With so many updates from the industry, it can be difficult to keep track of the updates from so many different sources.
Below are some of the industry updates that Kuehne + Nagel have sent to our customers.
Updated 24th October, 2018
Commercial Implications of IMO 2020 Sulphur Regulation
Please see below information regarding commercial implications of the IMO (International Maritime Organization) 2020 Sulphur regulations that will impact shipping lines globally.
On 1 January, 2020 a new regulation from the IMO will require all shipping lines to switch to fuels with a maximum Sulphur content of 0.5%, whereas today the cap is at 3.5%.
Currently, low Sulphur fuels are significantly more expensive. External sources estimate that additional cost to the shipping industry may be more than USD $60 Billion.
There are three ways to comply all with challenges, risks and uncertainties.
Use of low Sulphur fuels (max 0.5% Sulphur):
- Significantly higher fuel prices (currently only 0.1% sulphur fuels available)
- Refineries to develop 0.5% Sulphur fuel – there is uncertainty of the price but it is likely to be more expensive than current fuels
Scrubber method and use of high sulphur fuels:
- Scrubber installations will require dry docking in most cases
- High investment costs
- Some regulatory uncertainty
- Down time risk and compliant fuel needed for back up
Use of LNG propelled vessels:
- Only relevant for new-built vessels (too expensive to retrofit)
- More complex fuel handling
- Potential limitations to cargo operation during bunkering, due to safety requirements in the area of the bunker station.
A significant increase to the cost of shipping
Shipping lines will have to comply with the new IMO regulation by using low Sulphur fuel, a significant benefit to the environment and to human health.
As a result of the IMO regulation, customers should be prepared for significant increases to the cost of shipping.
One shipping line estimates that the cost increase will be in the order of USD $175 - 225 per TEU for standard containers, with significant variation depending on fuel price and length of travel.
Currently all shipping lines are studying viable alternative options, such as installing scrubbers and LNG powered vessels.
Should you have any further questions related to this matter, please contact your local Kuehne + Nagel representative.
Kuehne + Nagel Australia