MOL Chemical Tankers (MOLCT) acquired Nordic Tankers on 31 January 2019, emerging as MOL Nordic Tankers (MOLNT). In this interview, edited for length and clarity, director of business planning Hiroaki Okada talks about the new company, his expectations for the chemical tanker market and preparations for the International Maritime Organization (IMO) marine fuel sulphur cap in 2020.
How do you plan to meet the International Maritime Organization (IMO) 2020 marine fuel sulphur regulations?
We have already decided to install hybrid scrubbers to several tankers owned by MOLCT by the end of 2019. Generally speaking, it is not easy to install scrubbers to smaller tankers due to lack of space available. Therefore, first we will install scrubbers to larger tankers with relatively higher marine fuel consumption.
If the low-sulphur residual fuel oil specification is reliable and compatible to our engines, we shall purchase the residual fuel oil, on the assumption that it should still be cheaper than marine gasoil (MGO).
However, if we cannot be confident enough in the quality of the low-sulphur fuel oil, we shall burn MGO on the smaller tankers that we cannot fit with scrubbers. In addition, MOLCT is considering hedging some of its marine fuel purchases to try to mitigate the high cost of MGO.
Our parent company, MOL, considers LNG and methanol as alternative fuels for some types of vessels. At this moment, however, MOLCT does not consider those options.
Approximately how much marine fuel did you consume in 2018: high-sulphur bunkers and MGO?
MOLCT purchased approximately 304,000t of residual bunker fuel and 43,000t marine distillates in 2018. Purchasing of bunkers is done by term contracts between the parent company MOL and various bunker suppliers. MOLCT's vessels bunker the most in Singapore.
How many tankers do you have? Do you have plans to scrap any tankers?
As of 28 February 2019 MOLCT operates 59 tankers in various deep-sea trades and six smaller stainless-steel tankers in short-sea trades within southeast Asia. The current fleet of MOLCT consists of 65 tankers in total. Nearly 20 of these 65 tankers MOLCT chartered from various vessel owners for one or two years. By the end of 2020, we expect deliveries of 12 more new buildings. Separately, MOLNT operates 20 tankers and expects three new buildings to be delivered in 2019 and 2020.
The tankers owned by MOLCT and MOLNT are relatively young and there are no planned demolitions. MOLCT does not operate chemical tankers beyond 25 years of age. The company had sold aged tankers to other shipowners to operate, but never sold vessels for demolition.
What is your outlook for the chemical tanker market for 2019 and 2020? In which world region do you see the most growth and why?
Thanks to the stable US and Asian countries' economies, demand for chemical tankers remains high. However, in 2018, the medium range (MR) oil tanker market saw lower utilization rates and some MR tankers encroached on the chemical tanker sector by moving more chemicals, which negatively impacted the chemical tanker market.
The oil tanker market is still volatile but improving. Deliveries of stainless steel oil tankers that can also carry chemicals should decrease in 2019, and the chemical tanker market should recover towards the second half of the year.
In addition, in 2018 marine fuel price rose, but tanker freight rates were flat, which worsened shipping economies.
Currently marine fuel prices are stable. Even though the trade war between US and China affects the direct trade between these countries, the US needs to export more chemicals and China needs to import more. Therefore, even if trading between those two countries decreases, alternative export and import routes should emerge. Those alternative trade routes are generally longer in distance, which will boost the shipping utilization rates.
Do you see more consolidation between chemical tanker owners?
MOLCT is always open and ready to consider any good ideas about consolidation.
There are some chemical tanker owners who are looking to exit the business. There may be opportunities to consolidate with these owners, but I have no idea who can buy these owners under the current depressed market. In my personal opinion, there are not so many good matches among chemical tanker owners/operators due to differences in business strategies and fleets.
The European Parliament voted to include CO2 emissions from the shipping sector in the EU Emissions Trading Scheme (ETS) from 2023, if the IMO does not make progress on this issue from 2021. What is your opinion on the inclusion of shipping in the ETS?
MOLCT is supportive of these new environmental resolutions and ready to commit to them without a fail.
In my personal observation, there is a regulations-first-and-solutions-later approach. For example, new regulations about ballast water treatment had come first without any approved equipment to mitigate the ballast water. The low-sulphur marine fuel regulation was approved without knowing what specification fuels will be available.
[The shipping industry] is still in the dark with ten months left to the [IMO 2020] regulation. I appreciate IMO's approach and well understand that they need more time to reasonably conclude those [CO2] issues from various viewpoints, so that they can avoid further confusion and complication, which would create unnecessary costs. Therefore, even if IMO does not make progress as expected by EU, such separated and sole actions by EU should create far larger problems. I do not think such a separated and hasty approach is beneficial. We have to consider the issue globally, not only from the point of view of advanced European countries.
The implementation of the main new IMO Ballast Water management regulation has been deferred until September 2019. Is your fleet on track to meet the ballast water regulation? How many of your vessels are already prepared?
MOLCT has already installed ballast water management systems to the majority of its fleet. About 70pc of the feet will be outfitted by the end of 2019. We expect the entire fleet to be fitted by the end of 2021 or early 2022.
