Greek shipper bets $1 B on fuel rule
A Greek shipowner is predicting new rules for marine fuel will put thousands of the world’s merchant vessels out of business in the next two years, roiling global trade. In fact, he’s wagering $1.1 billion on it.
Evangelos Marinakis, chairman of Capital Maritime & Trading Corp., based near Athens, says his company has invested that much in the last 18 months to upgrade its 71 ships spanning from oil tankers to container carriers. The rules, designed to clean up vessel emissions, will benefit more modern vessels and contribute to sending many older ones to the scrapyard, Marinakis said.
“As much as a quarter of the current fleet could be scrapped,” Marinakis said in an interview in London, where he also has an office. More than 20 percent of the 95,000-ship global fleet is over 15 years old, too old for additional investments. “This could have an adverse impact on world trade,” added Marinakis, who founded his first shipping company in 1991 at the age of 24.
It’s a bold prediction – one critics say is overblown – but something is clear: The changes are creating expensive complications for owners. As of Jan. 1, 2020, the entire fleet, handling about 90 percent of global trade, must reduce the amount of sulfur vessels belch into the atmosphere, under rules adopted last year by the International Maritime Organization, a United Nations agency.
The goal is to curb a pollutant, sulfur, that’s been linked to asthma and acid rain, and which is a component of so-called bunkering fuel for vessels. The rules have been nearly a decade in the making.
The shipping industry sees challenges on several fronts, noting that few vessels have been equipped with the scrubbers needed to reduce sulfur pollution and too few refineries churn out enough of the cleaner fuel needed to meet demand.
Teething issues “We expect full implementation in 2020 but there may be some teething issues about the availability of the fuel at the port,” Simon Bennett, director of policy and external relations at the International Chamber of Shipping, said in a phone interview. The Londonbased group represents shipowners and operators controlling thousands of vessels.
Last year, the IMO determined that enough fuel would be available for ships to adjust to the changes by 2020 and agreed to implement the rules by that date. While vessels can switch to lower-sulfur fuel, it would increase demand, and hence the cost of that product. Shippers may even have to pay as much as $60 billion a year on higher quality fuel to comply, industry consultant Wood Mackenzie Ltd. predicted earlier this year. (Bloomberg)