Speaking about the upcoming 2020 sulphur cap, Hapag-Lloyd said that this regulation will challenge the entire shipping industry. The company cites three ways to achieve compliance and notes that if this is achieved then the industry will become much greener.
Ship owners will have to decide whether to switch to burning the more expensive low sulfur fuel, or place investment bets on scrubbers or LNG powered ships.
However, there is limited experience upon which to base these decisions, which will continue to have an impact on the profitability and competitiveness of liner shipping companies, long after the facts have become clear in hindsight.
To comply with the regulation, the company says that there are three main ways:
1. Switch to low sulphur fuel: This comes with a problem as “the lower the sulfur content, the higher the cost of bunker fuel.” Namely, low sulphur fuel is expected to be 150 to 250 US Dollar more expensive per ton than the current 3.5% sulphur heavy fuel oil. This will increase global average prices per TEU by around 80 to 120 US Dollar, or about 10%.
2. Exhaust Gas Cleaning System (scrubbers): These can remove the excess pollution from the exhaust gases while continuing to burn the cheaper 3.5% sulphur heavy fuel oil. The two main kinds are “open-loop” and “closed-loop”. Open-loop mode removes the pollution from the exhaust gases and then flushes it into the sea, instead of into the atmosphere. Closed-loop mode retains the pollution in tanks on board the ship, but this is not practical for long distance journeys. The challenge is that until now these systems have not yet been used with large container ships.
3. LNG: LNG powered ships can burn LNG as well as fuel oil. They need an additional LNG fuel tank to be installed in a cargo bay, together with some additional piping and machinery. The other approach is to build new ships, designed from the beginning to only burn LNG. The challenge here would be the fact that the capital costs to convert ships or to build them from new to burn LNG are quite high.
As Hapag-Lloyd said, every solution will have its challenges. However, low sulfur oil bunkering will have to start in the fourth quarter of 2019 because of the long round voyage times.
All in all, industry experts guess that the new fuel regulations will cost the shipping industry about 60 billion US Dollar per year.