- Surabhi Sahu
- INTERVIEW: Move to IMO's HSFO carriage ban 'very smooth': Precious Shipping MD
The transition to the International Maritime Organization’s HSFO carriage ban has been "very smooth" for the shipping industry despite initial fears of widespread non-compliance from some quarters, Thailand's Precious Shipping Ltd., or PSL, MD Khalid Hashim told S&P Global Platts.
"This was an ongoing process that most ship owners had started sometime during the second half of 2019. By the time the year ended, most ships were already running on LSFO," Hashim said in an interview Monday.
PSL, for its part, has had all its ships -- modern and those that are not so modern -- successfully switch over to LSFO without any issues, he said.
The company fleet comprised 36 ships, with an average age of just 8.3 years at the start of this year, PSL said in its Q1 2020 newsletter.
Cleaning the fuel tanks of these very modern ships has been easily done by the crew, costing the company no extra time or money, it said in its newsletter last week.
"For the few ships that are a bit older and that have their fuel tanks located in the double bottoms of these ships, we had started ‘dosing’ such bunker tanks with a chemical designed to dislodge residue sludge from the tank structure and bottom."
"After three cycles of such dosing, the tanks were cleaned by our ships staff for receiving compliant fuel oil," it added in the newsletter.
The coronavirus pandemic has crippled oil demand and the impact on crude oil prices has reduced prices of LSFO and HSFO, Hashim said.
LSFO prices have, however, fallen far more sharply than those of HSFO, resulting in the LSFO-HSFO spread "narrowing from over $400/mt at the start of the year to under $50/mt in the current low oil price environment," he said.
In Singapore, the world's largest bunkering port, the spread between delivered Marine Fuel 0.5% fuel and fuel oil 380CST was $79/mt at Monday close, Platts data showed.
"As we are a tramp operator of ships and we are never sure how long the next journey could be before we lift LSFO bunkers again, we generally tank up our ships when we are at a major bunkering port," Hashim said.
"As a result, we were carrying rather high priced bunkers at the start of the year and these will be/have been used up, as time progresses, and be/have been replaced by the much cheaper LSFO that is currently available," Hashim added.
Apart from that, the spread of the pandemic had also delayed planned dry docks as Chinese shipyards were not prepared to accept ships, and some are still reluctant to do so, he said.
This has also delayed scrubber retrofits and installation of ballast water treatment systems, he said.
"To the best of my knowledge, we had just a couple of ships that were so impacted but those ships have either got longer term extensions or are getting the BWTS fitted in the coming few months,” Hashim said.
Meanwhile, quarantine restrictions imposed by different countries on ships entering their ports, the issue of crew changes and new protocols to ensure crew safety have been some other fall-outs of the pandemic, PSL said.
PSL, however, hasn’t been impacted much, nor has it experienced any bunkering delays in Thailand or elsewhere in the world, Hashim said.
“There are likely a few owners who have stopped the retrofitting exercise for scrubbers on their ships as it is proving very costly in terms of down time as well as cash outlays in an environment where cash flows are being squeezed by the demand-destroying lockdowns being enacted by country after country all over the world,” Hashim said.
Separately, Alexander Yap, senior analyst at Platts Analytics, last month said the number of scrubbers in operation at the start of the year was 2,200.
“Platts Analytics previously projected 3,500 scrubber installations globally by the start of 2021, but this will likely not be met with disruptions from coronavirus and cancellations due to the narrowing price spread between high and low sulfur fuel,” he added.
Meanwhile, Hashim said that the HSFO sold in Argentina typically has a sulfur content of around 0.25%, which is even better than the IMO mandated LSFO that should not have sulfur content exceeding 0.5%.
"In terms of price differential, we have always maintained that this [HSFO-LSFO] spread should not be more than the $40/mt level, which was the difference in price of HSFO in Singapore and Argentina during 2019," Hashim said.
"We would not be surprised if/when the day arrives that this differential narrows to zero or reverses the other way around and you pay a premium for HSFO over the more commonly demanded and voluminously produced LSFO," he added.