Container fleet renewal considering multiple sulfur reduction technologies and uncertain markets amidst COVID-19

Abstract

The onset of 2020 is marked by stricter restrictions on maritime sulfur emissions and the spread of Coronavirus Disease 2019 (COVID-19). In this background, liner companies now face the challenge to find suitable sulfur reduction technologies, make reasonable decisions on fleet renewal, and prepare stable operation plans under the highly uncertain shipping market. Considering three sulfur reduction technologies, namely, fuel-switching, scrubber, and liquefied natural gas (LNG) dual-fuel engine, this paper develops a robust optimization model based on two-stage stochastic linear programming (SLP) to formulate a decision plan for container fleet, which can deal with various uncertainties in future: freight demand, ship charter rate, fuel price, retrofit time and Sulfur Emission Control Area (SECA) ratio. The main decision contents include ship acquisition, ship retrofit, ship sale, ship charter, route assignment, and speed optimization. The effectiveness of our plan was verified through a case study on two liner routes from the Far East to Northwest America, operated by COSCO Shipping Lines. The results from SLP model show that large-capacity fuel-switching ships and their LNG dual-fuel engine retrofits should be included in the long-term investment and operation plan; slow-steaming is an important operational decision for ocean liner shipping; if the current SECA boundary is not further expanded or the sulfur emission restrictions not further tightened, the scrubber ship will have no advantage in investment cost and operation. However, considering the probabilities of more flexible scenarios, the results from the robust model suggest that it is beneficial to install scrubber on medium-capacity fuel-switching ships, and carry out more LNG dual-fuel engine retrofits for large-capacity fuel-switching ships. Compared with SLP, this robust strategy greatly reduces sulfur emissions while slightly pushing up carbon emissions.