Supply chains stretched as shipping’s new fuel regulations enter force
Container vessel Sajir is due for conversion in 2020. For retrofit, MAN Energy Solutions will deliver a MAN Dual-Fuel ME GI (gas injection) engine to run on HFO and LNG. (Source: MAN)
Although most shipping companies have been preparing for the IMO’s new fuel regulations for many months, supply issues, uncertainties and risks, as well as opportunities, are likely in the early weeks of 2020.
New York-based shipbroker, Poten & Partners, estimates that the IMO’s regulations, which entered force at midnight on December 31, will have a direct impact on some 60,000 commercial vessels. Marine fuel prices have already risen, Poten reports, and global supply chains have been stretched to ensure that compliant fuels are available in all major bunkering hubs. Poten reports that the vast majority of shipowners have decided to switch to compliant fuels – either Very Low Sulphur Fuel Oil (VLSFO) with a maximum sulphur content of 0.5%, or Low Sulphur Marine Gas Oil.
Only about 1% of the world fleet is powered by LNG, according to a recent Poten market report, although some LNG retrofits have been completed or are planned. Hapag-Lloyd’s 19,870-TEU Sajir, a vessel acquired when the German container line took over UASC and due for conversion to LNG propulsion in 2020, is one example.
Meanwhile, another “several thousand vessels” have been fitted with scrubbers to remove sulphur from ships’ emissions, the broker said. Again, scrubber installations will continue for a significant spell.
However, in some locations, ship operators have been forced to wait for suitable fuels for up to one week. Meanwhile, a significant volume of fuel supply has been locked in on term contracts by owners who wish to guarantee availability and avoid exposure to spot market pricing risk.
