Denmark-based shipping company Torm has formed a new joint venture (JV) with ME Production and Guangzhou Shipyard International (GSI) to manufacture and install scrubbers on vessels in China.
Called ME Production China, the JV will provide scrubbers to both newbuild and retrofitted vessels.
TORM owns a 27.5% stake in ME Production China.
Scrubbers are designed to eliminate sulphur oxides from a vessel’s engine and boiler exhaust gases, helping the operators to comply with the upcoming International Maritime Organization (IMO) regulation on sulphur emissions.
Scheduled to come into force from 1 January 2020, the regulation aims to reduce sulphur emissions from fuel oil used on-board vessels operating outside designated emission control areas, from the current 3.5% to 0.5%.
TORM executive director Jacob Meldgaard said: “Our long-standing relationships with GSI and ME Production helped to facilitate this unique joint venture at a time when demand for scrubbers is expected to increase significantly.
“This strategic move provides us with a substantial economic interest in a venture that has the potential to be a large-scale international scrubber manufacturer.
“It will also result in TORM obtaining attractive prices for the scrubber investments that already have a short payback time.”
TORM has placed an order with ME Production China for a total of 16 scrubbers. The average capital expenditure (CAPEX) related to the development and installation of each scrubber is estimated to be less than $2m.
TORM has also signed a letter of intent with ME Production China for an additional 18 scrubbers.
The company is now committed to installing scrubbers on 21 of its vessels and potentially up to 39 vessels, which are around half of its current fleet size.