confidence Index -- the firm's regular survey of the industry -- included a supplementary question asking respondents to reply with their expectation of the price differential between high sulphur fuel oil and IMO-compliant low sulphur fuel oil on 1 January 2020.
The spread of price differentials given by the bulk of respondents was very wide: from US$175/tonne to nearly US$400/tonne.
For comparison, the projections from UK-based shipping consultancy Drewry are in the US$300/tonne range with a steep fall to less than US$90/tonne in the years that follow 2020, while CR Ocean Engineering (a long-time scrubber manufacturing business) president Nicholas Confuorto predicted the differential as high as US$600/tonne during his presentation to the Sulphur Cap 2020 Conference* in Amsterdam in 2018.
What we do know from observations from similar price phenomena such as derivatives is that expectations of future price narrow as the actual price deadline approaches. Which is why I welcome the Moore Stephens survey and I hope that this supplementary question is posed every three months in the run up to the IMO 2020 global sulphur cap and beyond.
What do you think the price differential will be in a year's time? Email me with your thoughts.