Graphic shows ways that shipping lines can cut pollution.
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ENVIRONMENT

High cost of cutting marine pollution

By Duncan Mil

November 20, 2018 - In a bid to clean up the world’s shipping industry, the International Maritime Organisation (IMO) has ruled that the amount of sulphur allowed in bunker fuel must be reduced from 3.5% to 0.5% by 2020.

Fuel costs are shipowners’ single most significant expense and shipping accounts for 90 per cent of world trade. The shift to cleaner fuel is expected to add US$13-$15 billion a year to the industry’s fuel bill -- costs which the industry will pass along to its customers.

The average price of bunker fuel has risen steadily this year, climbing by 32 per cent since April, from $370 to $490 per tonne in mid-October. IMO-compliant fuel is expected to add $150-$200 per tonne.

How carriers recoup the rising cost of fuel will be crucial to their profitability. Carriers have little option but to pass it on to shippers as a “Bunker Adjustment Factor” (BAF).

From 2020, Danish shipping giant A.P. Moller Maersk will be paying an extra $2 billion a year for low-sulphur fuel, hiking its annual fuel bill to around $5.4 billion. Maersk, the world’s largest carrier, estimates its BAF will add between $45 to $1,025 to the cost per twenty-foot equivalent unit (TEU) shipping container. Hapag-Lloyd, the world’s fifth largest container carrier, estimates increased costs of $115 to $333 per TEU.

Shipowners have limited ways to comply with the rule change. They can buy IMO-compliant fuels, or they can install expensive sulphur-reducing scrubbers. A third option is to slow down -- container vessels can cut fuel consumption by as much as 37 per cent by slowing by 1.5 knots (2.8km/h).

Whatever happens, the impact will affect trade in everything from commodities like oil, soybeans and steel, to items that move on container ships, like TVs, smartphones, furniture and clothes.

Sources
PUBLISHED: 20/11/2018; STORY: Graphic News
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