ONE Opts for Hybrid Fuel, Not Scrubbers

Japanese ocean carrier ONE says that it will opt for low-sulfur "hybrid" fuel to satisfy the requirements of the IMO 2020 sulfur emissions regulations, and will evaluate scrubbers and LNG as alternative options going forward. 

ONE, the merged entity that operates the container vessel fleets and ocean freight businesses of NYK, MOL and K-Line, says that it will rely on low-sulfur fuels without making major modifications to its vessels. "At current [sic], we identified this as one of the most realistic and cost-efficient solutions, to enable ONE to be compliant . . . by 1 January 2020," the line said in a customer advisory. 

According to DNV GL, "hybrid" fuels are hydrocarbon blends that have similar specifications to HFO but contain different substances, potentially including refinery products that have not traditionally been used as marine fuel. They generally have good combustion properties, but some are vulnerable to wax formation when cooled.

Scrubbers are a retrofit option for several of ONE's vessels, but would require sacrificing cargo space and taking each vessel out of service for more than a month. Building new vessels with scrubbers is a potential option for the future, but as newbuilding lead time is in the range of 2-3 years, it is not a compliance option for the January 2020 deadline. 

As other container carriers have suggested, ONE says the use of low sulfur fuels will come at a cost. The current market price difference between tandard HFO and low sulfur gas oil is roughly $150-200 per tonne, and ONE expects this price premium to increase after January 2020 due to higher demand for compliant fuel. Hapag-Lloyd estimates the price differential will be about $150-$250 per tonne, enough to raise the average price per TEU for ocean carriage by $80-$120, or about 10 percent. 

Leading ocean carrier Maersk recently warned that its fuel bill will rise by 50 percent due to the impact of the IMO regulations, an increase equal to about $2 billion annually. Overall, analysts expect that the industry-wide cost will be about $60 billion per year. Costs will likely begin to rise in the final quarter of 2019, as carriers will begin bunkering with low-sulfur fuel early in order to be compliant on January 1, 2020.