Dec 5, 2019: Ahead of the January 2020 deadline placed by the International Maritime Organisation (IMO) to reduce sulphur emissions, Essar Shipping is installing scrubbers in some of its vessels and simultaneously switching over to the use of compliant (low sulphur) fuel in the rest if its vessels.
The company will make capital investments in four out of the 12 owned vessels. The four vessels consist of three minicapes (bulk carriers) and one VLCC.
The IMO has directed that starting January 2020, the global cap of sulphur content in shipping fuel is to be reduced to 0.5 percent (from the current 3.5 percent). Pollution of the marine environment on a large scale, especially in the Northern European countries has triggered the move.
Essar Shipping estimates the installation of the scrubber to be completed by April/May 2020. With the installation of scrubbers, the capital expenditure recovery (payback period) may be 18 to 24 months depending on differential of prices between HSHFO and LSHFO.
It is estimated that present requirement of approximately 400 million tonne of HSHFO will have to be either replaced with compliant fuel (Low sulphur compliant fuel, Marine gas oil). It is estimated that approx. 15~20 percent of 400 million tonnes will be handled by vessels fitted with scrubbers.
Essar Shipping has listed some challenges while complying with the new rules. These include variables like demand and supply of tonnage, number of ships that are currently trading, the number of ships that will be scrapped, the number of ships that would be installed with scrubbers, the number of ships that are being ordered, the commodity cycle of a particular vessel, etc. It has also listed the imminent recession factor at play, which is caused by low demand for commodities and hence a cut in manufacturing. These lead to a lesser demand of dead weight tonnage (DWT) from the shipping industry.