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Mass business failures expected ahead of 2020 sulphur deadline

Industry denial over 2020 expected to force owners out of business within two years. It will generate nothing but chaos from mid-2019, says consultant

INDUSTRY denial over 2020 low-sulphur fuel regulations is expected to force a cascade of owners out of business within two years.

Highly indebted owners will find cost pressures from expensive low-sulphur fuels will push their businesses over the edge, forcing mass failures, Lloyd’s List has been told.

“The elephant in the room is IMO 2020,” marine energy consultant Adrian Tolson said. “A lot of people don't feel it yet. It has been pushed under the carpet.

“It will generate nothing but chaos from mid-2019.”

Reports of expected price differential between high-sulphur fuel oils and low-sulphur fuels post-2020 range from $200 to $600 per tonne, potentially adding millions of dollars in fuel costs per journey.

Veritas Petroleum Services group commercial director Steve Bee said a price differential of $400 per tonne would be a heavy increase in the operational expenditure for anyone choosing the distillate fuel option.

The price would be reflected in the limited availability of compliant fuels at ports, World Fuel Services marine technical quality manager John Stirling said.

That equated to about 3m barrels per day demand for distillates from January 1, 2020. “It will be very competitive for fuels at ports. Vessels could call at ports and find compliant fuel is not available.”

A 2017 study by energy consultants Wood McKenzie found that global bunker fuel costs could rise by up to $60bn annually from 2020 in a full compliance scenario.

The availability of heavy fuel oil is also expected to reduce dramatically post 2020, as demand drops off, pushing the cost up for vessels with abatement technology.

Fewer than 400 vessels in the global fleet currently have scrubber technology installed, Intertanko managing director Katherina Stanzel said, with less than 50 on board tankers. The window for fitting those systems closing fast.

“Smaller ports won’t continue to handle HFO post-2020,” BIMCO secretary-general Angus Frew warned.

“Bunker operators are going to have significant problems in stocking in many ports, both a distillate or a low-sulphur fuel and a heavy fuel oil; or at least not cheaply.”

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