Dive Brief:

• MSC will purchase 86 exhaust gas cleaning systems, more commonly known as scrubbers, to help reduce sulfur emissions from ship engines.
• The company has secured a $439 million loan to help pay for the hardware, according to Watson Farley & Williams, the law firm that advised the bank that coordinated the financing. 
• The scrubbers are part of MSC's plan for complying with new sulfur regulations taking effect in 2020. In September, the company said it would also evaluate its trade routes to ensure it is optimizing its energy efficiency, and introduce a fuel surcharge to help cover the cost of compliance.

Dive Insight:

The new regulations from the International Maritime Organization (IMO) require ships to cut their sulfur emissions from 3.5% mass by mass to .5% and Outfitting ships with scrubbers is just one option.

The alternatives to scrubbers for carriers are either using low-sulfur fuel or liquefied natural gas. Experts expect most carriers to switch to low-sulfur fuels, although they will "significantly increase fuel costs for shippers," according to McKinsey and Company. An estimate cited by Maersk puts this cost increase at between $5 billion and $30 billion per year. 

This cost is why some will look for other options, like the scrubbers purchased by MSC. The regulations prohibit ships from even buying fuel with a sulfur content greater than .5% unless they are outfitted with scrubbers, according to Maersk.

MSC confirmed the loan announcement to Supply Chain Dive, but declined to expand on how the installation of scrubbers could affect shipping time, how long the retrofit will take, and why it decided to go this route over other options available. 

"Installing scrubbers would allow shippers to continue to burn high-sulfur fuel oil (HSFO), though it comes at a high conversion cost both from the capital expense of the scrubber equipment and the lost time in service while the ship is in dry dock," McKinsey and Company wrote.

MSC is not the only carrier to announce new fees to help cover the costs associated with IMO. Maersk announced changes to its fuel adjustment surcharge last year, saying it "will have to invest in compliant fuels, LNG [liquefied natural gas] or scrubber technology." CMA CGM, Hapag-Lloyd and ONE have also changed the way they plan to recover fuel cost as a result of the IMO 2020 rules.