Low in sulphur but high in price?

Low-sulphur bunkers will be in adequate supply from the January 2020 implementation date for emissions reforms, but significant questions of price and quality of the fuel remain, a specialist said today.

Rasmus Jacobsen, managing director for Monjasa Americas, told the Association of Ship Brokers and Agents (ASBA) annual cargo conference in Miami Beach that supply is the issue he is most comfortable predicting after extensive discussions with producers.

“Everyone agrees there will be enough compliant fuel,” Jacobsen said.

“One reason that some people may be insecure about that is that the oil majors are not keen to talk about it (for competitive reasons).

“Pricing is a question that we get all the time, and the answer is that we just don’t know. There’s so much uncertainty that we’ve reached no conclusions on pricing yet.”

Jacobsen did refer to oil analysts’ projections that there could be a $425 per tonne spread between cost of complaint 0.5% fuel oil and HSFO by 2020.

There are indications of “a high incentive to use high-sulphur if you’re only looking at pricing,” Jacobsen said, with the need to factor in cost of exhaust gas scrubbers.

Other members of the conference’s opening tankers panel offered their own takes on pricing and quality concerns.

Jason Klopfer, managing director for Navig8 Americas, said his company took into account the price-spread issue when it elected to fit scrubbers on the eight long-range two (LR2) products tankers and eight medium-range (MR) units it has ordered from New Times Shipyard in China.

The tankers will operate under Navig’s Product 2020 banner. Klopfer’s remark on the subject is believed to be Navig8’s first public acknowledgement of the order outside of its website, and confirmed that the MRs will be included under Product 2020.

“We felt and we continue to feel that high-sulphur will get cheaper and low-sulphur will continue to get more expensive,” Klopfer said.

“There’s an advantage for owners to retrofit or install scrubbers on newbuildings coming from the yard. How long that spread will last is a question. But there will be a spread. And there’s obviously potential for it to widen even further (from 2020), where the chances of it dwindling are less likely.”

International Seaways’ Derek Solon, chief commercial officer, detailed the New York tanker company’s thinking behind its recent announcement that it would put exhaust gas cleaning systems on seven modern VLCCs, with an option to outfit the remaining three.

“The VLCCs were the most clear financially beneficial class of ship to put the scrubbers on — they burn the most fuel, they spend the most time at sea, they offer the biggest benefit,” he said.

But Solon also noted that Seaways plans to use low-sulphur bunkers for some of its smaller vessels.

Turning to Jacobsen, Solon said: “You say low-sulphur will be available — we happen to think the same way.”

The panel also cited concern over quality as the fuel situation becomes increasingly complex, particularly in the wake of bunkers contamination in the US Gulf, Singapore and other locations.

“Shipowners are testing products already,” Jacobsen said. “The actual quality and compatibility issues are still largely unknown.”

He added that owners will need to remain vigilant “to make sure the product you order is the product that you get.”

Speaking in reference to one of the Navig8 group’s less-known entities — bunkers procurer Integr8 — Klopfer said the unit has been working to increase transparency of fuel quality and pricing in communication with its clients.

“Bunker suppliers need to take more responsibility,” he said.

Solon said Seaways is already engaged with pools and commercial managers over the quality issue and such talks will intensify as January 2020 draws closer.

“For us, it’s about dialogue and the dialogue starts now,” Solon said. “Operational preparations need to be done. The implementation for (January 2020) starts sometime in the middle of next year.”