The World Maritime and Its Problem with the use of New Fuel
From 01 January 2020 and given the provision of a two-month transitional period of grace, global shipping is required to use the new fuels (LSHFO 0.5%) that have a low content of 0.5% sulphur. But there is a strong concern in world shipping because of the problems that have arisen since the beginning of time in terms of the use of new fuel.
The regulatory legislative framework governing the use of new fuel by world shipping cannot correct the problems that have occurred so far.
The problems with the use of new fuel and the problematic solutions
These problems are due to the limited availability of new fuel globally,
resulting in a large deviation in price
spread between the new fuel
(LSHFO 0,5%) in relation to the prices of old fuel (LSHFO
3,5%) and fuel oil (HFO) and the deficiencies presented in the
supervisory systems imposed on the proper use of the new fuel by the shipping
For newly-created ships using new technology fuels such as liquefied natural gas (LNG) and new fuel oil with the low sulphur content (LSHFO 0,5%) containing seven times lower sulphur content than fuel oil from 2012 onwards (LSHFO 3,5%) there is no problem in complying with the new regulations of MARPOL Protocol (For more information read the analysis titled«The Benefits of Reducing Air Pollution due to restrictions on Maritime Fuels»). But there are increased burdens.
Calculations of the previous week indicate price deviation in price spread
between the new fuel (LSHFO 0,5%) in
relation to the prices of old fuel (LSHFO
3,5%) and fuel oil (HFO) in the order of $200-$300 per ton. This means
an ever-increasing cost for shipping companies using the new fuel technology.
On the other hand, most vessels using the old fuel and adapting to the new data set by the new fuel regulatory framework forced to adapt new technologies.
More specifically, an increasing percentage of ships have installed scrubbers-sulfur purification systems, which appear as a good solution to reduce sulphur SOx emissions and PM particles from the engines, generators and boilers of their ships equally.
The scrubbers cost about €2,5 million – €4 million. A total of scrubbers’ ships has been placed on 3150 vessels, most of these ships are ferry boats and cruise ships, while existing scrubbers’ orders are approaching 3800 to be placed on a corresponding number of ships.
Until their placement and given the two-month grace period which has been given to them by the placing of the scrubbers they will be obliged to burn the new fuel (LSHFO 0,5%).
But here too there are problems since the scrubbers could hold only one
pollutant at a time, i.e. oxides of sulphur or nitrogen (NOx). In addition,
scrubbers cannot reduce CO2 emissions, while reducing particles
(ROM) by only 60%.
But the process of transition to the use of new fuel is very slow. This is
partly due to the need for a specific time to clean the tanks, boilers, engines
and generators of ships from the old fuel.
As a solution of necessity, these shipping companies are promoting the
mixing of high sulphur (HFO) fuel oil with low sulphur diesel fuel (LSHFO 0,5%)
to achieve the expected result that is a maximum of 0,5% sulfur in the mix. But
the mixing rate will practically reach 80% and increase the cost of the new
fuel by 50% compared to the old fuel.
Apart from the cost, such mixing of different fuels with different
compositions will cause serious problems in the safety of the ship and in the
maintenance of the problems that will occur in the manufactured for combustion
fuel oil nautical engines.
In addition, the increase in the price of new fuels will force shipping
companies to increase fares by 25%-28%, and as the burden borne by shipping
companies will shift it to shippers and therefore to consumers. In depth,
however, this increase in fares will correct downward due to the high availability-number
of ships using the new fuel.
Additional problem keeping the new fuels at high prices is that these are
not readily available on the whole planet and such as fuel oil (HFO). The
investments that will need to be made to have new fuel storage facilities
across the planet are approaching the sum of $330 billion. In addition, 5m
barrels per day (mbd) of high sulphur fuel oil fuels (HSHFO) will need to
switch to fuel with just 0,5% sulphur content.
Japan, and specifically the largest oil refining company of Cosmo Oil Company, Limited, since autumn 2019 began to accumulate stocks of new fuel (LSHFO 0,5%) due to the high anticipated demand for it. Respectively, China before the end of the previous year was forced to make a massive importation of the new fuel with aim to serve its growing needs.
The regulatory framework from the use of new fuel and the problems of the
According to the new regulatory framework for new fuels as it concerns for the authenticity of the marine fuel is considered responsible the supplier of fuel.
In the event that the ship’s management finds either on board or stationary at the port, that the fuel is not authentic new, due to the conduct of the ship, it is obliged to immediately inform the authorities of the country where its headquarters are, for the present deviations in the used fuels.
The monitoring systems under which the new maritime fuel (CISIS, THESIS)
and the EU is used to provide information on where and how the new fuels are
made available are not functioning effectively. For these reasons many
countries have banned the use of open loop scrubbers in their ports.
In our opinion the solution to all these problems is the low lending of small to capital adequacy shipping companies with repayment of these loans being done in the long term, so that these companies either replace their full manufactured for combustion fuel oil shipping engines of their ships or to invest in the construction of new ships of modern technology.
In this case the cost of borrowing and replacement will be allocated to long-term depreciation in order not to increase fares at high levels and at the same time all these shipping companies will remain competitive at international level.
However, this solution should be applied to all shipping companies worldwide so that the cost of raising fares is negligible in relation to the current prevailing conditions.
In this case, and if a stable and gradual replacement of the world maritime fleet is achieved in terms of the use of the new fuel, the shipping industry will not have to use solutions that oblige it to compete with other industries for the use of marine fuel that fires its cost at high levels and makes it less competitive.
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