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Monday, 16 September 19
SCRUBBERS AND FUEL PROFIT SHARE CLAUSES - CLYDE&CO
 From 1 January 2020, Regulation 14 of MARPOL Annex VI provides that the sulphur content in fuel oil used on board ships shall be reduced from a maximum limit of 3.5% to a maximum limit of 0.5% (the limit in emission control areas remains at 0.1%). Regulation 4 of MARPOL Annex VI permits equivalent methods of compliance provided such methods are at least as effective in terms of emissions reductions.
Whilst it is up to individual port state control and flag states to implement and enforce MARPOL Annex VI, the use of Exhaust Gas Cleaning Systems (“Scrubbers”) is widely expected to be a legitimate option as an equivalent method of compliance.
The anticipated key financial benefit for Owners that have invested or are considering in investing in Scrubber-fitted vessels, is that there will be substantial savings in the cost of trading the vessels due to the expected price differential between fuels with a high sulphur content and ‘compliant’ fuels with a low sulphur content. For example, this week press reports suggest that the fuels currently being traded result in a price differential of about $150-$250 per mt between 0.5% sulphur fuels and high sulphur fuels and predict a price differential of over $400 per mt in 2020 (the differential between high sulphur fuels and 0.1% sulphur fuels is greater).1
Owners have various options available to them in terms of benefitting from the expected fuel differential for Scrubber-fitted vessels.
For example, if Owners are spot trading their Scrubber-fitted vessels, typically it is Owners that pay for the fuel so Owners will therefore benefit from the lower costs of burning high sulphur fuels. If Owners are time chartering their vessel, typically under a time charterparty Charterers will pay for the fuel so Charterers will therefore benefit from the lower costs of burning high sulphur fuel. In consideration for providing this benefit under a time charter, Owners may simply demand a higher charter rate or a ‘scrubber premium’ on the market charter rate.
Alternatively, there are a number of creative ways in which Owners and Charterers can share the benefit of the expected or actual fuel savings for Scrubber-fitted vessels. One of these ways is through implementing a fuel profit-sharing scrubber clause (“FPS Scrubber Clause”) into the time charterparty. It has been reported in the press recently that these are being used with good effect by some owners to keep charter rates competitive.2
There are a number of different legal, operational and commercial factors which will have to be considered in negotiating and drafting FPS Scrubber Clauses and so it is unlikely there is a one-size fits all FPS Scrubber Clause that can be applied across the market. By way of example, the ongoing delay to an intended Bimco industry-standard scrubber clause is illustrative of the complexity and competing interests at play. For example, if owners are bearing the majority of the capital risk and operational risk of the Scrubber, then should owners be entitled to the majority of the benefit of the fuel differential? In the event that the Scrubber is not operational for technical or regulatory reasons, who is responsible for providing compliant low sulphur fuel?
An FPS Scrubber Clause is an innovative way for Owners and Charterers to allocate the anticipated risks and benefits of complying with the implementation of MARPOL Annex VI from 1 January 2020 through the use of Scrubbers. James Kennedy and Fanos Theophani have been involved in the negotiation and drafting of FPS Scrubber Clauses and are well placed to advise and assist the market on these issues.
1 “Songa Container pioneers profit-sharing scrubber clause” Tradewinds 30 August 2019
2 “IMO2020: RAI 2020 Marine Fuel Availability Study Re-Boot” Ship and Bunker 3 September 2019, and “IMO2020: Rollercoaster HSFO Prices Send Singapore VLSFO Premiums Under $85/mt” Ship and Bunker 30 August 2019
Source: Clyde&Co
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Wednesday, 31 July 19
SHIPPING MARKET INSIGHT - INTERMODAL
It was a fairly busy week in the dry S&P market. Despite the ease of Capesize rates which impacted Panamaxes as well, interest from potential b ...
Sunday, 28 July 19
ULTRAMAX - INDONESIAN COAL CARGOES SAW A 63,000DWT SHIP FIXING DELIVERY FOR A SOUTH CHINA TRIP VIA INDONESIA, REDELIVERY CHINA, AT $11,700 - BALTIC BRIEFING
Capesize
The market was a white knuckled ride this past week as a large downside movement shed value quickly leaving many in bewilderment. The ...
Wednesday, 24 July 19
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.27 PCT - XINHUA
China Taiyuan coal transaction price index stood at 138.78 points Monday, down 0.27 percent week on week.
The index, released by Chi ...
Wednesday, 24 July 19
SHIPPING MARKET INSIGHT - INTERMODAL
Tonnes of ink has been spent analysing the rebound of the dry bulk market the last weeks with the most representative example being the rising perf ...
Wednesday, 24 July 19
COAL'S DEMISE QUICKENS IN EUROPE AS MARKET SHIFT IDLES PLANTS - BLOOMBERG
Commodity markets are stripping away the case for coal in Europe, moving quicker than government efforts to close the most polluting power plants.
...
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- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Sakthi Sugars Limited - India
- Energy Link Ltd, New Zealand
- SMC Global Power, Philippines
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Grasim Industreis Ltd - India
- Therma Luzon, Inc, Philippines
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Carbofer General Trading SA - India
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Sical Logistics Limited - India
- PTC India Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Maheswari Brothers Coal Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GVK Power & Infra Limited - India
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Sindya Power Generating Company Private Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Uttam Galva Steels Limited - India
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Tamil Nadu electricity Board
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- Kartika Selabumi Mining - Indonesia
- Planning Commission, India
- Altura Mining Limited, Indonesia
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Power Finance Corporation Ltd., India
- Intertek Mineral Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- White Energy Company Limited
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- Bulk Trading Sa - Switzerland
- TeaM Sual Corporation - Philippines
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Indika Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- Indian Oil Corporation Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- Globalindo Alam Lestari - Indonesia
- Larsen & Toubro Limited - India
- Meenaskhi Energy Private Limited - India
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Ministry of Finance - Indonesia
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- The University of Queensland
- Sojitz Corporation - Japan
- Australian Coal Association
- Posco Energy - South Korea
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
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