Maritime transport decarbonization movement set to affect HSFO demand
Demand for high sulfur bunker fuel is expected to decline globally as it approaches 2030, likely leading to a decline in scrubber use as the shipping industry accelerates its decarbonization journey, an industry expert said on Oct. 25.
This is despite ports, such as Singapore, which recorded strong sales of HSFOs in 2021. January-September sales of high sulfur bunker fuel, which include 180 CST, 380 CST and 500 CST, in the most the world’s largest bunkering port amounted to about 9.4 million tonnes, up about 26% year on year.
“The shipping industry will surely undergo drastic changes, with the intensification of the International Maritime Organization [its action] on carbon-free, or zero-carbon emissions by the shipping industry by 2050, ”said Simon Neo, executive director of Singapore-based consulting firm SDE International in an interview with S&P Global Platts.
“I don’t see much of a future for fossil fuels in the bunker,” Neo said.
The initial greenhouse gas strategy provides in particular for a reduction in the carbon intensity of international maritime transport – CO2 emissions per transport work – on average by at least 40% by 2030, while continuing efforts towards a reduction of 70% by 2050, compared to 2008. The strategy aims to reduce the total annual GHG emissions from international maritime transport by at least 50% by 2050, compared to 2008.
Ammonia and hydrogen are the long-term solution for the industry, according to Neo, because they are both carbon neutral, while LNG is “an alternative fuel in use today but will be a solution in the short term. and medium term “.
The shipping industry, however, must work closely with engine manufacturers and various other stakeholders to make carbon-free fuels scalable, Neo said, adding that market-based measures, such as credits and carbon offsets would also contribute to decarbonization.
“My only fear about the carbon credit is that it increases the cost of transport by sea and that it increases a lot according to the cost of this credit,” he said.
Shipowners could buy or pay for carbon credits in the same way as paying carbon taxes, with the cost ultimately falling on the consumer, Neo said.
COVID interferes with demand
Global maritime operations have been severely affected due to COVID-19-related port closures, causing congestion at some of the world’s major hubs, with delays ranging from seven days to a few months, Neo said.
Crew change was another big issue that hasn’t been easily resolved at global ports, including Singapore, Neo said.
The bunkering industry has adopted contactless bunkering to overcome some of the challenges prevalent in ports, which has likely caused more disputes over the quantity in ports that do not use mass flow measurement systems for bunkering deliveries, said Neo.
“In Singapore, we have standards or guidelines to be followed by bunker suppliers and administered by the port authority. So it’s not too bad, ”said Neo.
The Port of Singapore has made mass flow meters, or MFMs, mandatory for marine fuel deliveries from January 1, 2017 and for distillate bunkering deliveries from July 1, 2019 to strengthen the integrity of bunkering operations and eliminate stray actors.
In 2020, the port city launched two new bunkering standards – SS 660, code of practice for the delivery of bunker cargo from oil terminal to bunker tanker using MFM, and TR 80, code of practice for checking counters using MFM master – improving transparency.
Rising oil prices are also likely to weigh on demand for bunker fuel, in addition to the challenges caused by COVID-19, Neo said.
“Different shipowners will adopt their own strategy, but the most popular will be slow sailing to reduce fuel consumption, unless ships today can switch to other alternative fuels to reduce costs, which so far hasn’t really changed at all. ” he said.
Tight credit weighs on margins
The collapse of oil trading companies Hin Leong, GP Global and others in 2020 and 2021 resulted in the credit lines of many banks being tightened or the funding of bunker players stopped, Neo said, hurting their ability to procure fuel for supplying ships.
“The physical suppliers of bunkers have a very thin margin and with reduced credit it reduces a supplier’s ability to source more oil to deliver bunkers,” Neo said. “The current high price of oil doesn’t help either… [credit situation] has actually increased the overall cost for local physical providers here in Singapore.
Singapore’s marine fuel industry lost a major bunker supplier after Hin Leong; However, its bunker industry remains diverse and vibrant, Neo said.
“Other physical suppliers and freight traders have stepped in to fill the void,” he said. “In addition, being an international trading center and a major oil hub helps cushion any shortfall created by these players.”
There were 41 approved bunker suppliers in the port of Singapore, as of Oct. 13, according to the Singapore Maritime and Port Authority. Minerva Bunkering and TFG Marine, which obtained physical bunker supplier licenses in April 2020, are on the list.