Refiners Indicating IMO 2020 Bunker Price Premium Will be Half Current Predictions: Euronav

Tuesday October 30, 2018

Refiners are indicating the premium for IMO 2020 compliant low sulfur fuel will be significantly less than current predictions, Euronav NV said today.

The news bolsters the case against scrubbers as a route to compliance with the new global 0.50% sulfur cap, which CEO Paddy Rodgers says was a "mistake" for IMO to allow use of in the first place.

In comments made alongside its latest earnings report, Euronav said that promoters of scrubbers have used MGO as a proxy for the price of IMO 2020 compliant fuel.

According to Ship & Bunker data, that premium in the world's key bunkering ports is currently around $260/mt, a spread some have suggested could widen to as much as $400/mt as demand shifts in the run up to the new rule's January 1, 2020 start date.

But Euronav disagrees: "Some refiners including Sinochem have recently confirmed that they will sell clean compliant fuel at a price likely to be half the difference between dirty HFO and MGO. So the investment case now has half the returns being promoted and it is still 14 months before implementation and nothing suggests this price gap will not further narrow in that time," it said.

The company also joined recently outspoken scrubber critics including INTERTANKO and the Union of Greek Shipowners (UGS) in raising serious question marks over the technology's environmental credentials.

"The problem with [open-loop scrubbing] of course, is once you've cleaned the exhaust which you do with sea water, you simply industrialize polution by pumping it overboard. So this looks like something that's very vulnerable to future regulation," Rodgers told Bloomberg TV.

"But its got a much bigger problem for the shipping industry which is that it's CAPEX in the hope of future decreased costs. Now you may know that our industry is famously volatile and that's because the vast bulk of our costs is in fixed CAPEX and we have very low OPEX, with the result that we bottom out when the market's over supplied at OPEX and we loose our CAPEX values. So this is not a great idea, its putting the cart before the horse to end up spending more capital in order to access cheaper costs."

A number of industry stakeholders have expressed their doubts as to whether there will be sufficient supply of 0.50% fuels in 2020, but this did not seem to be a concern for Rodgers.

"What the refining industry is saying is we haven't really paid attention to this in the past," he said.

"Now they're focused on it, they're saying compliant clean fuels will be available."