Pacific Basin to buy big in scrubbers and ballast systems

Malcolm Latarche
Malcolm Latarche
ShipInsight

04 March 2019


Hong Kong-based bulker operator Pacific Basin revealed planes for major investments in scrubbers and ballast treatment systems when presenting its 2018 results last week.

Speaking at the presentation, CEO Mats Berglund said, “There are three new regulations that impact our industry. The first requires the installation of Ballast Water Treatment Systems. Fourteen of our owned vessels have already been fitted with Ballast Water Treatment Systems and we have arranged to retrofit the balance 97 of our ships with a system based on filtration and electrocatalysis by the end of 2022.

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The second is the IMO’s global 0.5% sulphur limit which takes effect on 1 January 2020. Ship owners will have to comply either by using more expensive low-sulphur fuel, or by continuing to burn heavy fuel oil in combination with installing exhaust gas cleaning systems or “scrubbers”.

We expect the majority of the global dry bulk fleet, especially smaller vessels such as our Handysize ships, will comply by using low-sulphur fuel. This should have a positive effect on the supply demand balance as higher fuel costs encourage ship operators to slow down.

However, some owners of larger vessels with higher fuel consumption, including some Supramaxes, are installing scrubbers to take advantage of expected lower cost of heavy fuel oil. As we cannot risk being competitively disadvantaged, we are well prepared and have arrangements in place with repair yards and scrubber makers to install scrubbers on our owned Supramax vessels. These arrangements include fitting and testing scrubbers on Supras to gain experience early and to evaluate the equipment both technically and operationally.

Thirdly, in April 2018, the IMO announced an ambitious strategy to cut total greenhouse gas emissions from shipping by at least 50% by 2050 (compared to 2008) and improve average CO2 efficiency by at least 40% by 2030 and 70% by 2050. There is much uncertainty about how the market will eventually comply with these targets and the legislations that will in due course be implemented to achieve them. The easiest first step to decrease carbon emissions is to reduce speed, but our view is that these new IMO targets will also lead to the development of new fuels, engine technology and vessel designs that are not available or practical today.

We believe the IMO’s greenhouse gas reduction targets and eventual regulations will discourage new ship ordering in the short and medium term until new technologies and ship designs become available. We expect all these major new environmental regulations to be positive for the supply-demand balance and benefit larger, stronger companies with high quality fleets that are better positioned to adapt and cope both practically and financially with compliance”.

Berglund’s mention of the term electrocatalysis in connection with the ballast treatment systems suggests that these will likely be Headway’s OceanGuard system and would follow since the Chinese manufacturer has previously supplied systems to Bacific Basin.

The announcement of the scrubber installation programme represents another company making a U-turn on scrubber use after having previously been set against their use. While the exact number of systems was not mentioned, Berglund referred specifically to the company’s owned fleet of Supramaxes. Presently this would suggest up to 28 vessels will be fitted with scrubbing systems.