Shipowners speak with one voice: There is only one option to deal with the sulfur cap

The upcoming sulfur cap gives shipowners three options to meet sulfur emission limits: switching to low-sulfur fuel, using LNG as an alternative fuel, and installing exhaust gas cleaning systems. However, there's always a workaround, and clever shipowners will always find a way. Speed reduction has become the preferred choice for most shipowners of the three major ship types. Furthermore, the IMO sulfur cap may bring an unprecedented profit opportunity to the market.

Dry bulk shipowners: Speed reduction is the best option

At the 6th Analyst and Investor Day held during the recent Poseidon Maritime event in Greece, the International Maritime Organization's (IMO) decision to implement the 2020 sulfur cap was a hot topic among attendees. Most dry bulk shipowners agreed that speed reduction is the best option.

Seanergy Holdings CEO Stamatis Tsantianis claimed: "2020 will be one of the best years in 20 years to hit shipping." He predicted that once the price gap between marine gas oil (MGO) and high-sulfur fuel oil (HSFO) widens, shipowners' instinctive reaction will be to slow down. Due to the limited number of scrubbers currently installed, shipowners will be forced to use MGO.

Tsantianis predicts that the Cape size bulk carrier fleet will slow down by 20%, equivalent to 300 to 400 Cape size bulk carriers globally exiting the market. According to Tsantianis, shipowners will see Cape size bulk carrier daily charter rates reach $50,000 in the future.

Philippe Louis-Dreyfus, chairman of French commodity giant Louis Dreyfus, agreed, saying: "We need all shipowners to slow down; it's good for the environment and the market." Louis-Dreyfus has long advocated for speed reduction to solve the industry's problems and expressed his pleasure at the group's consensus.

Spyros Capralos, chairman of Star Bulk Carriers, the world's largest publicly traded dry bulk shipping company, revealed that his company is testing scrubbers on two newcastlemaxes bulk carriers and agrees that slowing down is the best way to deal with the sulfur emission cap. He said: "Slow steaming is the most environmentally friendly approach."

John Michael Radziwill, CEO of GoodBulk, said: "This makes sense financially, environmentally, and operationally."

Container shipowners: The impact of speed reduction is greater than that of dry bulk carriers

In the following panel discussion on the container shipping industry, some members also advocated for slow steaming. Mark O’Neil, chairman of the meeting and president and CEO of ship manager Columbia Marlow, pondered whether slow steaming is a panacea for all shipping problems.

Ian Webber, CEO of Global Ship Lease, said that this method is also applicable to the container shipping market. He pointed out, "The container shipping sector has been slowing down for the past 10 years, especially on long-haul trade routes such as the Asia-Europe route."

However, the challenge of fuel consumption for the container shipping industry is multifaceted because container ships have larger engine power than other ship types. In the next phase, speed limits for container shipping are expected to be more significant than those for dry bulk carriers and tankers. Speakers at the meeting believed that the container shipping fleet is expected to significantly reduce its speed.

George Youroukos, CEO of Poseidon Containers, said: "January 1, 2020, is the best gift for us. Speed limits will have a significant impact on the container ship fleet. Due to the large size and fuel consumption of container ship engines, slow steaming will have a greater impact on the container ship fleet than on dry bulk carriers."

Tanker shipowners: Speed reduction will prevail

Eddie Valentis, CEO of Nasdaq-listed tanker owner Pryxis Tankers, said that 2020 will be a boom year for tankers and that demand for tankers will surge. That is, because the global market increasingly needs access to low-sulfur fuel, tankers will benefit as they need to transport oil products around the world. This will in turn increase new trade routes and increase demand for tonnage. When discussing what will happen in the industry in 2020, he told the delegates: "Speed reduction will prevail." Experts from the tanker sector also agreed that speed reduction will prevail in this sector.

At a subsequent meeting of heads of the world's top shipowners' organizations, Nikos Tsakos, CEO of Tsakos Energy Navigation (TEN), criticized scrubbers, saying that shipowners don't like being treated as guinea pigs, and he also predicted that speeds would be slower.

George Prokopiou of Dynacom took the stage to criticize scrubber manufacturers. Prokopiou said: "Slow steaming, we can solve the problem immediately."

John Platsidakis, chairman of the International Association of Dry Cargo Shipowners (Intercargo), said that the only way for the shipping industry to meet stringent environmental regulations and comply with its commitment to reduce ship pollution emissions by 50% by 2050 is to use carbon-free fuels.

At the Poseidon Maritime exhibition on June 5, IMO Secretary-General Kitack Lim reiterated in his keynote speech that the implementation date of the sulfur cap will not be postponed and remains January 1, 2020. This means that in less than two years, ships worldwide will no longer be able to use fuel with a sulfur content exceeding 5%, unless they have scrubbers installed. There are still many uncertainties about the implementation of the new regulations.

It is predicted that by January 1, 2020, only about 5% of the world's ships will have scrubbers installed, and the remaining 95% are urgently seeking solutions.