Mediterranean: Emission Control Area Implementation, Will Lead to Higher Rates
According to Gibson, “current bunker demand in the Mediterranean is estimated at around 21.5 million tonnes, with >50% consisting of 0.5% VLSFO. Come May next year, demand for VLSFO in the region is expected to fall, with ships that do stem the grade doing so to burn once outside the ECA. According to data from Marine and Energy Consulting Ltd, demand for VLSFO could fall to around 6 million tonnes/year, shifting to 0.1% MGO and ULSFO. In theory, HSFO demand should remain steady as ships fitted with scrubbers continue to burn high sulphur grades. However, with some scrubber systems unable to “scrub down” HSFO to 0.1%, it remains to be seen how many Owners will be forced to switch to other grades”.
“Ships trading in the region will therefore face higher costs, unless they are using a scrubber. For the year to date in Gibraltar, 0.1% MGO has averaged $798/tonne vs. $590/tonne for VLSFO (+35%) which should translate into higher freight rates, and for tankers, likely higher Worldscale flat rates in due course. The ECA also has implications for the flow of refined products within, in and out of the region. A decline in demand for VLSFO is inevitable, which should facilitate export arbitrages from the region, most likely to East of Suez. At the same time, the Mediterranean should see its structural deficit of gasoil increase, with cargoes being imported from the US and Middle East. Trading of compliant grades across the region should also get a boost, at the expense of movements of VLSFO cargoes”, said the shipbroker.
“Overall, this suggests a modest shift from dirty to clean tankers for regional moves, although larger dirty tankers are likely to see some benefit from exporting surplus fuel oil to Asia. Bunker demand in the region will also be impacted (albeit to a lesser degree) by the upcoming FuelEU legislation which mandates a 2% reduction in the greenhouse gas intensity (GHG) from 1st of January 2025. Whilst the initial impact will be small, some demand will be shifted from conventional bunker fuels to greener alternatives”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide