Investment decision analysis of shipping desulfurization project based on a fuzzy real option approach

Fangping Yu, Bin Meng, Jie Guo, Lidong Fan and Wenming Shi

Maritime Policy & Management, 2025, vol. 52, issue 1, 78-105

Abstract: This study addresses shipping companies’ compliance with the International Maritime Organization’s 2020 sulfur emission limits, providing guidance for investment decisions in desulfurization projects. The paper uses a novel RCFM model, integrating real option theory (R), shipping cycle theory (C), fuzzy set theory (F), and Monte Carlo simulation (M). Key findings are: (1) During high oil price volatility, traditional binary tree models show computational distortions corrected by Monte Carlo simulation, whereas in lower volatility, the fuzzy binary tree model offers reliable investment intervals. (2) Investment in desulfurization depends on remaining vessel life and fuel price differences. For example, during the recovery period, for vessels with a remaining life of less than 5 years, investing in a desulfurizer is profitable if the fuel price difference exceeds $550/t and using low-sulfur fuel is advisable if below $400/t. For vessels of remaining life of 5-9 years, invest in a desulfurizer if the difference exceeds $500/t and use low-sulfur fuel if below $300/t. For over 9 years, invest in a desulfurizer if the difference exceeds $450/t and use low-sulfur fuel if below $200/t.

Date: 2025
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DOI: 10.1080/03088839.2024.2378457

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