New IMO regulations to cut marine pollution
January 1, 2020 - Strict International Maritime Organization rules kick in on January 1 to reduce air pollution, prohibiting ships from using fuels containing more than 0.5% sulphur -- down from 3.5% today.
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. Fuel costs are shipowners’ single most significant expense and shipping accounts for 90 per cent of world trade.
How carriers recoup the rising cost of fuel will be critical to their profitability. Shipowners will likely pass it on to shippers as a “Bunker Adjustment Factor” (BAF).
Since early October, the average low-sulphur bunker price for major bunkering ports tracked by Drewry -- maritime research service -- has been $542 per tonne, up from the $396 cost of high-sulphur fuel oil (HSFO) at the same bunkering ports. Shippers and forwarders are expected to set a BAF of around $145 per container from January.
Shipowners have limited ways to comply with the rule change. They can buy IMO-compliant fuels, or they can install expensive sulphur-reducing scrubbers.
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.
- Ocean Bunkering tops 2018 list of Singapores largest marine fuel suppliers (Reuters)
- Sulphur 2020 – cutting sulphur oxide emissions (International Maritime Organization)
- Scrubbers under scrutiny by maritime industry as IMO 2020 nears (S&P Global Platts)
- What is the IMO 2020 effect on the fuel bunker mix short- and long term? (Rystad Energy)
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