Shipping sector faces delays in fitting equipment in China

LONDON • The shipping industry tends to do badly when Chinese demand disappoints, but the coronavirus outbreak has done more than just damage the amount of cargo that needs to be transported. It is also preventing owners from making their ships commercially viable.

Capesize carriers taking iron ore and coal to China are now earning US$2,660 (S$3,700) a day, said the Baltic Exchange in London. That is a fraction of what they need even to pay their crew, and 93 per cent below a 2019 peak.

Supertankers transporting 2 million-barrel cargoes of crude have fallen about 95 per cent from their high point last year.

And the virus is presenting more woes: Many owners urgently need to have their vessels fitted with scrubbers at shipyards in China.

The kit allows carriers to keep legally burning fuel and that saves them millions of dollars a year, but the coronavirus is preventing such installations, said vessel owner DHT Tanker Holdings.

Jefferies senior vice-president for equity research, Mr Randy Giveans, said: "Getting people and parts to the yards for installation has been a massive quagmire" due to the outbreak.

From Jan 1, vessels had to cut emissions of sulfur oxides, so the cost of ship fuel prevalent last year fell as it contained too much of the pollutant. The new variety surged in price.

Some owners gained an edge fitting scrubbers in advance of the rules, to keep burning the old product. Now others are rushing to get their own fleets refitted.

Supertankers with scrubbers are earning about US$15,000 a day more than those that don't, said Mr Giveans. Over a year, it means they make about US$5 million more.

Mr Anoop Singh, head of East of Suez tanker research at Braemar ACM Shipbroking, said eight supertankers and two tankers installing scrubbers are now facing delays.

Mr Peter Sand of industry group Bimco said: "Coronavirus is closing down retrofit yards in China... The uncertainty of how long this is going to take is massive."

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A version of this article appeared in the print edition of The Straits Times on February 11, 2020, with the headline 'Shipping sector faces delays in fitting equipment in China'. Print Edition | Subscribe