Analysts say a recent surge in scrubber orders will not be enough to absorb the predicted surplus of high-sulphur residual fuel oil when IMO's global cap on sulphur in fuel takes effect in 2020.
Argus Media analysis of energy and shipping industry manufacturing sectors added to a growing body of evidence showing an uptick of scrubber orders in 2018, particularly in the tanker sector, but said order numbers were too small to have a significant impact on HSFO consumption post-2020.
“Tankers, the second biggest category of residual bunker fuel consumers, saw an uptick in scrubber demand, especially for VLCCs, but the count remains small in the context of the global fleet,” the Argus Media report said.
The report also pointed to a reluctance within the container shipping sector to agree contracts for scrubber installations. Combined with the short installation window ahead of the 1 January 2020 sulphur cap implementation date, the report concluded energy markets would not be able to avoid an HSFO surplus.
“Container ships are the biggest residual fuel oil bunker consumers, and the bigger container ship conglomerates have yet to commit to a scrubber installation strategy,” the Argus Media report said.
“Tankers, container ships and bulk carriers are the biggest consumers of heavy bunker fuel oil, but the number of those vessels with scrubbers accounts for less than 5% of their respective fleets.”
The Argus report cited 2015 figures from the US-based International Council on Clean Transportation which estimated that tankers, container ships and bulk carriers accounted for 78% of the global HSFO bunker demand. Container ships made up 30%, bulk carriers 25%, oil tankers 16% and chemical tankers 7% of global demand, estimated at the time to be more than 210 mta, the report said. The demand for marine distillates in 2015 was roughly a quarter that of HSFO, at 49.52 mta.
With less than 5% of those primary HSFO-consuming market sectors committed to using HSFO with scrubbers after 2020, the likely compliance option for the remainder of the fleet would be low-sulphur distillate fuels, representing a major market shift.
Numbers from Argus Media's own scrubber database shows just 253 vessels across the global commercial fleet fitted with scrubbers. Another 151 vessels will add scrubbers in 2018 and 2019, 130 more between 2020 and 2023, and 309 vessels have contractual options for scrubber installations with no set dates yet agreed.
The report put the total for installed and ordered scrubber systems across the shipping industry at 842, a tally which Argus noted is significantly lower than the 983 scrubber systems the Exhaust Gas Cleaning System Association (EGCSA) reported installed or on order as of May 2018. The discrepancy, according to Argus, “can be attributed to the fact that some shipowners prefer to keep their scrubber installation plans confidential as it could affect their competitive advantage of offering cheaper freight rates in 2020.”
Cruise ships led the charge for scrubber installations in shipping, the Argus report noted, accounting for the majority of vessels with scrubbers in 2017, followed by RoRo freight vessels and ferries.
“To date in 2018, tankers have outpaced cruise ships when it comes to the number of vessel scrubber installations. The tanker count, which includes crude, product and chemical tankers, reached 190 and the cruise ship count was at 174,” Argus reported.
Frontline, which ordered scrubbers for 14 tankers with the option to add 22 more on tankers of unspecified size, are among the shipowners with the most scrubber orders. DHT Holdings is retrofitting scrubbers on 12 of its existing VLCCs and commissioning two newbuild VLCC with scrubbers. Other tanker shipowners outfitting VLCCs and Suezmaxes with scrubbers include Cosmo, Hunter Group, Kyklades Maritime, Maran Tankers, Sentek Marine & Trading and Trafigura.
Trafigura plans to charter up to 32 newbuild tankers of undisclosed size with scrubbers when they are delivered before 2020. Other oil companies that have been looking to secure time-charter of tankers with scrubbers include ExxonMobil, Koch, Total, Statoil, Irving Oil, and GS Caltex, among others.
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