Tanker owners say IMO 2020 to boost freight markets

The upcoming International Martime Organisation's (IMO) 2020 sulphur cap on shipping emissions is likely to increase tanker demand, according to tanker owners Ardmore Shipping and Euronav.

Under the new IMO regulation, vessels must limit sulphur emissions in exhaust fumes to 0.5pc, down from a current maximum of 3.5pc. Shipowners will either have to burn new 0.5pc sulphur fuel oil blends, use marine gasoil (MGO) or run LNG to comply with the cap. They can also fit ships with exhaust scrubbers to continue to burn high-sulphur fuel oil.

Ardmore and Euronav expect global refinery runs for middle distillate products — including MGO — to rise from the second half of this year, on increased demand because of the IMO sulphur limit. This could in turn boost crude and oil products tanker demand, according to the firms.

Ardmore shipping said it already benefited from higher freight rates in the first quarter of 2019 because of strengthening supply-demand fundamentals in the tanker market. "This is in spite of heavy refinery maintenance and upgrade downtime as the global refinery complex prepares for the IMO 2020 marine fuel transition, partially masking the extent of the underlying strength," Ardmore chief executive Anthony Gurnee said.

"As refineries return to full operation and anticipated heightened levels of throughput in the second half, we expect that product tankers will experience a meaningful increase in demand. The firm expects demand to increase further from July," he said.

Meanwhile, tanker supply could tighten as some owners aim to retrofit their tankers with scrubbers before the IMO sulphur cap comes into force, Euronav and Ardmore said. Euronav estimated that the retrofitting of very large crude carriers (VLCC) and Suezmax tankers could impact up to 2pc of the global fleet in the run up to IMO 2020.

The two firms also suggested that the end of the US waivers from its unilateral sanctions on Iran could take more Iranian tankers out of the market.

Euronav also said the IMO regulation will allow for older tonnage in the tanker fleet to be used as fuel oil storage, which will could lead to a slowdown in older tonnage recycling in the short term. Euronav and German energy trading firm Uniper have already begun using floating storage for low-sulfur fuel oil ahead of IMO 2020.