With more and more areas around the world turning into SECA (Sulphur Emission Control Area), tanker owners are increasingly finding themselves with puzzles to solve, as availability of the "green" fuel is not always there and in most cases, a pre order must be placed to secure procurement. In its latest report, London-based shipbroker highlights the latest area to be turned into a SECA. It's the North American one, expected to take place in 100 days. It will be the largest and extend 200 nautical miles off the US Coast and take in Canada and several island territories, including the Hawaiian islands.
According to Gibson, "the implementation of the ECA means that ships entering the designated area will need to burn ultra low sulphur fuel or use an exhaust gas scrubber for the duration of their voyage that is within that area. The U.S. Environmental Protection Agency expects the implementation of the ECA to drastically cut NOx, SOx and particulate matter from ship emissions and lower sulphur content levels to 1% (down from 3.5-4.5%) from the 1st August 2012. This sulphur threshold will be further lowered to just 0.1% from January 1st 2015" said Gibson.
It added that "when the North Sea ECA was just a few months away from implementation there was stiff opposition and owners sought to delay the introduction. At that time the tanker markets were booming and owners were in better shape to absorb the additional costs required to comply with the new regulations. Today we appear to have a reverse situation, where the tanker market is under greater pressure, while the price of bunkers has risen sharply adding to owners’ costs. The introduction of the latest ECA appears to have had little opposition and owners are more resigned to the need for change. Of course, the latest ECA will present a whole new set of challenges to the tanker and refining industries as both continue to struggle against making losses. Issues about the availability of low sulphur fuel will create problems for tanker owners, competing with owners of other ship types also requiring bunkers. It could take some considerable time before supply meets demand for low sulphur fuel, particularly as emissions control areas will be expanding from the transatlantic area for the first time into the Pacific Basin. Availability of low sulphur fuel in the Far East is also an issue, with the exception of the Singapore / Malaysian region, which even here prior notice is required for the supply of low sulphur bunkers" mentioned Gibson.
It also stated that "one of the criticisms of the existing ECA regions is that they are not properly policed. Under existing regulations, bunkers are sampled and documentation is inspected by the appropriate authority amongst the various European states. Many of the European states have limited resources to conduct these inspections and vessels will slip through the net. The North American ECA will be administered mainly by the US Coastguard, which has considerable resources at its disposal to effectively police the area. If history tells us anything, the US authorities will clamp down heavily on any infringements of the regulations" concluded Gibson.
Meanwhile, in the tanker markets this week, Gibson said it was a "Deja vu for the VLCC market in the Middle East Gulf. Charterers continued to hold back from heavy fixing into the new month (May), and the elongated slower spell undermined Owners' sentiment which then converted into a significant downward correction. Rates now stand at WS 50/52.5 East and a little under WS 40 West. Volumes should be higher next week, but although that should prevent much further erosion, it will take a little longer for a rebound to be engineered. Suezmaxes kept flatline through the week with 130,000 by WS 80 the mark East, and West rates dipping to below WS 50. Some Owners continue to ballast away, and that at least keeps a degree of balance in place. The aframax picture hardly changed and although volumes picked up a little, availability was more than sufficient, and rates stayed at an average 80,000 by WS 92.5/95 level for Singapore discharge" said Gibson.
It continued by adding that "Suezmax Charterers in West Africa amused themselves cherry picking the most suitable units at bottom hugging numbers. Rates compressed down to 130,000 by WS 62.5 for US Gulf, with little/no premium payable for U.K. Continent or Mediterranean destinations. Again, as in the AG, the only way up will be when Charterers do decide to go bargain shopping in numbers. VLCCs were priced out of inter Atlantic deals, but saw some degree of interest to the East. Rates had to realign with the weaker Middle East, however, and ended the week at 260,000 by WS 55 for China discharge, and low 4 million for West Coast India.
Aframaxes in the Mediterranean improved a little, and held 'best in class' levels, However it’s all relative, and an average 80,000 by WS 97.5 cross-Mediterranean is hardly cause for the popping of champagne corks. It’ll hold for a while, but there’ll be downward pressure once again - and soon enough. Suezmaxes relied heavily on Eastern interest to boost the fixture list with rates operating at around USD 3.7 m for China discharge with about USD 4.2 m for Black Sea load. Local voyages were thin on the ground, however, and rates softened further to 140,000 by WS 60 ish for European destinations.
VLCCs in the Caribbean had another quiet week of it, and rates became largely theoretical, and are expected to next show close to USD 4.7 m for Singapore on the back of the generally weaker scene for that size. Aframaxes started to get just a little more attention in the second half of the week and that moved rates off their bottom - but only by a fraction to 70,000 by WS 95/97.5 upcoast, and no rate spike is forecast over the near term" concluded Gibson.