Chembulk, ARC prepared for IMO 2020

Market: Oil products
22/10/19

Shipowners Chembulk Tankers and American Roll-On Roll-Off Carrier (ARC) say they are prepared for bunkering 0.5pc sulphur fuel oil.

The two shipping companies outlined different approaches when procuring 0.5pc sulphur bunkers in talks at the Argus Fuel Oil Summit in Miami, Florida.

American Roll-On Roll-Off has a term contract in Antwerp, its primary fueling port, for the purchase of 0.5pc fuel oil through the first half of 2020 at about $70-$80/t discount to gasoil, said Fred Finger, head of operations for the company.

Chembulk Tankers is buying 0.5pc sulphur fuel oil on a spot basis but gives suppliers ample notices, said Melbourne Pinks, senior vice president of marine fuel services for Chembulk. Chembulk has already been burning low-sulphur fuel from Buenos Aires, Argentina. The company will also carry 0.5pc sulphur fuel in cargo tanks, in addition to their fueling tanks, as cargo when necessary to ensure they do not easily run out of the product.

Chembulk said it will not be filing fuel oil non-availability reports (Fonars) — a self-report on non-compliance to a port and a ships flag country — because there's no guarantee the reports will be accepted by the authorities and could lead to fines and vessel detentions.

ARC is using small quantities of marine gasoil (MGO), around 3-15t, to wash out its fueling tanks from high-sulphur fuel oil (HSFO) in preparation for the regulation. The MGO is then consumed in the main engine as HSFO. The washout can be performed while the vessel is in service and is less costly than manual tank cleaning, which requires a cleaning crew.

When shopping for 0.5pc sulphur fuel oil ARC has encountered wide ranging viscosities of five to 210 centistokes.

Both shipowners said they believe 0.5pc sulphur fuel will not be available at some of the smaller ports globally. Pinks said that supply of the IMO 2020 compliant fuel may be an issue on the Pacific coast of South America where Chembulk vessels often fuel.

ARC and Chembulk are not currently investing in scrubbers. For ARC scrubbers could not be justified because of the older age of its vessels, between 12 and 23 years. Pinks expects HSFO to be limited in availability outside of the bunkering hubs and the high-low sulphur fuel oil price discount may not be as wide as the industry was expecting at the beginning of the year.

A shipping market with lots of scrubbers would also result in depressed vessel freight rates, whereas a market with and without scrubbers will encourage a two-tiered freight market, he said.

About 10-14pc of the global fleet would be outfitted with scrubbers by the end of 2019, said Peter Sand, chief shipping analyst with shipping industry association Bimco. This number would increase to 14-20pc by the end of 2020. Sand expects about one third of the VLCC fleet to be fitted with scrubbers by the end of 2020.

Chembulk Tankers owns 17 tankers and time-charters another 17 tankers. About 70pc of its bunker purchases are on a spot basis and the remainder are on a term basis.

ARC operates ten US-flag roll-on roll-off vessels between the US and northwest Europe. About 60pc of ARC's marine fuel burn is MGO and the rest is HSFO. In 2020 it expects to burn half MGO and half 0.5pc sulphur fuel oil.

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