Speaker 1: Hey, DNA, Mark, are you looking forward to the new year?
Speaker 1: I try not to think about it is the new
Speaker 1: year as much as my birthday because New Year's Eve
Speaker 1: is my birthday. Yeah, I did know that, but this
Speaker 1: is also the turn of the new decades? So which
Speaker 1: is better your birthday or the turn of the decade. Well,
Speaker 1: I'm going to be on my way back to London
Speaker 1: on my birthday, which means I won't be celebrating New
Speaker 1: Year's Eve. But my mother used to tell me when
Speaker 1: I was a kid, all the fireworks for for me.
Speaker 1: So if we continue to operate under that premise, maybe
Speaker 1: it's a draw. Okay, fine, that works. What are you
Speaker 1: looking forward to about the change of the decade in
Speaker 1: the new year. Well, clearly it's going to be I
Speaker 1: m O when new regulations come into force for the
Speaker 1: global shipping industry. Clearly joining us today in the studio
Speaker 1: is Richard Chatterton, who is our lead oil analysts, and
Speaker 1: Richard's actually based out of our Singapore office. Mark and
Speaker 1: I had a business trip to Singapore last year around
Speaker 1: the New Year. And Mark, what do you remember most
Speaker 1: about Singapore chili crab? Yeah, it was really tasty. Apparently
Speaker 1: it doesn't come from Singapore though, Um, I don't know.
Speaker 1: Maybe maybe a thin from Singapore. They can correct me
Speaker 1: on that, but yeah, tall buildings, I don't know. In
Speaker 1: the Merlin, don't forget the half Mermaid, half Lion. Well,
Speaker 1: the thing I remember most of all about Singapore is
Speaker 1: when you look outside the window and you're flying in,
Speaker 1: you see ships in that bay. More ships and maybe
Speaker 1: I've ever seen anywhere, and I actually grew up in
Speaker 1: northern California. I've seen quite a few ships in San
Speaker 1: Francisco Bay. But Singapore, You've got more ships in one
Speaker 1: bay than I even thought was possible. So it is
Speaker 1: perfect that we have Richard Chatterin joining us today to
Speaker 1: talk about shipping. UH and I am ow we actually
Speaker 1: write a monthly report about im. If you would like
Speaker 1: to read it, you can find it on the Bloomberg
Speaker 1: terminal at b NF, go on bn F dot com,
Speaker 1: or on the b NF mobile app. And if you're
Speaker 1: already turning this podcast off thinking it's about shipping it's
Speaker 1: not for me, well you'll find out pretty quickly that
Speaker 1: this really applies to pretty much every sector. So have
Speaker 1: a listen, stay tuned, and UH, let's jump in with Richard.
Speaker 1: As a reminder, biennyf does not provide investment or strategy advice,
Speaker 1: and you can hear a full disclaimer at the end
Speaker 1: of the show. Now let's jump in with Richard. Hi,
Speaker 1: rich thank you for joining us today. Thank you for
Speaker 1: having me. I am O is a phrase that I
Speaker 1: was not familiar with until this year, but is pretty
Speaker 1: much well anybody can talk about in the shipping industry
Speaker 1: at the moment. Can you please tell us what it is? Well?
Speaker 1: Being an oil analyst, it's pretty much the only thing
Speaker 1: that I've worked on for the past twelve months. Um,
Speaker 1: i'm is the most important regulatory changed to impacts or
Speaker 1: reported markets for decades. It's is creating significant disruption and
Speaker 1: complications for the shipping industry, but it's also a big
Speaker 1: deal for the refining sector. So from the first of
Speaker 1: Jan the sulfur fuel content specification as regulated by the
Speaker 1: International Maritime Organization will fall from three point five per
Speaker 1: cent SUL for contents to zero point content. Now, that
Speaker 1: is a really really big shift to put into context.
Speaker 1: Sulfur has been regulated out of pretty much every other
Speaker 1: sector where oil is used. Why because it's a very
Speaker 1: undesirable pollutant that causes localized devolution in an urban setting.
Speaker 1: If you look at the regulations which which have come
Speaker 1: into force over the past decades to to to reduce
Speaker 1: the sulfur content of road fuels, which were quite significant.
Speaker 1: Um if we go back to the seventies, eighties and
Speaker 1: early nineties, they were causing acid rain. It's it's it's
Speaker 1: really something that's undesirable. So regulators acted to to to
Speaker 1: push down the sulfur content of of road fuels and
Speaker 1: other phosphors which are used in built up areas. What
Speaker 1: this then resulted in Thore is that refiners are faced
Speaker 1: with the problem when you when you look at what's
Speaker 1: in a barrel of oil hydrocarbons, and there's impurity. Is
Speaker 1: one of the key impurities of sulfur um. If you
Speaker 1: push sulfur out of the u of the of the barrel,
Speaker 1: across across diesel, across gasoline, across kerosene um, it ends
Speaker 1: up in the bottom of the barrel, the residual, so
Speaker 1: to speak, which is the main source of supply for
Speaker 1: the for the bunker market for shipping fuels. So what
Speaker 1: you've ended up with is this concentration of sulfur emissions
Speaker 1: from oil essentially accumulating in shipping fuel. Interesting statistic is
Speaker 1: the fifteen of the largest ships actually admit more sulfur
Speaker 1: than all of the world's cars now because the regulation
Speaker 1: around road fuels is so stringent and the and the
Speaker 1: absence of regulation for shipping fuels means that suff emissions
Speaker 1: in the in the ship industry un constraint. So this
Speaker 1: is the first time, from the first chance with the
Speaker 1: first time that sulfur content will be regulated to a
Speaker 1: meaningful degree, and that is causing causing some big challenges.
Speaker 1: But it's been a step change coming for some time,
Speaker 1: hasn't it. It has, but this is the first time
Speaker 1: that it is creating a pain point. This is the
Speaker 1: first time that shipping companies are having to install equipment
Speaker 1: to to comply with with more stringent regulations, and it's
Speaker 1: the first time that the refining system is having to
Speaker 1: significantly reconfigure and having to significantly react to a new standard,
Speaker 1: which which will require a wholesale re engineering of the
Speaker 1: marine fuel supply infrastructure. Um So there are different ways
Speaker 1: that you can comply. From the beginning of the year,
Speaker 1: you can either just buy low sulfur fuels, but you
Speaker 1: can also install a few if you're a vessel operator,
Speaker 1: instead of buying low so for fuel, which may be
Speaker 1: more expensive, you can install a piece of kit on
Speaker 1: your ship to scrub the sulfur emissions from the flu gasses.
Speaker 1: These are these exhaust gas cleaning systems or scrubbers for shorts,
Speaker 1: which costs money. Like maybe it can be it can
Speaker 1: be several million dollars to install one of these things,
Speaker 1: and the challenges that there are only a few companies
Speaker 1: that have the capacity to to install scrubbers. These scrubbers
Speaker 1: have been pretty common placed in the power sector for
Speaker 1: some years now. Are the same companies that installed them?
Speaker 1: There are the same ones that install them on chips um.
Speaker 1: It's a good question. I think that a lot of
Speaker 1: the technology is the same, but the main companies are
Speaker 1: marine technology companies or mean engineering companies, your Apple vowls,
Speaker 1: your what Sillers, your Yarra marine. But there's no doubt
Speaker 1: that they also in a sell into the supply chain
Speaker 1: that that provides similar equipment of stationary stationary application. So
Speaker 1: if I'm a stationary provider, should I see this as
Speaker 1: an opportunity? Well, a lot of people saw this as
Speaker 1: an opportunity for UM, the for the marine engineering companies.
Speaker 1: And we did see sort of in the run up
Speaker 1: to IM or in the run up to the discussions
Speaker 1: maybe last year and early part of you saw significant
Speaker 1: increases in the share prices of some of these companies.
Speaker 1: But the expectations for scrub adoption have actually fallen off
Speaker 1: some what and I'll tell you why. What what you've
Speaker 1: had is is this sort of face off between the
Speaker 1: refining system and the shipping industry as to who acts first.
Speaker 1: It's kind of a bit of a first movie disadvantage, right,
Speaker 1: if you're absolutely if you if if you're if you're
Speaker 1: one of the big vessel operators or shipping companies, if
Speaker 1: you install scrubbers on all your vessels in the expectation
Speaker 1: that UM, you're gonna you're gonna make more money by
Speaker 1: complying that way, I should probably explain the rationale to
Speaker 1: install a scrub on your vessel is because you would
Speaker 1: assume that the high soul for fuel which you will
Speaker 1: then be able to continue burning. Because remember you're scrubbing
Speaker 1: the solfa on your ship. You're so you're still in compliance.
Speaker 1: You're reducing your sulf emissions, but you can still buy
Speaker 1: the high sulfur fuel, which should trade at a discount
Speaker 1: to the compliant fuel which has had to go through
Speaker 1: more extensive refining processes. Um, the gamble that you're making
Speaker 1: is that the multimillion dollar investments to restore the scrubb
Speaker 1: but will be paid off over time by the lower
Speaker 1: fuel costs. All right, So you you're essentially taking a
Speaker 1: bet on the outlook for fuel prices. However, if the
Speaker 1: refining system does one of two things, if they increase
Speaker 1: the supply of compliant fuel to such an extent that
Speaker 1: there isn't really a price spread between high sulf and
Speaker 1: low suff for fuels, then it might not be worth
Speaker 1: it all the scrubbers. But then, on the other hand,
Speaker 1: it just might not be possible to buy high sulfur
Speaker 1: fuel over a period of time. If you think about it.
Speaker 1: You know, in the revual sector, was the last time
Speaker 1: you ever saw leaded petrol for so it gets regulated
Speaker 1: out of the market. Suppliers will you know, will will
Speaker 1: will respond if the market diminishes to certain extent, and
Speaker 1: if they have infrastructure constraints or they only have one
Speaker 1: barge that they can use to rebunk of vessels in
Speaker 1: a particular location. They might just not offer high sulfur
Speaker 1: fuel oil in a particular place, which means it doesn't
Speaker 1: matter if you have your scrubble or not, you're still
Speaker 1: gonna have to pay for the for the compliant fuel.
Speaker 1: So as a result, you've had a kind of very
Speaker 1: slow decision making process from the shipping industry as to
Speaker 1: how many scrubbers were going to install, and we've got
Speaker 1: closer from collection close to the deadline. Earlier this year,
Speaker 1: there were some big estimates that were put out there
Speaker 1: by by other by other analysts, five six thousand scrubbers
Speaker 1: by numbers always been around about three three and a
Speaker 1: half thousands. We think by the end of the year
Speaker 1: of the number will be about three thousands. So that
Speaker 1: means about one in ten large ships will have one intent.
Speaker 1: Ships not the largest ships will one intent. Of the
Speaker 1: marine fleet will have have a scrubber installed. That means
Speaker 1: that there's the st equilibrium that we've got to write
Speaker 1: where companies are sort of hedging their bets. They're installing
Speaker 1: a few scrubbers here, and they're they're gonna they're gonna
Speaker 1: they're gonna buy compliant fuel for the rest of their fleet,
Speaker 1: and what they're um, well, they're What they're essentially going
Speaker 1: to do is wait and see see what happens to
Speaker 1: the price breads. So if you're a Lavello, what Silla
Speaker 1: and you were making, people were making big bets on
Speaker 1: the number of scrubbers that you were going to sell
Speaker 1: over this period of time, you're you've probably been disappointed
Speaker 1: by how this has turned out. But the scrubbers do
Speaker 1: have some advantages, don't they In terms of timelines for
Speaker 1: the actual ships. Scribbers have a number of disadvantages. I
Speaker 1: would say they probably, I think, I think in terms
Speaker 1: of in terms of operational um in terms of operational flexibility,
Speaker 1: scrubbers provide ships with less risks in terms of bunkering operations.
Speaker 1: Because you could argue that in certain places from January one,
Speaker 1: it won't be possible to get a hold of piint fuel.
Speaker 1: We can go into this amite, but I actually don't
Speaker 1: think that's going to be the case. In most major
Speaker 1: bring reports that is going to be availability. But if
Speaker 1: you were worried about that, you could say it installing
Speaker 1: the scrubber means it's less likely that I'll have any
Speaker 1: issues with getting hold of the pliant fuel. But the
Speaker 1: downside is there are operational challenges with having scrub on board.
Speaker 1: It's a complex piece of kit which usually need to have.
Speaker 1: You need to have a certain degree of expertise and
Speaker 1: training for the crew to operate. There are inputs that
Speaker 1: you need to You need to you need to feed
Speaker 1: these things with with re agents, with soda ash lime.
Speaker 1: You also have an issue with wash water and this
Speaker 1: is going to become a bigger issue I think over
Speaker 1: the coming years. There are two types of well, the
Speaker 1: three types of scrubber. There's an open loop scrubber, there's
Speaker 1: a close loop scrubber, and there's a hybrid scrubber. The
Speaker 1: names sort of sort of our self explanatory and openly scruber,
Speaker 1: but it does as it pushes water in through an
Speaker 1: inflow through the flu gasses, dissolves the sult of content
Speaker 1: in the in the exhaust gases, and then it just
Speaker 1: chucks the water out into the sea. A closed loop
Speaker 1: scrubber it's the same process, but you have as a
Speaker 1: self contained closed loop where you have storage tank on
Speaker 1: board and there is no there is no discharge and
Speaker 1: the hybrid allows you to switch between the two. Difficult
Speaker 1: thing about having closed scruber is that aim more expensive
Speaker 1: and be the second more space on the vessel. The
Speaker 1: problem with an open loop scrubber is that it's not
Speaker 1: very nice. It sounds like there's any scrubber eventually, Rightly,
Speaker 1: what you actually want to push towards is compliant fuel,
Speaker 1: right absolutely. I mean, if you're an environmental advocate, well,
Speaker 1: I think I think in terms of the way that
Speaker 1: the regulation has been structured, it's it's been a bit
Speaker 1: of a compromise, because that in prinsible, it should just
Speaker 1: be we're moving to a lower um sour fur specification
Speaker 1: for fuels, let's let's get it done. But the argument
Speaker 1: was we have to give the industry a pathway to adapt,
Speaker 1: a pathway to be able to to to transition to
Speaker 1: that lower spec over time, and scrubbers allow you to
Speaker 1: do that. I think that in terms of the impact
Speaker 1: of our mo we don't want to we don't focus
Speaker 1: too much on scrubbers because they are they are kind
Speaker 1: of a only only only only part of the equation.
Speaker 1: What you have with the economics of scrubbers is really
Speaker 1: a temporary trend. One of these things, like I said,
Speaker 1: costs a few million books, and you're you're betting on
Speaker 1: there being a spread between the price of the high
Speaker 1: sulfur and low sulfur fuels. That spread is now really
Speaker 1: really significant. It's two hundred and fifty per ton. We
Speaker 1: calculated that at a hundred and seventy five to two
Speaker 1: hundred dollars, you can pay back one of these things,
Speaker 1: and under two years two you're you're you're pushing closer
Speaker 1: towards eighteen month payback. So really, you know that that's
Speaker 1: that's that's that's going to probably pay off the three
Speaker 1: thousands that that that are that are that are going
Speaker 1: to be stored by the end of the year. We
Speaker 1: think around about three thousand, seven hundred thousand, eight hundred
Speaker 1: are going to be installed in total over the next
Speaker 1: Over the next year or so, it also just seems
Speaker 1: like more time to allow for compliance fuel supply to
Speaker 1: build up. Yeah, well this is the thing, like after that,
Speaker 1: you know, year eighteen months is up and those those
Speaker 1: investments have been paid off, you're probably not gonna write
Speaker 1: I want to install the scouple because you're not gonna
Speaker 1: able to get hold of the three point five fuel,
Speaker 1: are not gonna able to get hold of the dirty stuff,
Speaker 1: so you might as well, you might as well, um,
Speaker 1: look beyond this, this this transition technology and think think
Speaker 1: longer term about how you comply with with tightening regulations.
Speaker 1: There's also a risk and this is this is going
Speaker 1: beyond the current market question. But what's going to happen
Speaker 1: post I Naturally there's going to be a push toward
Speaker 1: even more stringent targets, perhaps constructs on carbon emissions as
Speaker 1: well as sulfur content of fuels, which is causing a
Speaker 1: lot of shiping companies to lose sleep Can we talk
Speaker 1: about that for a second, Like regulations and center of
Speaker 1: mass or where things are going? Who is enforcing these rules? Right?
Speaker 1: So is it just kind of consensus or did they
Speaker 1: ratify something the shipping companies or what are the loosing sleepover?
Speaker 1: If they say just forget it, I'm just not gonna comply,
Speaker 1: who's going to say anything. There's there's two sectors which
Speaker 1: sort of fall outside of the full stool cracks you say,
Speaker 1: of the global climate policy debate. When you look at
Speaker 1: the Paris Agreement, it's structured around country level targets. So
Speaker 1: each country adopts a golfer its long term carbon low
Speaker 1: carbon pathway. International aviation and international shipping are the two
Speaker 1: sectors which fall outside of that framework, because which country
Speaker 1: we're talking about, which country is responsible for those for
Speaker 1: for those missions and for that, for that, for that
Speaker 1: fuel consumption. So what you have is a is a
Speaker 1: sort of delegation of the of the of the of
Speaker 1: the climate policy framework to the multilateral institutions which are
Speaker 1: most well aligned and most well positioned to be able
Speaker 1: to carry the the issue um into some form of
Speaker 1: regulatory framework. So for aviation you have i k OH
Speaker 1: it's the International Civil Aviation Organization, and for shipping you
Speaker 1: have the IMO. And the IMO operates in very much
Speaker 1: the same way as as the UN Framework Commational Climate Change.
Speaker 1: It's a multilateral organization. They have they have periodic meetings,
Speaker 1: they have working groups, they have a number of leading
Speaker 1: voices have they have different UM country groupings and and
Speaker 1: coalitions which which which take on opposing positions and that
Speaker 1: and that drive the debate. So enforcement of this is
Speaker 1: driven through the IMO framework. To answer the question directly,
Speaker 1: enforcements is based at the flag state level. So in theory,
Speaker 1: if if if a ship is noncompliant, for a ship
Speaker 1: is in some way breaking the rules, the procedure is
Speaker 1: to report that ship to the flag states, and the
Speaker 1: flag state is then obligated onto the IMO framework to act.
Speaker 1: The problem is that most flag states don't have the
Speaker 1: institutional capacity to do so because most ships are actually
Speaker 1: flout in quite random parts of the world Mauritius, Liberia, Panama,
Speaker 1: major flag states, and it's mainly because of various tax reasons.
Speaker 1: But but as a result it's it's it's kind of
Speaker 1: an ineffective compliance framework for anything which is going to
Speaker 1: create a meaningful, meaningful disruption or require meaningful levels of policing.
Speaker 1: So there is a discussion underwear them many about what
Speaker 1: to do about this. Do you shift the burden of
Speaker 1: compliance onto the ports state? Which is one way of
Speaker 1: thinking about it. So if you dock your vessel in Singapore,
Speaker 1: if you dot your vessel in Rotterdam, if you dot
Speaker 1: your vessel in the UK, would the authorities in that
Speaker 1: jurisdiction have the have have the ability under the IMO
Speaker 1: framework to impost sanctions or or to to impound vessels
Speaker 1: to to to do what's necessary to enforce compliance. That
Speaker 1: is an unresolved discussion at this time. Is that way
Speaker 1: their industries or other people, investors, companies are interested in
Speaker 1: this because if it transitions to the port country, right,
Speaker 1: and my goods are being held up in port or
Speaker 1: outside of port, then that affects me. My deliveries are
Speaker 1: not being shipped, right. So is that why non shippers
Speaker 1: are worried about I M O or is there something else?
Speaker 1: I think that the main reason why people people paying
Speaker 1: attention to this is because it is likely to and
Speaker 1: already is increasing the cost structure of the shipping industry,
Speaker 1: so increasing the cost of shipping my stuff wherever. Yeah,
Speaker 1: the compliance issue is a bit of a red heron
Speaker 1: because most people are going to comply. The reason why
Speaker 1: most people are going to comply is because the companies
Speaker 1: involved here are major companies, especially on the container sides,
Speaker 1: on the tankering side, They're just not gonna They're not
Speaker 1: gonna risk the reputational damage that non compliance would would entail.
Speaker 1: If if we're talking about small merchant vessels that are
Speaker 1: that are that are moving between ports in the region,
Speaker 1: that they are probably going to get away with it,
Speaker 1: then yeah, there's going to be non compliance. But we're
Speaker 1: talking in terms of tons of fuel. We're talking we're
Speaker 1: talking small numbers that the major components of demand in
Speaker 1: the international shipping segment are contain a line as tankers
Speaker 1: which are going between major ports, and therefore we're gonna
Speaker 1: we're gonna likely see high high compliance rates across across
Speaker 1: the volumes that matter. The cost structure question is really
Speaker 1: interesting one because the global shipping industry, I'll take a
Speaker 1: step back, there has been a really surprising coalition of
Speaker 1: support for the IS and I followed I've followed through
Speaker 1: my career the climate negotiations and regulatory um discussions at
Speaker 1: the international level for many years, and and and and
Speaker 1: has never ever been a situation that I've seen where
Speaker 1: governments and business and civil society all agree on the
Speaker 1: approach that's being taken and wanted to be implemented as intended.
Speaker 1: If you look at at the aviation discussion in comparison,
Speaker 1: there's there's a huge disconnect between the principles that the
Speaker 1: regulators want to work toward and what the aviation industry
Speaker 1: want because there is no credible pathway the for the
Speaker 1: aviation to reduce CEO two emissions, which is the discussion
Speaker 1: under the IK framework at the moment. For though, the
Speaker 1: reason why the shipping industry are on board is because
Speaker 1: there's a big surplus of capacity in the market, and
Speaker 1: it's been there pretty much the financial crisis. For all
Speaker 1: the vance crisis is very high increase in the rate
Speaker 1: of ship building. That overhang is still really really depressing
Speaker 1: shipping rates globally across almost all segments, but particularly in
Speaker 1: the tank, in the in the in the bulk carrier segment.
Speaker 1: So if you're MASK or CMA, CGM or Happy gloydal
Speaker 1: one of the other big container container liners, or if
Speaker 1: your costco um or one of the other big book carriers,
Speaker 1: what you what you want is to you want to
Speaker 1: flush out the smaller players. You want to try and
Speaker 1: get rid of that over capacity. So what this what
Speaker 1: this is, What this does is it increases the cost
Speaker 1: structure of the industry. The people who are less equipped
Speaker 1: to deal with that increase in costs are smaller players.
Speaker 1: They you're going to get out of business first. You
Speaker 1: might have a little bit of pain if you're one
Speaker 1: of the one of the bigger players, but it's going
Speaker 1: to be to your benefit ultimately because because hopefully the
Speaker 1: whole market can be brought back into balance. So um So,
Speaker 1: I think that in terms of cost the too dynamics
Speaker 1: of play one is the fuel costs going to go up,
Speaker 1: But we're not talking a huge amount here. We're talking
Speaker 1: for a container to be shipped Fromrottenham Singapore's approximately an
Speaker 1: increase of fifty And I live in Singapore. When I
Speaker 1: moved out of there, moving my stuff costs thousands of
Speaker 1: dollars in containers, So you know, we're talking about um
Speaker 1: a couple of percentage points in terms of in terms
Speaker 1: of the cost of transporting goods. However, the real shift
Speaker 1: or potential shift in the cost of shipping is not
Speaker 1: going to come from increased fuel prices. It's going to
Speaker 1: become from come from a tightening of capacity in the
Speaker 1: shipping market, which I'm is not in itself going to
Speaker 1: bring about, but it's definitely going to It's definitely going
Speaker 1: to work in that direction. What are you watching for
Speaker 1: on January one? What are you going to know on
Speaker 1: January one that you don't know now? The first thing
Speaker 1: I'm going to do when I open up my blooming
Speaker 1: terminal on the first day, first first trading day of
Speaker 1: the year is to look at the price bread between
Speaker 1: high sulfur and low sulfur fuel oil, because that is
Speaker 1: the key indication of the extent of the dislocation in
Speaker 1: the market that this is causing. It reflects the balance
Speaker 1: of availability of complying fuel with noncomplying fuel. It also
Speaker 1: gives you an indication of how how refiners are going
Speaker 1: to respond and what refiners are essentially faced with in
Speaker 1: terms of the pricing environment. So what happens from the
Speaker 1: first of January will define how the dynamics of the
Speaker 1: down stream economics will look for a period of time,
Speaker 1: and and the question will then be how big is
Speaker 1: that dislocation and how likely is that dis location to persist,
Speaker 1: Because that's gonna that's going to create trading opportunities, it's
Speaker 1: gonna it's going to create interesting unusual movements of crude
Speaker 1: and products around the world. Potentially, there's also the potential
Speaker 1: for this to actually impact diesel prices quite consistantly. One
Speaker 1: of the big question marks that's been hanging over the
Speaker 1: market all year is will in increased diesel prices? Overall
Speaker 1: we've had this question from a number of clients that
Speaker 1: don't really have any interest in shipping. They just want
Speaker 1: to make sure that the cost of diesel doesn't go up.
Speaker 1: The expectation has been that it would. The expectation has
Speaker 1: been that there will be an increase in middle distillate demand.
Speaker 1: Middle distillance is the casual term for diesel, for kerosene,
Speaker 1: for gas oil, for that middle cut of the barrel.
Speaker 1: And there has been this expectation that that because of
Speaker 1: I'm more of the little distilate supply will have to
Speaker 1: be pushed into into the into the marine sector. So far,
Speaker 1: that doesn't look like it's the case so far. What
Speaker 1: we're actually seeing as the opposite. There's weak demand fundamentals
Speaker 1: for diesel because of the China US trade war, because
Speaker 1: of weak economic growth fundamentals, because there's been particular softening
Speaker 1: of de bands for diesel in India over the last
Speaker 1: few months. That's actually having a much more of an
Speaker 1: impact on on refining margins and middle of su prices
Speaker 1: than I am owas at the moment, whether or not
Speaker 1: come first of Johnny that that switches will make boos.
Speaker 1: Thank you so much for joining us today, and I
Speaker 1: think we look forward in actually having you back after
Speaker 1: the first of Jan and this has actually all had
Speaker 1: some time for the dusk to settle, or maybe the
Speaker 1: sulfur to settle, if you will, Um, Thank you so
Speaker 1: much for joining us today. Rich thanks for having Bloomberg
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