2015 saw the introduction of the latest ECA regulations. With additional regulations planned the industry is going to face greater scrutiny around fuel quality, fuel availability and supplier reputation.
There is uncertainty around the levels of fines and exactly when the next regulations will be implemented but what is clear is that the regulations are coming and ship operators need to plan now in order to be ready for the changes once they come into force.
As this is such a hot topic at the moment we wanted to get the views of the industry around a number of regulation questions:
New technology - 37%
There has been a lot of discussion in the press about the various options available to address the regulatory changes in the industry. In our survey four areas stood out:
These findings have been mirrored by other research on the market. A recent article by MEC Intelligence in Ship and Bunker looked at the published compliance strategies of the top 10 operators across 7 key industries (container (deep sea and short sea treated as separate), passenger, ro-ro, general cargo, bulk carriers and tankers) operating in EU SECAs. According to MEC ‘Results show that passenger and ro-ro categories have decisively moved towards scrubber technology with 75% of assessed companies voting in favour of the technology. LNG offers promises for the future, however, reach has been limited to coastal/inland shipping. The majority seems to be moving towards marine gas oil (MGO). Growth prospects for other alternates seem limited at the moment.'
With the continued drop in fuel prices the high cost of introducing scrubbers appears to be slowing adoption. The infrastructure and supply of LNG bunkers also remains an uncertainty and lower fuel prices are also impacting the adoption of the technology. So LSMGO is currently the fuel of compliance for the vast majority especially the containers, bulkers and tankers. It is a familiar option, requires minimal investment on vessel infrastructure, there is a well-established bunker supply chain and prices are currently favourable.
The challenge, what will happen when the fuel price eventually starts to rise and additional regulations planned for 2020 are introduced? Will the industry be ready?
Price volatility still an option
The introduction of new ECA regulations in 2015 and the ongoing discussions about whether the global introduction of the 0.5% sulphur cap comes into force in 2020 is placing a lot of uncertainty within the shipping industry.
This uncertainty has been reflected in our research. When asked about the impact of the regulations volatility in price was the main concern for 55% of respondents with prices increasing expected by 17% of the audience.
With fuel prices falling the higher cost of low sulphur fuel is being offset and overall rise in operating costs as a result of the regulations may not have been as high as initially expected. However with the additional regulations on the horizon and uncertainty about when they could come into force – volatility is going to remain an issue.
This uncertainty is likely to continue especially around MGO availability; its cost – ECA-compliant MGO is charged at a premium compared to the most commonly used residual fuel, IFO380; its compatibility with existing fuel systems; and the issues surrounding the cost of non-compliance and fines.
Systems that help manage compliance, drive operational efficiency, streamline operations and enable shipping operators to buy the highest quality fuel at the best price – can help shipping operators manage the potential uncertainty new regulations present.
50% of respondent
to adapt their buying behaviour
50% of respondents say they have the tools and processes in place to adapt their buying behaviour to the changing regulatory climate. That however also means that 50% are not adequately prepared.
73% not fully prepared
Here there is a real mixture of responses. A total of 27% of respondents either strongly agree or agree with this statement. That leaves 73% of respondents not feeling completely prepared/ready for changing regulations.
There are applications on the market that enable fuel procurement managers to track, alert and optimise vessels while they trade in and out of ECA zones.
Shiptech ECA Compliance is an application that uses a built-in rules engines so companies can capture information about a voyage; record fuel purchase – quantity (BDN) and quality (Lab); monitor the presence of equipment on board – scrubber (on/off); and capture the geo-location of a vessel. This application means operators can achieve continuous compliance and can be prepared for the challenges that staying compliant requires.