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Shipping fuel changes for 2020 concern shipowners

Featured Shipping fuel changes for 2020 concern shipowners

Shipowners internationally are awaiting wit baited breath in view of the deadline for the introduction of new low sulfur marine fuels.

After 1 January 2020, shipping should burn fuels with a sulfur content of only 0.5% or if it uses other higher sulfur fuel, it should install scrubbers to "clean" the fuel, in order to achieve the 0.5% target. Other alternatives are the use of other fuels (LNG, etc.), whose emissions are very low in sulfur.

The concern on many shipowners' minds is very broad, as the questions are many. Indicative questions arise as to whether there will be a sufficient amount of new fuels in all ports, and what their price will be, if the best option in terms of cost is the placement of scrubbers or the retrofitting of a ship with engines burning LNG and how easy it will be to supply etc.

More generally, the "2020" case looks like a crossword puzzle for shipowners, as yet without a solution. Shipowners listen to everyone, they study scenarios and avoid making a decision. This is apparent from the fact  that very few are custom-made vessels that can burn LNG. It is calculated that there are little
more than 200 vessels, in a fleet of 49,000 ships above 1,000 gt.

Also, according to the Latest Exhaust Gas Cleaning Systems Association
(EGCSA) data, the demand for scrubbers is minimal, since less than 100 are fitted per year. with the result, as is maintained, this also forces the costs of
system, which are calculated for some vessels at $ 2.5 million.

However, with regard to new fuels, the International Bunker Industry Association(IBIA) presented aseries of forecasts last year at its annual meeting in Sngapore, according to which there is a general optimism that refineries will have many options for shipbuilding to achieve compliance with
limit of 0.50% sulfur content. These fuels will be a mixture of relatively well known fuels generally referred to as very low sulfur fuel oils (VLSFO). Refineries predict that the majorityof the demand for 2020 will
be covered by VLSFO and not by marine gasoil (MGO), while LNG is thought will gain significance after 2025!

In any case, fuel will be available, maintains Ms Irene Notia, founder of Prime Petroleum Services, which, from in 2002, has been active in the international market for marine fuels and represents major Greek shipowners as a Bunker Broker. Already large suppliers such as BP and Chinese firm Bright Oil, are preparing through large scale investments, so that they are ready by 2020, she says.

The crucial question is, however, how will ship owners react to the new environment, and whether the will have the funding to procure fuel. As estimated, there will be presale agreements and in this case the liquidity and stability and close relations of the owner with the natural purveyor is of particular importance.

More generally, Ms Notias noted that the market for marine fuels is a very particular market, in which commodities and services move,and which displays
marked changes, in recent years, which require more and more diligence from shipowners, who are interested in reducing risks and costs.

Marine fuels, one of the three largest costs for the operation of a ship, pre-
the shipowner procures either directly from Physical Suppliers, or through merchants (Bunker Traders) that mediate between physical suppliers
and shipowners, explains Ms Notia. Until 2005, the customer - end user - was "king" and was known by the whole market as he created competition, since
he addressed many physical suppliers and bunker traders, putting it this way
many players in the game and ending up often agreeing straight through the physical supplier, either through a broker or on his own. There was still some
trust. The big change came after the fall of the multinational (Supplier
and Trader), OW Bunker, according to Ms Notia, and this change meant that the buyer, the final consumer, is no longer the "king," as bunker traders
had acquired significant power, being the one who provides credit for the
user and payment without delay to the physical supplier, who in turn does not risk giving credit to a customer he does not know, thus prefering the safety of the bunker trader.

Therefore, many are those who prefer the trader for the supply of their ships, as he secures credit and a longer repayment period. However, Ms Notia warns, when end-users distance themselves from physical suppliers may lose their negotiating power.