How can shipowners comply with the 2020 global sulphur limit economically?

• Published in: Transportation research. Part D, Transport and environment Transport and environment, 2020-02, Vol.79, p.102234, Article 102234
• Main Authors: Zhu, Mo, Li, Kevin X., Lin, Kun-Chin, Shi, Wenming, Yang, Jialin
• Format: Article
• Language: English
• Subjects: Cost-benefit analysis; IMO 2020 sulphur limit; Low-sulphur fuel oils; Scrubber; Sensitivity check
• ISSN: 1361-9209; 1879-2340
• DOI: 10.1016/j.trd.2020.102234

•Low-sulfur fuel oils and scrubbers are the most common sulfur reduction approaches.•The cost-benefit analysis is used to assess the economic efficiency of the two approaches.•Scrubbers are found to be more attractive in practice. To comply with the International Maritime Organization’s (IMO) 2020 global sulphur limit for maritime shipping, low-sulphur fuel oils (LSFOs) and scrubbers are the most commonly applied approaches in practice, as a result of which, however, shipowners’ profits will be affected. This paper is to identify a more economical sulphur reduction approach, for which a 19,000 twenty-foot equivalent unit container ship sailing between Far East and Europe is set as a case study. Using the cost-benefit analysis, the use of scrubbers is proved to be more economical due to the higher net present value and lower annual unit cost. The sensitivity check suggests that a scrubber is more attractive in most cases except for two scenarios where LSFOs are more popular. That is, a scrubber is losing its attractiveness when prices of LSFOs and heavy fuel oil (HFO) move in the same direction with the price spread is equal to or below US$56 per ton, and when prices of HFO rise and prices of LSFOs fall with the price spread is equal to or below US$16 per ton. This finding well explains the current popularity of installing scrubbers among shipowners although retrofitting still faces many challenges.