Singapore — The Asian market has seen a growing trend of scrubbers being offered to shipowners at no outright cost, with both refiners and cargo owners making the offer to shipowners, said market sources this week.
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The trend in particular, has been fairly widespread in Northeast Asia, especially Japan and South Korea, sources added.
This comes 2.5 years ahead of the International Maritime Organization's mandate that all vessels in 2020 would have to comply with a 0.5% global sulfur cap for the marine industry, from 3.5% currently.
Related special report: Tackling 2020: The impact of the IMO and how shipowners can deal with tighter sulfur limits
The proposal so far in Japan has had cargo owners from the steel industry offering to buy or take loans for shipowners to buy and install scrubbers. In return, shipowners have to commit to the producers, a 10-year chartering contract and have some sort of exclusivity for the ships installed with scrubber systems, market sources said.
In South Korea, refiners were heard proposing this to shipowners in return for five-year term contracts to buy high sulfur residual material only from the refiner that is contracted with the shipowner, they added.
The solution makes sense for refiners who do not wish to pump in millions of dollars to upgrade their existing refineries and this solution is much cheaper financially, while solving their problem of disposing the fuel oil somewhere, said trade sources.
The shipping industry could also benefit from this arrangement, as the industry continues to battle with the twin woes of bulging overcapacity as well as a plethora of new regulations.
A scrubber system can cost anything from $3 million to as high as $10 million per unit, they added.
But this would imply that a shipowner entering into such an agreement with a refiner would be fully tied to the refiner's prices, sources added.
So far, there have been no takers for these proposals, trade sources said.
The wider sentiment across the industry is mostly aligned with Maersk's announcement earlier this year that it would simply switch to low sulfur marine gasoil come 2020, instead of investing in alternative technology or solutions.
"At the end of the day, it's either use LSMGO or flout the IMO mandate come 2020 if the price of LSMGO is unaffordable," said one industry source.
"Shipowners would be reluctant to be locked in for five to 10 years, given the uncertainty of what would happen in 2020 and beyond. Should they want to scrap or sell their vessels, the legality of ownership of the scrubber system would cause problems for them," said a trade source.
--Goh Shu Hui, firstname.lastname@example.org
--Edited by Irene Tang, email@example.com