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Pacific Basin says new environmental rules herald positive fundamentals for shipping

Singapore — Hong Kong's Pacific Basin Shipping said Thursday that major environmental regulations in shipping including the International Maritime Organization's global sulfur limit rule for marine fuels, its Ballast Water Management Convention as well as IMO's GHG emissions cut targets were likely to have a positive effect on supply and demand fundamentals in shipping.

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Pacific Basin Shipping is among the world's largest shipowners and operators of modern Handysize tonnage.

The IMO will cap global sulfur content in marine fuels at 0.5% starting January 1, 2020, from 3.5% currently. This applies outside the designated emission control areas where the limit is already 0.1%.

To comply with the rule, shipowners will be forced to either switch to cleaner, more expensive bunker fuels or burn HSFO in combination with installing scrubbers.

"We expect the majority of the global dry bulk fleet, especially smaller vessels such as our Handysize ships, will comply by using low sulfur fuel," Pacific Basin CEO Mats Berglund said during the company's 2018 annual results earnings call.

This should have a positive effect on the supply and demand balance as higher fuel costs encourage ship operators to slow down, he said.

However, some owners of larger vessels with higher fuel consumption, including some Supramaxes, are installing scrubbers to take advantage of the expected lower cost of heavy fuel oil, he said.

"As we cannot risk being competitively disadvantaged, we are well prepared and have arrangements in place with repair yards and scrubber makers to install scrubbers on our owned supramax vessels," he said.

These arrangements include fitting and testing scrubbers on Supramaxes to gain experience at the early stages as well as to evaluate the equipment both technically and operationally, he said.

In April 2018, the IMO announced its GHG strategy and targets to improve CO 2 efficiency in shipping.

The rundown on the shipping markets in the run-up to IMO 2020

Jason Silber chats with Pradeep Rajan, senior managing editor, Asia freight and Jack Jordan, editorial lead at Platts Bunkerworld, for a rundown on the shipping markets in the run-up to IMO 2020.

Listen

IMO has set targets that include a 50% cut in the shipping sector's GHG emissions by 2050 compared with 2008.

There is much uncertainty about how the market with comply with these targets and the legislations that will in due course be implemented to achieve them, Berglund said.

"The easiest first step to decrease carbon emissions is to reduce speed but our view is that these new rules will also lead to development of new fuels, engine technology and vessel designs that are not available or practical today," he said, adding that the rule will discourage new ship ordering in the short and medium term until new technologies and ship designs become available.

Meanwhile, the company is also preparing for ballast water treatment systems installations on its vessels.

The IMO's Ballast Water Management Convention requires ballast water treatment systems, or BWTS, to be fitted on ships during docking surveys between 2019 and 2024 to substantially eliminate organisms from transferring between marine ecosystems.

"Fourteen of our owned vessels have already been fitted with BWTS and we have arranged to retrofit the balance 97 of our owned ships with a system based on filtration and electro-catalysis by the end of 2022," he said.

As of January 31, the company's fleet comprised over 200 vessels, which includes owned and chartered ships.

It consumed bunkers worth $382.7 million in 2018, a year-on-year increase of about 13%, it said in its results announcement.

-- Surabhi Sahu, surabhi.sahu@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com