Data from Bloomberg Intelligence show that 67% shippers are not ready for the IMO 2020 Sulphur Limitation Order. Meanwhile, 65% refinery plants said they are not ready, either.
Ben Luckocl as the person in charge of oil trade department for the global commodities trading giant Trafigura views that various participants on the market did not move forward previously because they are not certain about when the new rules will come into effect, “there are only 6 to 12 months left when they believe that the effective date would not extend.”
Clear and transparent rules are necessary
Luckock points out that rules relating to scrubbing units are yet to be clarified and improved. “The precondition for investors to make investment is that they know the rules. Changing rules are not in favor of this industry, what we need are clear and transparent rules.”
Luckock expresses that Trafigura has invested 1.5 billion U.S Dollars to install scrubbing units on 38 newly-built vessels of various sizes. Trafigura will apply other methods to cope with the sulphur limitation order, including applying low-sulphur fuels. “We have no other choice but to comply with it” he said. It is reported that Trafigura is one of the founding members of the Clean Shipping Alliance 2020 that advocates for scrubbing units.
Following the coming sulphur limitation order, the industry will face the issue oversupply of high-sulphur fuels and short-supply of low-sulphur fuels.
Luckock says “We see many refinery plants are trying to increase the production of low-sulphur products, but we still fell that there is imbalance for demand and supply. We believe that there are still 350,000 more barrels of high-sulphur fuels supplied each day than conventional fuels, while there are 350,000 barrels low-sulphur fuels in short each day.” He thinks that such imbalance will be reflected in the prices of products. There will be a mess for first 6 months after the new rules’ becoming effective.
Luckock views that during the first 6 months after sulphur limitation order comes into effect, shipping cost will fluctuate, attributable partly to the reason that there are not many large bunkering centers such as Singapore. “Most bunkering stations are small in size and they need to balance the types of fuels reserves.” “Therefore, the fluctuation is not caused by oversupply of high-sulphur fuels and short-supply of low-sulphur fuels but by prices dislocation from regions and ports, because it is not easy to switch fuel oil in such short time”.