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Clean tanker owners prepare fuel strategies ahead of IMO 2020

Clean tanker owner companies Ardmore Shipping and Scorpio Tankers discussed their bunkering plans ahead of the implementation of IMO 2020 in their Q1 2019 earnings calls Wednesday and Thursday, taking separate stances on the utilization of scrubbers or compliant 0.5% sulfur fuels.

Scorpio Tankers released their fleet’s dry dock schedule for 2019 and 2020 Thursday, having ordered scrubber systems for their full fleet of 45 Medium Range tankers, 12 Long Range 1 tankers, and 38 Long Range 2 tankers. One of Scorpio’s LR2s and one MR tanker were already outfitted with scrubber systems in the first quarter.

President and director of Scorpio Tankers, Robert Bugbee, said in the company’s Q1 earnings call that the company expected the global clean tanker market to see an increase in freight rates and earnings ahead of IMO 2020. Bugbee expected the increased dry docking of tankers for scrubber installations to help bolster rates as tonnage supply leaves the market.

According to the dry dock schedule, eight MRs, three LR1s, and six LR2s are scheduled for scrubber installations in Q2. In Q3, six MRs, three LR1s, and 10 LR2s are scheduled to install scrubbers; while in Q4, nine MRs, one LR1, and eight LR2s are scheduled to go to try dock for scrubber installations.

The remainder of Scorpio’s fleet, including 22 MRs, 12 LR1s, and eight LR2s are scheduled to be outfitted with scrubber systems in 2020.

Bugbee said that tankers without scrubbers would likely begin bunkering compliant 0.5% fuel as early as October, nodding to Ardmore Shipping’s decision to do the same, as stated in Ardmore’s Q1 earnings call.

We will tackle the critical questions surrounding the rapidly approaching International Maritime Organization’s sulfur cap, examine how the industry has prepared, and what the outlook is past January, 1, 2020.

Ardmore Shipping CEO Anthony Gurnee stated in Wednesday’s call that the company would use new compliant 0.5% bunkers ahead of IMO 2020 as early as October, and said that Ardmore Shipping was not unique in that regard. Gurnee expected there would be a demand for those LSFO fuels early on, as larger ships with longer voyages would have to load early.

The availability of LSFO before and immediately after January 1, 2020, has been a concern of the shipping industry, and Gurnee said in the earnings call that a huge number of outports that have to provide bunkering services would have to switch to compliant fuels, with gasoil likely to be the predominant choice early on.

Gurnee said Ardmore Shipping was not yet sure what kind of fuel it would use for bunkering, whether gasoil or compliant LSFO, but that the company has been indirectly involved in testing new compliant fuels. Ardmore tankers will likely burn both gasoil and LSFO, but that, like other owners, the company would err on the side of caution, sticking to quality 0.5% blends or burning gasoil at the beginning of 2020. Gurnee said the company was still not considering investing in scrubber systems for their fleet.
Source: Platts

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