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Wallenius Wilhelmsen set to opt for low sulfur fuel oil, scrubbers to meet IMO 2020 rule

Singapore — Global shipping and logistics company Wallenius Wilhelmsen will most likely use a mix of low sulfur fuel oil as well as HSFO with scrubbers to meet the International Maritime Organization's global sulfur limit rule for marine fuels.

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The implementation of the IMO 2020 0.5% global sulfur cap represents a challenge and risk for the shipping industry, with fuel costs expected to increase significantly, it said in its quarterly report this week.

It cited a lack of clarity around availability and quality of fuels.

The IMO will cap global sulfur content in marine fuels to 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%. Shipowners will be forced to either switch to cleaner, more expensive fuels or install scrubbers.

"To handle this uncertainty, Wallenius Wilhelmsen has chosen a balanced approach which gives the best chance of managing risks and costs," it said. "The group has therefore arrived at a strategy of combining operating with different types of low sulfur fuel and installing scrubbers on the most suitable vessels."

In June, Wallenius Wilhelmsen decided to initiate a program to retrofit scrubbers on 20 vessels over the next four years, increasing the number of vessels in the fleet with scrubbers to 25, it said.

The scrubbers will be retrofitted during scheduled dry docking to minimize the impact on operations and will be financed through available cash and/or credit facilities, it said, adding that the average cost per scrubber installment is estimated to be $6 million-$7 million.

The growing thrust on scrubbers comes as pricing economics for their adoption is becoming increasingly favorable while myths around difficulties in their installation and maintenance are also being quelled.

Over 1,000 ships globally have ordered or installed scrubbers as of May 31, according to the Exhaust Gas Cleaning Systems Association estimates in July.

According to some industry sources, at least 60% of current ships are expected to opt for scrubbers by 2022.

In the second quarter Wallenius Wilhelmsen operated a core fleet of 127 vessels with carrying capacity of 873,000 CEU (car equivalent unit), representing about 22% of the global car carrier fleet, the company said.

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

--Edited by Jonathan Fox, jonathan.fox@spglobal.com