Wait and see the smart play for 2020’s sulphur cap

Who’d be a maritime inventor? A combination of the glacial pace of legislation and the notoriously last minute approach to technology take-up by shipowners makes even the best laid plans difficult to market to maritime customers. Take scrubbers. They’re set to be a hot topic at this year’s Posidonia where Maritime CEO magazine will be distributed. However, despite being marketed for many years – and at many Posidonias of yore – their adoption by owners has still been slow, and now time is running out fast to IMO’s 2020 sulphur cap date. With the number of scrubbers installed on the global commercial fleet still yet to hit four figures, there’s now not enough time and ship repair capacity for mass adoption with 18 months until the sulphur cap kicks in. Owners, it would seem, have shunned scrubbers for now and adopted a wait and see approach with an eye on what refiners will be offering them come January 1, 2020.

Scrubbers have come in for a fair bit of bad press lately. Consultancy Drewry dismissed them in a recent report as a “messy answer” in shipping’s ongoing search to reduce its emissions. Drewry said scrubbers cost approximately $4m to install, and users will still be faced with the problem of waste disposal.

“Owners will also feel vulnerable to later changes in regulations that might make their scrubbers non-compliant,” Drewry warned.

Unlike LNG and low-sulphur marine gasoil, the report pointed out scrubbers will not reduce emissions of greenhouse gases, and this is an area that is likely to come under increasing regulatory scrutiny. A survey of owners by Drewry suggests that they see scrubbers as only a short-term solution.

Khalid Hashim, boss of Thai bulker owner Precious Shipping, writing for us earlier this year, maintained that scrubbers are not the solution, just yet another “mechanical add-on”.

Ishaan Hemnani from bunkering platform BunkerEx suggested in an article for us in April that owners should not be drawn into buying a scrubber just yet.

Scrubbers are not the answer, he wrote, a point of view shared by giants such as Maersk, Hapag-Lloyd and Pacific Basin who have all publicly expressed their doubts.

“Due to the large gulf between HSFO and MGO prices (currently about $230/mt), there is a strong economic incentive for refiners and blenders to produce a stable <0.5% sulphur fuel oil. This increases as the difference in the forward curves gets wider after 2020,” Hemnani wrote.

Besides the likely increased availability of a <0.5% sulphur fuel, there is also the probability of decreased availability of HSFO as it becomes uneconomical for refiners to produce it, and this is perhaps the key in the chicken and egg scrubber big picture debate.

The folk over at Bureau Veritas-backed VeriFuel tell me that in the context that the take-up of scrubbers has been lower than hoped, vessels with scrubbers installed will need to prepare for a future where HSFO could become a niche fuel with reduced availability.

You’ve opted for a scrubber? Then you’re going to need to ensure you’ve got suitable HSFO availability, HFSO storage capacity and HFSO barging (this latter one could be the real wild card) going forward. As a consequence long-term contracts will likely be necessary to ensure supply and pricing. The spot market for will inevitably dwindle.

While normally I do applaud first movers in shipping I have come to believe that owners’ wait and see approach regarding scrubbers and fuel prices come 2020 is actually a smart play.

I threw the scrubber debate out to LinkedIn in May and within days more than 3,000 people had checked out the ensuing discussion. Bjørn Højgaard, CEO at Anglo-Eastern Univan, commented that if the current retrofit pace is anything to go by, less than 2% of the world fleet will have scrubbers come 2020.

“That, in turn,” wrote Højgaard, “just may mean that demand for HSFO will be potentially down 98%, and if that’s the case will the supply chain – between refineries and ship-side – be able to accommodate such a shallow demand, especially given that the same supply chain infrastructure must now contain a multitude of MGO/MDO and hybrid/blend oils that may not be able to mix? What if – just what if – scrubbers turn out to be a red herring, solving a problem that eventually does not exist?”

Dan Weil, CEO at New Navigator Capital, agreed, asking what refineries would be incentivised to produce HSFO in a market they know by definition is declining.

“That’s like arguing for the survival of the finest buggy whip company after the Model T started rolling off the lines,” Weil quipped.

Arguments for and against scrubbers will, I am sure, be heard across the many events at Posidonia next week.

This article first appeared in the just-published Posidonia-themed issue of Maritime CEO magazine. Splash readers can access the full magazine for free online by clicking here.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.


  1. EGCS may not a long term answer but defnitely the best so far for the marine industry as it has been with the inland industries, keeping OPEX low for owners and charterers, avoid increase of GHG for distillates production and LNG, good for PM filtering. The Oil Majors themselves are adopting or supporting its adoption. But it is like with anything, hedge your bets and secure your supply. A lot to say about Maersk too.

  2. 2% of the world fleet having scrubbers does not equate to a 98% reduction in potential HSFO demand. The biggest volumes by far are consumed by the larger ships: Tankers, bulk carriers and Container Ships. These are the ones who possibly stand to benefit financially by continuing to take HSFO. And it has little relevance to the linked suggestion of not affecting greenhouse gas emissions etc. CO2 is a factor of fuel consumption. Those chasing LNG have still not worked out how to deal with methane slip; with methane quoted anywhere up to about 20 times ‘worse’ as a greenhouse gas compared with CO2. At least CO2 is a ‘natural’ gas and dealt with to a great extent within the environment.

  3. The question, “why use a scrubber”, is simple. Compliant MGO is hundreds of USD more in price than scrubber ready IFO 380. LNG is compliant, but not user friendly. Can bunker suppliers give the same coverage with LNG as current bunkers of all types? Brazil to China is over 11,000 NM. Will anyone provide LNG for fuel in Brazil? That is just one loadport. Will there be any economically to visit LNG fuel Hubs Worldwide? Ship Owner/Operators are used to stemming bunkers at the dock or anchorage. A bunker visit otherwise can be uneconomical. Enter Methonol. Methonal can be manufactured using Natural Gas, Coal, or renewable Biomass. It reduces GHG, and PM. It can be stored and used in the current distribution infrastructure. It is biodegradable and mixes and disipates with water. It is environmentally friendly. All the octane needed for a mid-level alcohol fuel is available at a third of the cost. Harry Perry

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