As 2018 draws to a close and we look ahead to 2019, one topic is dominating conversations throughout the shipping industry.
The International Maritime Organisation (IMO)’s sulphur cap to ban fuels with over 0.5% m/m sulphur content by weight, was first agreed in 2008, with an agreed deadline of January 2020. Today, despite having had a decade to prepare, the close proximity of the deadline has the shipping sector in a near-crisis situation.
A situation has now emerged in which the whole shipping industry has a challenge on its hands – to make the approximately 60,000 commercial vessels operations today compliant with the new rules in just over 12 months. As it stands, only a tiny proportion are currently compliant. A gargantuan task then, which has left many companies wondering if efforts now are just going to be too little, too late.
When it comes to tackling this, consensus is that there are 2 options available. Either change the fuel source entirely (which was the intention of the 2008 agreement) or to cut down the sulphur emissions from the fuel currently being used.
For someone coming into the situation blind and unaware of the complexities of the problem, the obvious solution to this would be to change the fuel to a low-sulphur alternative. If you’re currently using environmentally-unfriendly fuel with high sulphur emissions, just use a more environmentally friendly fuel source with lower sulphur emissions, right?
Well, kind of, but it’s not that easy. It could have been, if the industry had acted collectively in the early 2010’s, but they didn’t. The situation now exists where alternatives to high-sulphur fuels are available, namely Liquified Natural Gas (LNG) but the timescales mean that the adoption needed simply isn’t possible by the 2020 deadline.
According to DNV GL, there are approximately 125 LNG-reliant ships in operation at the moment with another 400-600 expected to be delivered by 2020. These certainly tick the boxes, as LNG reduces sulphur emissions by up to 95%, but that figure is nowhere near enough to scratch the surface of the 60K vessels out there today.
So LNG might be the future of environmentally responsible shipping, but it’s unlikely to be the solution for companies that want to be compliant with the sulphur cap by 2020.
So, as companies aren’t able to change their fuel source en masse, they’re turning to another solution – reducing the emissions of the fuel they’re using. This means Exhaust Gas Cleaning Systems, more commonly known as scrubbers. Retrofitting this technology typically only takes around 2 weeks to install and can reduce emissions to the levels demanded by the cap.
So, problem solved, scrubbers are the answer!
Well, not quite.
The problem here is volume. Even though the scrubbers themselves only take around 2 weeks to fit, the capacity of manufacturers to install them simply doesn’t meet demand. For example, Wartsila installed 70-80 scrubbers last year, which amounted to a third of those installed across the industry. That means that last year 0.4% of the industry was ‘scrubbed’. With a year to go.
That’s not to say that scrubber production and implementation won’t increase significantly. Predictably, as demand has grown for scrubbers, so has supply. Companies are emerging regularly that are manufacturing scrubbers and looking to capitalise on the booming market. But that may be the cause of more problems.
Whilst potentially fast (even though lead manufacturing times can take up to 9 months), installation is still an expensive process, estimated to cost between €1-5M per vessel. That means that ship owners are looking to lower costs and some companies have emerged that are more than happy to offer cut-price options to capitalise on this need.
The concern from some, including from Yara Marine Technologies CSO, Kai Latun, is that these companies are manufacturing products with cheaper materials that aren’t corrosion-proof. That means that, even if enough scrubbers can be manufactured to meet demand, there could be a crisis in a few years’ time when those same scrubbers need replacing.
That’s the question that’s being asked all over the shipping industry. Given that it’s already been over 10 years, it seems unlikely implementation will be delayed. However, it looks equally impossible that the vast amount of vessels needed make themselves compliant in the time left. Many think something’s got to give, but aren’t sure exactly what that something should, or will, be.
It’s unthinkable that the global shipping industry should grind to a halt, but the now-urgent timescales involved means we’re left with an impasse. The volume of non-compliant ships contrasted with an immovable legislative deadline means, going into 2019, the industry is scratching its head for a solution.
So, will something give? Have the IMO got a choice but to change the legislation, or will it simply be ignored? Let me know what you think the sulphur cap means for the industry in the comments.