The International Maritime Organisation’s new ruling on the use of low-sulphur fuels comes into force on January 2, 2020. This new ruling reduces the sulphur content of marine fuel to 0.5% mass by mass (m/m), down from the current 3.5% m/m. See full press briefing on International Maritime Organization’s website.
The new ruling is meant to reduce pollution and protect the environment in shipping lanes by reducing sulphur oxides. Primarily, the really bad areas for such pollution are India, Java, the Arabian Gulf and East Asia.
Lower sulphur fuels and their alternatives (LNG – Liquified Natural Gas, marine diesel etc.) are costlier and there are genuine concerns that the costs of shipping will increase to offset the additional cost of these alternative fuels.
For the shipping industry itself, there are additional logistics issues such as the availability of compliant fuels at a ‘bunker port’.
The sulphur dioxides emitted by ships is know to be harmful to people and the environment and can increase ‘acid rain’. To put this industry into perspective, it’s estimated that this sector contributes some 3% to global greenhouse emissions.
Whilst shipping companies could stick with the current fuel, they would have to install ‘scrubbers’ to remove the sulphur dioxide. However, fitting scrubbers can’t be done quickly as there simply isn’t sufficient capacity in ports to undertake such works in such a short period of time before the new rules come in to force. Added to this time dilemma, scrubbers can cost over £2.0million per ship and not ‘one size fits all’ as each ship is different and even ‘sister’ ships will vary in design and layout.
As an indication as to the size of a scrubber, we aren’t talking a couple of filters that you’d find on your car’s exhaust system. The units used on ships can be as large as a 40ft shipping container!
Whilst the above just talks about the costs of shipping (mainly fuels), there are other parts of the industry that will also be impacted by the introduction of the new ‘sulphur cap’, including the marine cargo insurance market who could also ‘hike’ up prices to cover losses caused by lack of appropriate fuels in ports and/or losses caused by ship breakdowns as a result or incompatible fuels being used.
Whilst the longer-term impact of a reduction in sulphur emissions is good for us all, we predict there will be a number of issues in the short-term whilst the industry adjusts to the new regulations. As for the cost of the goods we buy, who knows what impact we’ll see at the tills!
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