Drewry foresees more slow steaming and transshipment

Drewry says container carriers may try to mitigate the rising cost of fuel by slowing ship speeds and relying more on feeder ships.

Drewry foresees more slow steaming and transshipment

Drewry says container carriers may try to mitigate the rising cost of fuel by slowing ship speeds and relying more on feeder ships.

Drewry foresees more slow steaming and transshipment

Drewry says container carriers may try to mitigate the rising cost of fuel by slowing ship speeds and relying more on feeder ships.

 

   The International Maritime Organization mandate that ships not equipped with scrubbers utilize low sulfur marine fuel next year is likely to result in more “slow steaming” of ships and transhipment, according to Drewry, the London-based consultants.
    “Depending on their success in raising the fuel recovery rate, carriers will inevitably seek to mitigate the anticipated higher operating expenses,” the company said in its Container Insight Weekly newsletter.
    “One potential side-effect from the new regulations could be greater slow steaming and use of transshipment," it explained, saying that as the sailing speed of ships is reduced and round voyages are extended "carriers will drop ports from rotations to ensure that transit times to key points remain competitive.”
    Slow steaming also has been used by carriers as a way to absorb excess capacity since an additional ship must be added to a vessel string if that string is to call the each port on the same day each week.

   Drewry said fewer direct port calls will result in greater need for transshipment and feeder operations.
    Research “shows that in the past there is a reasonably high correlation between incidences of transshipment globally (as a percentage of total port throughput) and bunker prices,” it said.
    “From what we hear, there is a general acceptance among shippers that they will have to pay more towards the fuel cost burden, although there are still a number of sticking points regarding the mechanics of how it should be done,” Drewry said.
    Starting Jan. 1, 2020, the maximum sulfur content in marine fuels globally will be reduced from 3.5 percent to 0.5 percent. Ships with so-called scrubbers that remove sulfur from exhaust gas will be able to continue to use high sulfur fuel. Regulations in so-called “emission control areas,” such as that along much of the U.S. coastline, requiring even cleaner fuel with a maximum sulfur content of 0.1 percent, will also remain in effect.
    The International Energy Agency (IEA) said last week the impact of the IMO cap on the sulfur content of marine fuel will be “possibly biggest shakeup of oil product markets since the phase-out of lead.”
   Fuel costs of carriers “will start to differ to a considerable degree” depending on what kind of fuel they use, Drewry added. Ships with exhaust scrubbers, for example, will be able to continue to use lower cost, residual high sulfur fuel oil (HSFO). Drewry said that in 2018 HSFO was approximately $210 per ton cheaper than cleaner, marine gas oil (MGO) at the Port of Rotterdam, a major bunkering port.
    A new report by IEA suggests that MGO, which is a distillate fuel, will be the preferred option for shipowners whose ships do not have scrubbers starting in January because of reduced availability of low sulfur material to blend with HSFO to make a low sulfur residual fuel, VLSFO or very low sulfur fuel oil.
    IEA said “some shipping companies may also be reluctant to adopt a new fuel immediately, and would prefer to use MGO until they have confidence that VLSFO will be easily available in ports and stable and compatible with similar grades.”
    Last week ExxonMobil told Forbes magazine it will have IMO 2020 compliant fuels available in the ports of Antwerp, Rotterdam, Genoa, Marseilles, Singapore, Laem Chabang and Hong Kong, with locations in North America to follow. Luca Volta, marine fuels venture manager at ExxonMobil, told the magazine he expects the top 10 bunkering ports will have fuel available.
    BP Marine also said last week that it is introducing a new VLSFO, with a maximum 0.5 percent sulfur content, following successful sea trials with fuel manufactured and supplied by BP in the Amsterdam/Rotterdam/Antwerp (ARA) and Singapore hubs.
   “Although the shipping and refining industries have been preparing for the new rules for several years, there have been fears of shortfalls when the rules come into effect,” IEA said
    It said demand for high sulfur residual fuel oil, the main vessel fuel since the 1960s, will fall from 3.5 million barrels per day to 1.4 million barrels per day in just one year. It estimates there will be 4,000 scrubbers installed on large vessels by the end of 2020, consuming 700,000 barrels per day of HSFO.
    IEA said many shipping companies will prefer to use MGO instead of VLSFO, despite its higher price, and the quantity of VLSFO produced will initially be limited to 1 million barrels per day.
    "Some shipping companies may also be reluctant to adopt a new fuel immediately, and would prefer to use MGO until they have confidence that VLSFO will be easily available in ports and stable and compatible with similar grades."

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Drewry foresees more slow steaming and transshipment

Drewry says container carriers may try to mitigate the rising cost of fuel by slowing ship speeds and relying more on feeder ships.

Mar 18, 2019 on Dec 27, 2018AmericanShipper.com

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Drewry foresees more slow steaming and transshipment

Drewry says container carriers may try to mitigate the rising cost of fuel by slowing ship speeds and relying more on feeder ships.

Mar 18, 2019 on Dec 27, 2018AmericanShipper.com