Operators of handy bulk carriers are facing plenty of fuel headaches in the final month before the sulphur cap starts.
Leaving aside all the technical preparation and permutation that IMO 2020 has thrown up, the essential commercial problem facing shipowners is simple: How can you get to the December 31 burning high sulphur without being left with non-compliant bunkers onboard? Today the spread between the two fuel grades sits at between $250 and $300 per metric tonne, so the impact on returns is potentially huge.
In some areas of the shipping market this is actually not proving that difficult, as for example with the containerships that are trading in regular patterns that can be predicted months in advance. The bulk market, especially in the smaller geared sector is a different story. Quite often the trading pattern of the ships can change wildly from voyage to voyage, and often is not finalised until the day the vessel comes open from a charter. So how much bunkers should you have onboard? Logic suggests most handy owners would be cautious and keep high sulphurs bunkers onboard to a minimum, and top up where they can.
But, and the following are all very current examples, life is not that simple.
1) Some ships have ended up with far too much bunkers remaining onboard, due to negligence or chance. A good example is a vessel that has been fixed out of North China to the Middle East last week with 450 metric tonnes of non-compliant bunkers onboard. Her problem apparently was she took her fill of bunkers in Singapore in September, and then waited unexpectedly for six weeks in Manila to discharge a cargo.
2) Where ships are on long-term charters to owners that cross the 2020 deadline but don’t have protective clauses, there are disputes arising as charterers try to maximise earnings and push the fuel issue onto the owners. One broker has said they can see large numbers of potential cases looming as January 1 approaches.
3) Some operators are profiteering by finding vessels that need to perform long voyages to use up bunkers remaining onboard, and are fixing them at low rates, locking in better than normal voyage profits. As one large handy operator said, there currently isn’t a shipping market – there are just owners managing their bunkers.
4) Even prudent owners with minimal non-compliant fuel on board are struggling, precisely because predatory operators are preferring to find owners with problems, and fix with them, and in every region there seems to be enough over bunkered vessels willing to discount heavily.
It’s making for a confusing and frustrating Christmas chartering market in the handy sector.