Ocean Rates will Increase based on New IMO Sulphur Regulation
The International Maritime Organization announced that the Marine Sector will occur a cap on all sulphur emissions related to international waters effective January 1, 2020. The Marine Sector is required to reduce sulphur emissions by over 80%. In order to accomplish this, they must switch to lower sulphur fuels or install scrubbers. The current maximum limit for fuel oil Sulphur of 3.5 weight percent (wt%) will fall to 0.5 wt%.
What exactly is Sulphur?
According to the International Maritime Organization, “The main type of “bunker” oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.
Limiting SOx emissions from ships will improve air quality and protects the environment.
IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.
From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This 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. The sulphur oxides regulation (MARPOL Annex VI, regulation 14) applies to all ships, whether they are on international voyages, between two or more countries; or domestic voyages, solely within the waters of a Party to the MARPOL Annex.”
How will this Affect Shippers?
According to Shipco, The Marine Sector consumes about 3.8 million barrels of fuel per day, responsible for half of the global fuel oil demand. The cost difference between IMO compliant and non-complaint fuels is significant. Ship operators that now need to change to a different fuel type, will now compete for fuel directly with truckers, railroads and airlines. In other words, ocean freight rates will increase or a surcharge will be implemented to cover fuel increases. We expect to see different fees from different carriers.Download IMO FAQ (pdf)