The International Maritime Organization (IMO), a specialized agency of the United Nations responsible for the safety and environmental performance of the shipping sector, has ruled that beginning on 1 January 2020, sulfur emissions be slashed by over 80% in international waters. In order to comply, the maritime sector will have to switch to low sulfur compliant fuels, reducing sulfur emissions from 3.5 weight percent (wt%) to 0.5 wt%. The new tougher limits will be the largest reduction of sulfur content in fuel undertaken at one time.
The global sulfur cap is part of the IMO’s response to growing concerns over harmful emissions from ships. The IMO states that this new regulation “will significantly reduce the amount of sulfur oxide emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.” For more information, please visit the IMO’s website by clicking here.
The estimated cost of compliance for the liner industry could reach $15 Billion annually, and many carriers are planning to pass on the cost to their customers beginning on January 1, 2019, a full year before the IMO regulations go into effect. Carriers who have already announced new January 1 fuel surcharges include CMA CGM, Maersk, Hapag-Lloyd, and MSC. OOCL also announced a new bunker recovery charge but has not yet announced when the charge would be effective.
Carriers are exploring other options for reducing sulfur emissions, such as:
- Slow steaming, a process of deliberately reducing the speed of cargo ships to cut down fuel consumption, which could potentially result in tighter capacity
- Installing exhaust gas cleaning systems (scrubbers) that enable ships to continue to burn cheaper heavy fuel oil, which would require sacrificing cargo space and removing vessels from service while the scrubbers are installed
- Switching to ships that run on liquefied natural gas (LNG)
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Sources:
- The Loadstar – Shippers are being ‘left in the dark’ as carriers look for recover IMP 2020 costs
- The Loadstar – Hapag-Lloyd attempts to avoid a ‘messy’ IMO 2020, unveiling it’s ‘fairer’ MFR
- Business Insider – Hapag-Lloyd to Introduce Clearer Fuel Charges from 2019
- The Maritime Executive – Hapag-Lloyd Announces Sulfur Fuel Charge
