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Shipping fuel costs to spike 25pc in 2020 on Sulphur Cap

Global shipping fuel costs are likely to rise by a quarter, or $24 billion, in 2020 when new rules limiting sulphur kick in, consultants Wood Mackenzie quoted as saying last Wednesday. The ballooning costs will come as the change in regulations forces a portion of the world’s fleet to switch to lower sulphur, but higher cost, fuels such as marine gasoil (MGO) and ultra low sulphur fuel oil. The International Maritime Organization’s (IMO) rules targeting air pollution will cut the maximum amount of sulphur emissions that ships worldwide can burn to 0.5 percent of fuel content by 2020, from 3.5 percent currently. Ships that install “scrubbers” can continue to burn cheaper high sulphur fuel oil, but the bulk will not install these in time for the shift in 2020.

The 2020 global sulphur limit and the scrubber exercise

It has been a long-standing objective of the IMO to reduce the sulphur content in marine fuels for quite some time now hence, its latest decision to lower the cap to 0.5 percent sulphur content from January 1st, 2020 is of no surprise to anyone.

As expected, this decision aims to reduce the adverse impacts of the SOx, NOx and Particulate Matter emissions produced by the world fleet on human health and to improve the air quality of this world. Although transportation of goods by sea is by far the most environmentally efficient method of trade – far more than road or air transport; these latest regulations will inevitably impose even stricter environmental criteria for the shipping industry. However, the inherent paradox in this, is that the pollution ratios for shipping are constantly improving while the totality of cargo carried by the global fleet is constantly increasing.

South African, Colombia thermal coals compete for weak Indian spot demand

Colombia origin thermal coal is increasingly being sought by traders and end-users in India to compete with South African origin coal, which has been rallying in price for several weeks now.

With the increased interest for Colombian coal in India, sellers of South African 5,500 kcal/kg NAR coal were being pressured to increase their discounts from the benchmark grade 6,000 kcal/kg NAR coal. “It should pressure our discount, but it could also encourage Colombian sellers to increase their price and meet the spot demand,” a producer-trader of South African coal quoted as saying last week.

The source said the supply tightness for the 5,500 kcal/kg NAR grade would likely keep a lower limit on the discount rate, which had been seen to slightly widen so far this week. Although the possibility of Colombian coal completely displacing South African was highly unlikely, it could become a strong competitor for marginal spot cargoes, particularly while Indian demand is weaker than in previous years.

Meeting on shipping industry needs held

The shipping industry needs to move to renewable and alternative fuels to reduce the sector’s impact on the environment. But there is no widely available fuel to manage climate change and local pollutants according to a recent study by researchers at The University of Manchester. How the shipping industry’s need to radically reduce its CO2 emissions will a prominent discussion when the International Maritime Organisation’s Marine Environment Protection Committee (MEPC) meets in London from 9-13 April.

 

Capesize index still bearish

The Capesize index remains technically bearish as we approach the first of our Fibonacci support levels. Technically we remain bearish however momentum indicators are looking oversold as we approach technical support suggesting we should see some form of relief from the downside pressure soon.

Iraq exports nine shipments of gas condensates

Iraq exported nine shipments of natural gas condensates and 21 shipments of gas liquids in the first quarter of the year, its oil ministry quoted as saying last Tuesday. Iraq started exports of natural gas extracted alongside crude oil at its fields in the southern region in 2016. Shipments for the first quarter totalled 188,838 cubic metres of condensates and 73,740 tons of liquids, the ministry said, citing Oil Minister Jabar al-Luaibi. He said he expected volumes to increase as more gas is captured at the fields and processed.

World’s top iron shipper says China import boom to level off

The world’s largest iron ore exporter delivered a mixed message on the outlook, raising near-term price forecasts but combining that revision with a more somber message that China’s gargantuan imports are set to level off as steel production eases in the coming years. Iron ore will average $61.80 a metric ton this year and $51.10 in 2019, Australia’s Department of Industry, Innovation and Science said in a quarterly report on Monday. That compares with projections of $52.60 and $48.80 in the previous outlook. The forecasts are for free-on-board prices.

Compliance to the imo 2020 rule to be ‘quite high’ post-2020 despite concerns

Compliance to the International Maritime Organization’s global sulfur cap rule will likely be ‘quite high,’ with the level expected to settle around 85 -90 percent in the initial years after 2020, Marine and Energy Consulting Limited Managing Director Robin Meech said at an S&P Global Platts event last week.

Less than two years remain for the regulation to be implemented, but there have been widespread industry concerns about the extent of compliance to this rule due to the magnitude of the change and the costs involved. The introduction of the 0.5 percent global sulfur cap is the most significant change since the introduction of liquid bunkers. Some 60 percent of the bunkers will have to switch from [high sulfur fuel oil] to 0.5 percent sulfur overnight, Meech said at the Platts 2nd Annual Bunkering and Storage Asia Conference in Singapore.

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