Pacific Basin dismisses using scrubbers to meet IMO 2020 rule

PacificBasinShipping

Hong Kong’s Pacific Basin Shipping — one of the world’s largest shipowner and operator of modern Handysize tonnage — will likely opt for low sulfur fuel oil over scrubbers to comply with the International Maritime Organization’s upcoming 0.5% global sulfur cap rule, the company said Wednesday.

“We do not think that sulfur scrubbers are an effective solution either technically or environmentally,” Pacific Basin CEO Mats Berglund said during the company’s 2017 annual results presentation.

By announcing its plans to use LSFO as an option to comply with IMO’s sulfur cap starting January 1, 2020, from 3.5% currently, Pacific Basin joins a list of shipowners including Maersk Line — the world’s largest shipping company –who last year said it would not be using the scrubbers technology in 2020.

There are too many uncertainties over the price of scrubbers and availability of fuel oil for vessels with scrubbers, Berglund said.

According to industry estimates, a scrubber costs around $2 million-$6 million per ship to install while switching to 0.5% sulfur fuel will cost nothing initially.

Once the bulk of marine demand has switched to 0.5% sulfur fuel, the incentive to keep fuel oil in stock for the few vessels that have scrubbers installed will be much lower, according to them.

Waste water management, potential transition periods before one can practically comply also made a scrubber investment very difficult, Berglund said.

“We much prefer a mandate to use low sulfur fuel and the level playing field, lower speeds and lower emissions (including CO2) this would support,” he said.

While the global sulfur cap is set to bring about one of the most significant changes in the shipping industry, Pacific Basin is also preparing for IMO’s regulation on ballast water management.

“We are planning to start installing systems late this year and then gradually ship by ship over a five-year period through 2023,” Berglund said.

Although the new rules are expected to increase capital expenditure costs for shipowners, Berglund said the move was a positive one as the cost of complying with the new regulations will penalize poor performing and older ships while benefiting stronger companies with high quality fleets.

The rules will also likely improve the prospects of the dry bulk sector as accelerated scrapping will likely occur, thereby reducing net fleet growth, he said.

STEAMING AHEAD

“A positive global economic and commodity demand outlook and lower newbuilding deliveries, especially in our segment, bode well for the market in the medium term,” Berglund said.

The company will continue to focus on its Handysize and Supramax dry bulk business, he said.

Newbuildings are not being ordered right now as the risk and payback is excessive due to uncertainties in several areas including new environmental regulations and potential technological developments in future.

However, the company will continue to look at “good quality secondhand ship acquisition opportunities” as prices are still historically low, Berglund added.

The group swung to a net profit of $3.6 million for the year ended December 31, 2017 after reporting a net loss of $86.5 million in 2016. Its bunker fuel consumption in 2017 was $338.5 million, up from $220.5 million in 2016, according to its latest annual report.

The dry bulk shipper operates about 7% of the global 25,000-42,000 dwt Handysize ships of less than 20 years old, and around 3% of global 50,000-65,000 dwt Supramaxes of less than 20 years old.

As of December 31, its total fleet size was 225 vessels, of which 105 were owned by the company.

Source: Platts

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