Analysis of economic return differences of VLGC vessels’ two methods for complying with IMO 2020 among three different voyage routes

Abstract

IMO 2020 has come into force since the beginning of this year, it aims to limit the emissions of vessels sailing at open sea. This policy leaves shipowners two options to comply with: either change vessels’ fuel from high sulfur fuel to very low sulfur fuel or continue to burn high sulfur fuel but installing scrubbers. From the IMO perspective, the goal is to reduce emissions of maritime transportation, while the process (how to achieve this goal) is not what the organization cares about. However, from the shipping companies’ perspective, it is the process that how to achieve this goal that really matters. This paper aims to analyze and compare when VLGC vessels sailing at three different voyage routes, how the independent variables (bunker price differences between high sulfur fuel and low sulfur fuel, freight rate, scrubber cost) affect the economic return differences of scrubber scenario and non-scrubber scenarios. This paper will use the quantitative research strategy and sensitivity analysis method. The conclusion is that bunker price difference is the core factor to affect the economic return differences, and scrubber cost is also important to the scrubber cost repayment cycle time. The Ras Tanura – Chiba – Ras Tanura route can bring more economic return differences than Houston – Chiba – Houston via Panama route, and Houston – Chiba – Houston via Panama route can bring more economic return differences than Houston – Flushing – Houston route.

IMO 2020 has come into force since the beginning of this year, it aims to limit the emissions of vessels sailing at open sea. This policy leaves shipowners two options to comply with: either change vessels’ fuel from high sulfur fuel to very low sulfur fuel or continue to burn high sulfur fuel but installing scrubbers. From the IMO perspective, the goal is to reduce emissions of maritime transportation, while the process (how to achieve this goal) is not what the organization cares about. However, from the shipping companies’ perspective, it is the process that how to achieve this goal that really matters. This paper aims to analyze and compare when VLGC vessels sailing at three different voyage routes, how the independent variables (bunker price differences between high sulfur fuel and low sulfur fuel, freight rate, scrubber cost) affect the economic return differences of scrubber scenario and non-scrubber scenarios. This paper will use the quantitative research strategy and sensitivity analysis method. The conclusion is that bunker price difference is the core factor to affect the economic return differences, and scrubber cost is also important to the scrubber cost repayment cycle time. The Ras Tanura – Chiba – Ras Tanura route can bring more economic return differences than Houston – Chiba – Houston via Panama route, and Houston – Chiba – Houston via Panama route can bring more economic return differences than Houston – Flushing – Houston route.