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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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Monday, 22 July 19
SUPRAMAX: THE ASIAN ARENA SAW INCREASED ACTIVITY AND STRONGER NUMBERS BEING CONCLUDED; INDONESIAN ROUNDS REMAINED FIRM - BALTIC BRIEFING
Capesize
Another week of gains as the Atlantic basin continues to be pressurised on tonnage and Brazilian cargoes keep up a steady flow. The Ca ...
Thursday, 18 July 19
WORLD TRADE IN HARD COAL ROSE BY 4.7% IN 2018 - GERMANY COAL IMPORTERS ASSOCIATION
World Trade in Hard Coal Rose by 4.7% in 2018
Hard Coal Can Prevent Stress in the Electric Power System in Germany
• Sharp decl ...
Wednesday, 17 July 19
MARKET INSIGHT - INTERMODAL
The Strait of Hormuz is one of the most important waterways in the world, connecting crude producers in the Middle East with key markets in the res ...
Tuesday, 16 July 19
KING COAL RULES IN JAPAN AS POWER UTILITIES IN THRALL TO LOW-COST FUEL - REUTERS
Japanese utilities will rely on the return of coal-fired power plants from maintenance to meet peak electricity demand this summer, highlighting th ...
Tuesday, 16 July 19
SUPRAMAX: THE ASIAN ARENA WAS SPLIT, WITH A BUILD-UP OF TONNAGE AND LACK OF ENQUIRY IN THE NORTH - BALTIC BRIEFING
Capesize
It was a Brazilian affair with a strong splash of bunkers characterising the Capesize market over the past week. Largely traded in Eur ...
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- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Orica Mining Services - Indonesia
- Economic Council, Georgia
- McConnell Dowell - Australia
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- Central Electricity Authority - India
- Tata Chemicals Ltd - India
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Indian Energy Exchange, India
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- The State Trading Corporation of India Ltd
- Karaikal Port Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Jaiprakash Power Ventures ltd
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Kaltim Prima Coal - Indonesia
- Latin American Coal - Colombia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- Edison Trading Spa - Italy
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Sree Jayajothi Cements Limited - India
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Ministry of Finance - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- Interocean Group of Companies - India
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- SMG Consultants - Indonesia
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Indian Oil Corporation Limited
- Gujarat Mineral Development Corp Ltd - India
- Petron Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- ICICI Bank Limited - India
- Asmin Koalindo Tuhup - Indonesia
- GAC Shipping (India) Pvt Ltd
- CNBM International Corporation - China
- Planning Commission, India
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Orica Australia Pty. Ltd.
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Coastal Gujarat Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Aditya Birla Group - India
- The University of Queensland
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- Intertek Mineral Services - Indonesia
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- IEA Clean Coal Centre - UK
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Xindia Steels Limited - India
- Trasteel International SA, Italy
- Antam Resourcindo - Indonesia
- GN Power Mariveles Coal Plant, Philippines
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