In January 2020, new IMO fuel regulations will affect global shipping costs and capacity
In nine months, on January 1, 2020, the International Maritime Organization (IMO) will implement a new regulation regarding the fuels used to power container ships. Compliance will require switching to lower-sulphur fuels in order to reduce sulphur emissions by over 80%. According to an article on Forbes.com, “The new tougher limits will be the largest reduction in the sulphur content of a transportation fuel undertaken at one time.”
The new fuel will cost more, and the added cost will likely be passed on to shipping customers, making already-expensive maritime shipping even more costly.
Once the new regulation is implemented, container ships will not be permitted to burn noncompliant fuels, such as the ones they use today, at least not without on-board scrubbers that can refine today’s less expensive fuel when the ships are at sea. On a rotating basis, 1% of a carrier’s global fleet will have to be taken out of service for scrubber installation.
“I don't expect to see a major impact on the charter market, because it's going to be mainly bigger vessels that will be equipped with scrubbers, and the charter market is not so liquid in many of those segments. If you want to install a scrubber, our estimate is that it means that the ship is out of service (for) maybe 30 days. Even if hypothetically you would do two every month, which is more than what we will actually do, you would be talking about an impact which is between 1% and 1.5%, it shouldn't be more than that.”
- Rolf Habben Jansen, CEO, Hapag-Lloyd, 23 March 2019
The estimated cost to the shipping industry will be $15 billion, though no solutions have been fully outlined. Currently, ocean carriers burn three million gallons of fuel per day, amounting to 60% of the total cost of shipping operations.
“Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease,” the IMO says on its website. “In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contribute to the acidification of the oceans. Limiting SOx emissions from ships will improve air quality and protects the environment.” The new regulations “will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.”
In anticipation of these regulations and their effect on global maritime shipping, Laufer can work with you to find alternative solutions that will minimize disruptions to your supply chain and keep your business running smoothly.
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