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Did you know? IMO 2020 regulations part 2

Did you know that the IMO has set new regulations into place 1 January 2020 to limit the sulphur oxide emission of ships? And do you know which new hedging tools can help you secure your fuel expenses when installing a scrubber? 

 

 

Last month we introduced you to the IMO 2020 regulations. Read it here. 

 

The new regulations have opened for new hedging tools to secure ships fuel expenses. This hedge secures the profit margin for ships that have installed a scrubber to comply with the 2020 regulations. A scrubber is an exhaust gas cleaning system that removes sulphur oxides from the ship’s engine and boiler exhaust gases.

A so-called scrubber hedge offers you the opportunity to fix the current spread between 3,5% fuel oil and gasoil. This means, that with a hedge you do not have to worry about the spread decreasing and ensure your competitiveness against peer groups who have not installed scrubbers. 

A scrubber is expensive and entails several risks that can be avoided with a scrubber hedge. These are:

  • Installing a scrubber is a huge investment. Since no one can exactly predict what is going to happen with the 3,5% fuel oil prices, it can potentially take years to pay back the scrubber.
  • The more scrubbers get installed, the more likely it is for the price drop of 3,5% fuel oil to be smaller, since there will be no abundance of 3,5% fuel oil after all.
  • Refineries are expected to produce lighter-end fuels, being cheaper than the current alternative to 3,5% fuel oil and thus decreasing the price spread even further. 

 

Read more on how Global Risk Management can help you with a scrubber hedge here.