The expansion of China’s emission control area or ECA rules to several key ports from the start of 2017 has had little impact on ship operators and owners due to low bunker fuel prices and ample preparation time, market sources said recently.
Implementing ECA regulations:
The gradual implementation of ECA regulations, which were first adopted by Shanghai port last April, and Shenzhen last October, and less stringent sulfur content requirements than in other ECAs internationally has given ship owners time to respond, the sources said.
Fuel usage during the first and last hour of berthing is also exempted at present, they noted.
A source reported, “Everything has been pretty smooth as this regulation started from last year, so ship owners are aware of what to do”.
Vessels berthing in 11 key ports in China’s Pearl River Delta, Yangtze River Delta and Bohai Sea regions have been required to use fuel with a maximum sulfur content of 0.5% since January 1.
In other ECA regions such as the Baltic Sea, North Sea, and North America, sulfur content is capped at 0.1%.
Rules apply to all ships entering China:
China’s new regulations, which apply to all vessels entering ECAs except military, fishing and sporting vessels, kick off at a time when pollution from shipping, particularly sulfur emissions, has become a global concern.
“Fuel purchasing has become a little bit more expensive [since ECAs were introduced] but the differential is not all that much. We support the move towards greener shipping in China and had been using compliant fuel even before the ECAs came into force,” one shipowner said.
“In any case, for now, the regulations are quite OK — ships can still use high sulfur fuel for the one hour after they arrive and for the hour before departure, so it’s only the berthing period between the first and last hour that they have to use low sulfur fuel,” another source said.
“Not much fuel is needed while discharging cargo or otherwise during berthing,” a ship broker said. “There has not been any impact on trade negotiations either as it might have been already factored into the rates that owners are expecting,” the broker added.
Further tightening from 2018:
From January 1, 2018, the ECA regulations that now apply to the 11 ports — Shenzhen, Guangzhou, Zhuhai, Shanghai, Ningbo-Zhoushan, Suzhou, Nantong, Tianjin, Qinhuangdao, Tangshan, and Huanghua — will be extended to all ports in the three ECA zones in China, and for the entire berthing period.
From 2019, all vessels will have to switch to using low sulfur fuel before entering an ECA in China.
“I don’t think there will be a big problem [once the 2018 regulations come into force]. Vessels calling at Hong Kong are already exposed to similar regulations so it won’t be an issue; it’s manageable,” a trader said.
A source said 2019 will be the “real game changer” as 0.5% compliant fuel will by then commands a significant premium over heavy sulfur fuel oil.
Some estimates point to a differential of up to $450/MT between 0.5% sulfur fuel oil and high sulfur bunker fuel oil around 2019 as demand for the former increases ahead of the International Maritime Organization’s imposition of a 0.5% global sulfur cap from 2020.
Woes of ship owners:
Some sources said ship-owners were likely to increasingly worry not only about the likely rise in fuel prices but also about having to switch between fuels, as many vessels are not currently equipped to do and will require costly modifications.
Did you subscribe for our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Platts
