Will the product tanker fleet benefit from IMO 2020? Craig Jallal is not so sure.
Shipping analysts seem to collectively agree that the product tanker fleet will benefit from the IMO 2020 global sulphur cap. The theory is that new refineries are most likely to feature the hydrocrackers required to extract sulphur to create the low sulphur marine fuel. The majority of new refineries have been or are under construction in the Middle East and southeast Asia, whereas the low sulphur fuel is required in Europe and the Americas.
Analysts readily admit that there are flaws in this theory. The main flaw is that refineries alter the ‘slate’ or the mix of the output in response to market conditions. If there is local high demand for aviation fuel, then the refinery will alter the slate to maximise production of avgas. Nonetheless, it is felt there will be a high demand for low sulphur fuel post-2020, which will be shipped in product tankers from the Middle East and southeast Asia to Europe and the US markets.
However, at the Marine Money 10th Anniversary London Forum, Maritime Strategies International managing director Dr Adam Kent mentioned two new factors. The first is that not all the new refineries in China are geared towards serving traditional markets. Apparently two substantial refineries have been built to serve the requirements of petrochemical plants which are attached to clothing factories.
The second factor is that Suezmax and even VLCC newbuildings are making maiden voyages carrying petroleum products from southeast Asia to the West. According to MSI, in one case a newly delivered Suezmax made four consecutive clean petroleum product voyages.
What is the potential to impact the product tanker trade east to west? According to VesselsValue, there are 87 VLCCs and Suezmax tankers due for delivery by the end of 2019. These have the potential to be a ruinous swing supply of product tankers by carrying clean petroleum products on their first voyage or subsequent voyages.
This ad hoc analysis suggests to me that the IMO 2020 global sulphur cap on marine fuel may not be the bonanza the product tanker trades were expecting, but I stand to be corrected.
Do you think the product tanker trades will benefit from the change in marine fuel regulations – how and why? Contact firstname.lastname@example.org
Don’t forget, you can have your say on these matters at the Asian Tanker Conference in Singapore in February.