While analysts expect disruptions in the coal export and import markets, solutions to the International Maritime Organization\u2019s 2020 sulfur cap remain unclear, a Wood Mackenzie analyst said in a report.<\/p>\n
Starting January 1, 2020, the current 3.5% sulfur cap will fall to 0.5% per IMO regulations.<\/p>\n
\u201cCoal companies relying on ocean transport should brace for increased voyage rates,\u201d Anthony Knutson, Principal Analyst at WoodMac, said in the report.<\/p>\n
\u201cThere will be high costs across the entire supply chain,\u201d a Platts Analytics analyst concurred in an interview with S&P Global Thursday.<\/p>\n
The price of diesel will go up, leading to higher cost for domestic coal freight and to overall higher costs in coal production, from mining equipment, to trucks as the global supply curve shifts to the right.<\/p>\n
In addition, export and domestic margins would tighten, and US demand would be at risk most, the Platts analyst said.<\/p>\n
Particularly, the long-haul supply routes such as Columbia to Asia and South Africa to Asia will be impacted more, the analyst added.<\/p>\n
Additionally, the 2020 cap may lead to increased competition in the power sector.<\/p>\n
\u201cThe idea is if HSFO needs to be gotten rid of, it might be burned in certain power markets,\u201d the Platts analyst said, adding there are limited locations, including the Middle East, ASEAN, and Mexico, which can use high sulfur fuel oil (HSFO) for power generation.<\/p>\n
\u2018WAIT AND WATCH\u2019 APPROACH<\/p>\n
Uncertainty surrounding compliance, in addition to competition between refining and marine investments, have prompted a \u201cwait and watch\u201d approach from both the sectors, the WoodMac report said.<\/p>\n
\u201cRefineries are slow and possibly reluctant to make major investments for the swing,\u201d Knutson said. \u201cRefineries have shown reluctance to invest the hundreds of millions to billions of dollars to increase production of low sulfur marine fuels.\u201d<\/p>\n
Bulker fuel costs are expected to rise even before 2020 and continue rising afterward until a balance is found between shipping company demand and refinery marine bunker fuel output.<\/p>\n
The Wood Mackenzie analyst examined three options for lowering sulfur emissions, including emissions scrubbers systems, switch to low-sulfur fuels, and switch to alternative fuels.<\/p>\n
SCRUBBERS<\/p>\n
WoodMac predicted emissions scrubbers systems to be a \u201cmedium term solution,\u201d although cost effectiveness would come into play in addition to the reduced cargo capacity, considering the added weight.<\/p>\n
The shipping industry is still recovering from the economic downturn of 2016, and has limited credit to pay for fleet-wide projects, especially when scrubbers would likely become superfluous in long term due to increased production of lower-sulfur fuels.<\/p>\n
However, WoodMac \u201casserts the installation of commercial scrubbers has the advantage of being less expensive and faster to put in place than a major refining upgrade, which is highly capital intensive and can take many years to implement.\u201d<\/p>\n
WoodMac estimated scrubber penetration at less than 1% in 2020, in addition to future ship builds being \u201cconstructed \u2018scrubber ready\u2019.\u201d<\/p>\n
By 2025, WoodMac expects \u201cone in five 2013-2018 vintage bulkers will have a scrubber.\u201d<\/p>\n
HIGH TO LOW SULFUR FUEL<\/p>\n
WoodMac said the switch from high-sulfur to low-sulfur fuel as a \u201cshort-to medium-term solution.\u201d<\/p>\n
Bulk carrier ships currently burn residual-based high sulfur fuel oils (HFSO) which have a sulfur content cap of 3.5% under regulations from the IMO.<\/p>\n
Alternate fuel options include distillate fuels marine gasoil (MGO), which has a sulfur content of 0.1%, and an emerging fuel specification with a 0.5% sulfur content known as very low sulfur fuel oil (VLSFO).<\/p>\n
Depending on the compliant fuel type, WoodMac estimates a 20%-40% jump, on a US$\/mt basis, on coal route voyage rates for coal shippers.<\/p>\n
ALTERNATE FUELS<\/p>\n
The last option, switching to alternative fuels such as liquefied natural gas, is seen as a \u201clong-term solution\u201d by WoodMac.<\/p>\n
Although LNG is low-sulfur with clean burning properties, WoodMac listed underdeveloped global infrastructure, slow global investment, and inefficient fuel transfer technology as problematic.<\/p>\n
WoodMac sees \u201climited but growing LNG ship penetration\u201d from 2020 to 2025.<\/p>\n
IMO originally released the coming sulfur cap October 27, 2016, and the organization came to the definitive January 1, 2020, start date this year.<\/p>\n
Source: Platts<\/p>","protected":false},"excerpt":{"rendered":"
While analysts expect disruptions in the coal export and import markets, solutions to the International Maritime Organization\u2019s 2020 sulfur cap remain unclear, a Wood Mackenzie analyst said in a report. Starting January 1, 2020, the current 3.5% sulfur cap will fall to 0.5% per IMO regulations. \u201cCoal companies relying on ocean transport should brace for […]<\/p>\n","protected":false},"author":1,"featured_media":411,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/posts\/410","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/comments?post=410"}],"version-history":[{"count":0,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/posts\/410\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/media\/411"}],"wp:attachment":[{"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/media?parent=410"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/categories?post=410"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bme.vn\/index.php\/wp-json\/wp\/v2\/tags?post=410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}