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Shipping to face sulphur shakeup, says ING Bank commodities strategists

Observes further upside in middle distillate cracks, while pressure is likely to persist for high sulphur fuel oil.

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Warren Patterson, Head of Commodities strategy, and Wenyu Yao, Senior Commodities Strategist, at ING Bank on Tuesday (10 December) published an analysis ‘Shipping to face the sulphur shakeup’ to share the financial institution’s view of IMO 2020; the article has been shared with Manifold Times:

The implementation of the International Maritime Organization's new sulphur regulations will lead to significant shifts in the demand outlook for refined products. We continue to see further upside in middle distillate cracks, while pressure is likely to persist for high sulphur fuel oil.

Shipping industry facing the realities
The first of January is fast approaching and with that comes the implementation of the long-awaited IMO sulphur shipping regulations, which will see the global shipping fleet having to move from burning fuel oil with a sulphur limit of 3.5% to just 0.5%. The industry has had years to prepare for this, however, and those preparations were slow to start. Many thought or hoped these regulations would be delayed. As we approach the end of the year, the industry has accepted that this really is happening and appears close to be ready to comply with the regulations. 

Options for the shipping industry
The shipping industry has several options to comply with this new regulation. Shippers can turn to a compliant fuel – this could either be a very low sulphur fuel oil (VLSFO) or a marine gasoil (MGO). We believe that's the route that most shippers will take. This is already reflected in a very weak high sulphur fuel oil (HSFO) market, where spot cracks in Europe are trading at a discount of US$29/bbl to ICE Brent, a clear sign of the falloff in demand that is expected from the shipping industry. However, switching to a compliant fuel is more expensive and in recent months we have seen the spot gasoil-HSFO spread widen to around US$400/t from US$330/t back at the start of 4Q19. It is similar for the VLSFO-HSFO spread, which widened to as high as US$290/t at one stage in November, up from US$200/t at the start of 4Q19.   

This strong price differential makes another option for the shipping industry more attractive. Shippers can continue to burn the cheaper HSFO as long as they have a scrubber installed on the ship. The wider we see the compliant fuel-HSFO spread trade, the more of an incentive there is for the shipping industry to go the scrubber route; at current spread levels the payback on a scrubber can be as little as one year. However, despite this attractive spread, there are a number of issues with this option. For a start, there is just not enough capacity to install all ships with scrubbers on time for the regulation, and so either way we will see a signifiFcant shift to a compliant fuel.

Shipowners may want to minimise yard-time for their vessels, particularly if freight rates are buoyant. In fact, strong tanker rates appear to have disrupted scrubber retrofits. A scrubber would also mean that a ship would need to reduce its load. There are still plenty of concerns over scrubbers and the environmental impact they have, particularly for the open-loop system. A number of ports have already banned the use of scrubbers.

Another option for shippers is to go via the LNG route. However, retrofitting vessels will be expensive and so we believe this option would be more viable for new builds. That said, there is also an issue of bunkering infrastructure for LNG, which is fairly limited at the moment. 

Of course, ship owners could simply refuse to comply with the regulations, but we believe this will be minimal. We think owners will seek to avoid being fined while non-compliance also has implications for insurance, as the vessel would not be considered seaworthy if it burns non-compliant fuel. The exception to non-compliance would be where a ship has tried to secure compliant fuel but has struggled with availability. In this situation, a waiver for non-compliance would be provided.

In terms of the availability of compliant fuel, refineries are likely to increase refinery run rates to ensure adequate availability. We are also likely to see VGO diverted away from gasoline production in order to produce low sulphur compliant fuel.

Demand shifts & crack response
We believe that we could see around 2.2MMbbls/d of bunker demand shifting from HSFO to MGO/VLSFO. It is more difficult to get an idea of the split between MGO and VLSFO, as availability might prove to be an issue, whilst some shippers may be reluctant to switch to a new VLSFO at least initially, with uncertainty around how it may perform.

The use of scrubbers and also a small element of non-compliance means that we are likely to continue seeing some demand for HSFO. As a result of these shifts in demand, we continue to believe that HSFO cracks will remain weak- currently calendar 2020 3.5% fuel oil cracks in NW Europe are trading at around a discount of US$24/bbl to ICE Brent, and we expect this to weaken to an average of US$26/bbl next year.

For middle distillates, it is more difficult. We continue to hold a constructive view of gasoil cracks. However, worries over economic growth and the potential for a negative impact on oil demand growth frees up some middle distillate availability for the shipping industry, which would reduce some of the bullishness for middle distillate cracks. While the gasoil crack in NW Europe has weakened considerably over November, we do believe that the crack will trade back above US$20/bbl. This is driven by expectations of stronger demand whilst inventory levels in the US are currently around the five-year low, and in the ARA region, gasoil stocks remain below the five-year average.

Source and photo credit: ING Bank
Published: 12 December, 2019

 

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Alternative Fuels

Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

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Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Taiwanese shipping firm Yang Ming Marine Transport Corporation (Yang Ming) and South Korean shipbuilder Hanwha Ocean on Wednesday (2 September) signed a shipbuilding contract for six 13,000 TEU class LNG dual-fuel container vessels. 

The contract was signed by Dr. Chuck Tsai, Chairman of Yang Ming, and Mr. Charles Kim, CEO of Hanwha Ocean. The vessels are scheduled for delivery between 2028 and 2029. 

They will complement Yang Ming’s existing fleet of 10,000+ TEU vessels and serve as key vessels on East-West services, with deployment flexibility across trade lanes connecting Asia with the East and West Coasts of North America, South America, and the Mediterranean. 

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

“As Yang Ming transitions toward net-zero emissions, LNG provides a relatively mature and economically viable alternative fuel solution, capable of reducing greenhouse gas emissions by approximately 20%,” the company said. 

“At the same time, ammonia can serve as a carbon-free fuel by utilising converted LNG storage facilities, while offering relatively lower conversion costs and comparatively well-developed supply chains and infrastructure. The Ammonia Fuel Ready design will therefore provide Yang Ming with greater flexibility in responding to increasingly stringent international regulations on greenhouse gas emissions.”

In addition, the vessels will be equipped with Type B LNG fuel tanks with a design pressure of 1.0 bar to enhance the safety and efficiency of LNG operations, together with a range of energy-saving technologies, including Wind Shields, Rudder Bulbs, Pre-Swirl Stators, and Shore Power Systems. Smart ship technologies and cybersecurity protection features will also be incorporated to enhance operational efficiency, safety, and reliability while effectively reducing fuel consumption and greenhouse gas emissions.

Deliveries under Yang Ming’s next-generation fleet optimization plan commenced earlier this year. By 2030, a total of 24 new vessels are expected to enter service. 

This includes 18 LNG dual-fuel vessels—comprising five 15,500 TEU, seven 16,000 TEU, and the six 13,000 TEU vessels under this contract—alongside six 8,000 TEU methanol dual-fuel-ready ships. 

 

Photo credit: Yang Ming Marine Transport
Published: 4 September, 2026

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Alternative Fuels

LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Both secured AiP for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

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LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Lloyd’s Register (LR) and the Marine Design and Research Institute of China (MARIC) on Thursday (3 September) have secured Approval in Principle (AiP) for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

Announced at SMM 2026, the concept addresses one of the biggest investment challenges facing shipping today: the need to develop vessels and capabilities that can support a range of alternative fuel options and pathways as technologies, infrastructure and regulations evolve.

While LNG is already a mature fuel pathway, methanol and ammonia remain at an earlier stage of development, with questions around global fuel availability, infrastructure development, economics and long-term adoption.

The 114,000 DWT tanker concept has been designed as a product and crude oil carrier that can accommodate future conversion to LNG, methanol or ammonia as technologies, regulations and fuel supply chains mature. By incorporating conversion readiness at the design stage, the concept aims to reduce future retrofit complexity and provide owners with greater confidence when planning long-term fleet investments.

The design concept was reviewed against LR’s July 2026 class rules and regulations, including requirements relating to ships using gases and other low-flashpoint fuels, alongside relevant IACS Common Structural Rules for oil tankers. Final classification and statutory approval remain subject to full compliance with all applicable rules and regulations.

Theo Kourmpelis, Global Business Director for Tankers, Lloyd’s Register, said: “Shipowners are being asked to make major investment decisions today despite continued uncertainty around which fuels will dominate in the decades ahead. Alternative fuel solutions each offer potential pathways to compliance, but fuel infrastructure, regulation and economics continue to evolve at different speeds around the world.

“Designs that preserve flexibility will be critical in helping owners manage risk while preparing for multiple future scenarios.”

Si Nan, Marine & Offshore Marketing Department Vice Director, MARIC, said: “As the industry explores different decarbonisation pathways, shipowners need vessel designs that can adapt alongside technological and regulatory developments. This concept was developed specifically to provide greater fuel flexibility and long-term resilience, allowing owners to respond to changing market requirements without being locked into a single fuel strategy.

“Receiving Approval in Principle from Lloyd’s Register is an important milestone that validates the design concept and supports its future development.”

 

Photo credit: Lloyd’s Register
Published: 4 September, 2026

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Alternative Fuels

DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

LNG-fuelled vessels accounted for the vast majority of August activity while the strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year.

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DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

Latest data from classification society DNV’s Alternative Fuels Insight (AFI) platform alternative-fuelled vessel ordering was strong in August, with 52 new vessels added to the platform.

This is the highest monthly total since October 2024 and follows another active month in July, when 47 vessels were added to the database.

LNG-fuelled vessels accounted for the vast majority of August activity, with 46 orders recorded. The container segment led the way with 30 orders, while the car carrier segment contributed a further 12 LNG-fuelled vessels. In addition, four ethanol-fuelled bulk carriers and two hydrogen-powered bulk carriers were added during the month, as well as one LNG bunker vessel.

The strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year. In total, 242 alternative-fuelled vessel orders have been placed in the first eight months of 2026, representing a 27% increase compared with the same period in 2025.

LNG remains the dominant fuel choice, accounting for 63% of all alternative-fuelled vessel orders registered so far this year. Container vessels represent the largest share of these LNG orders (59%), followed by car carriers (30%).

Jason Stefanatos, Global Decarbonization Director at DNV Maritime, said: “The past two months have been particularly strong for alternative-fuelled vessel ordering, with August recording the highest monthly total we’ve seen since October 2024. This has helped lift year-to-date orders to a level well above the same period last year.

“LNG remains the leading fuel choice, driven largely by activity in the container and car carrier segments. These sectors have been among the earliest adopters of alternative fuels, supported by predictable liner operations and increasing demand from cargo owners to reduce emissions across supply chains. 

“For many owners, LNG offers a combination of emissions reductions, fuel availability and future flexibility while the longer-term fuel landscape continues to evolve. 

“At the same time, the latest figures include orders for ethanol- and hydrogen-fuelled vessels, highlighting that owners continue to explore a range of decarbonization pathways. Different segments are making different fuel choices, but the overall level of activity demonstrates continued investment in lower-emission shipping.”

Screenshot 2026 09 04 at 12.29.26 PM Screenshot 2026 09 04 at 12.29.36 PM

 

Photo credit: DNV
Published: 4 September, 2026

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