Crude and product tanker owner and operator Diamond S Shipping believes IMO 2020 to be a positive development for its sector.
“I guess the most talked about issue in the industry over the last two years has been IMO 2020 and going from 3.5% sulphur fuel to 0.5%. It's a very significant event for the industry, and it's super positive for our business,” said Chief Executive Officer Craig H Stevenson Jr in a recent earnings call.
“Demand for medium and heavy crudes, crude oil, is stronger, because it will yield more distillate products. That's what's needed to produce the compliant fuel. This will continue to drive ton miles given the disconnect between these oils and the location of complex refineries.
“About 3 to 4 million barrels a day of high sulfur fuels will be displaced by this light oil or even gas/oil blends. Refineries are expected to change their feedstock slates in order to supply this compliant fuel.”
Stevenson Jr notes the shipping industry to be also investing in scrubbers in anticipation of a cost advantage over vessels that buy compliant fuel.
“Today about 16% of the tanker fleet is investing in scrubbers. Diamond S is a participant in this. We have five scrubber contracts, and we're gonna evaluate two others,” he said.
“And we expect in the second half of 2019 we'll see scrubber tonnage going offline to install these systems, creating the opportunity for the shipping market to capture stronger returns.”
Diamond S posted net loss of $1.0 million during the first quarter (Q1) of 2019, significantly lesser than loss of $13.7 million during the similar quarter last year.
The company successfully completed a merger with the tanker business of Capital Product Partners L.P. on 27 March, creating a publicly traded, large scale company with 68 crude and product carriers with an estimated gross vessel asset value of over $1.6 billion as of April 2019.
“The merger of Diamond S with the tanker fleet of Capital Product Partners has created one of the leading publicly traded tanker operators in the world,” notes Stevenson Jr.
“We are hard at work finalizing the integration of the two fleets. We believe the combination of our two platforms will drive operating and overhead efficiencies that will result in significant cost savings.
“Our emergence in the public markets could not come at a better time as we believe the broader tanker market is entering a multi-year up cycle driven by restrained vessel supply growth, steady demand improvement and the massive industry changes to come as a result of marine fuel sulphur regulations.”
Published: 15 May, 2019
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