IMO Sulphur 2020: Eco-friendly regulation that could be expensive...

While only the Emission Control Zones (ECAs) – North Europe, the Baltic Sea and North America – have so far been subject to binding regulation, on 01/01/2020 all maritime areas will be affected by the obligation to Not to exceed 0.5% sulphur in air (compared to 3.5% in 2015).

Companies are already adapting their means and fuel to meet IMO Sulphur 2020.

To achieve this, they will have three possibilities:

• Use marine diesel (0.1% sulphur content), twice as expensive as the current fuel;
• Installing smoke reprocessingcalled « scrubbers »;
• Use as far as possible alternative energiessuch as liquefied natural gas (LNG).

According to some players in the sector this measure would involve a estimated incremental cost between USD 160 and USD 300/TEU, all or part of which could be offset by new overloads.

Many shipping companies have already introduced a Low Sulphur Overload (LSS) on the containers leaving the ports of Shanghai and Ningbo and the « blue river ».

This overload « LSS China » should be extended to all Chinese ports from 1 January 2019, while overloadingLSF(Low Sulphur Fuel) already existing in Northern Europe will be maintained.

In the long run, theBAF(Bunker Adjustment Formula) and theFreight ratewill likely be dissociated (end of ALL IN) to better respect changes in the cost of oil.

All these overloads may increase depending on seasonal peaks...

Source(s): www.imo.org | www.dbschenker-france.fr