This has been decided by the Marine Environmental Protection Committee of the IMO (International Maritime Organization). The measures should reduce sulphur emissions and thus improve the environment. What exactly does it mean for shipping? And for shipping your containers?
With the IMO 2020, the authority hopes to reduce the negative impact of shipping on human health.
Why the IMO 2020?
Ships transport large quantities of goods across the world's oceans - and trade by sea continues to grow. The largest container ships can carry more than 20,000 containers and the largest bulk carriers can carry more than 300,000 tonnes of goods (such as iron ore). This requires powerful engines, which emit pollutants and other harmful emissions. Currently, all modern commercial ships run on fossil fuels such as MGO (Marine Gas Oil), MDO (Marine Diesel Oil), IFO (Intermediate Fuel Oil), MFO (Marine Fuel Oil) or HFO (Heavy Fuel Oil). These fuels together are known as 'bunker' fuel. They have a high sulphur content which is quite harmful to the environment.
With IMO 2020, the authority hopes to reduce the negative impact of shipping on human health. A ship that is more energy efficient burns less fuel and emits fewer harmful substances. The regulation focuses mainly on the reduction of sulphur emissions. A reduction in sulphur emissions helps prevent acid rain, among other things, and combats the acidification of the oceans. The IMO states that between 2020 and 2025 more than 570,000 premature deaths could be avoided thanks to the new regulations.
What measures are in place for shipping?
The global rules limit the sulphur content of marine fuels to 0.5 per cent. Currently, a sulphur limit of 3.5% still applies. As a result, the shipping industry has to take measures. This can be done by installing emission-reducing systems or by switching to cleaner fuel.
Use of scrubber driers
For example, they can make use of so-called 'scrubbers'. This is a method of removing pollutants from the ship's exhaust (a so-called emission cleaning technology). This allows the ships to continue using fuels with a higher sulphur content. However, the installation of these machines is limited and can be expensive. Moreover, the availability and price of fuels with higher sulphur content after 2020 are uncertain.R
Switching to non-petroleum based fuels
Newer ships can switch to non-oil fuels such as liquefied natural gas. This is feasible for ships with appropriate specifications. However, the infrastructure supporting the use of oil is currently limited in size and availability. Experts predict that by 2020 around 250-500 ships (or a maximum of 10-12% of the global container fleet) will either be equipped with pollution control technology or be able to burn LNG (source: Origine Clarksons Research - June 2019).R
Switching to very low sulphur fuel or MGO
As a third option, they can switch to very low sulphur fuel (VLSF) or marine gas oil (MGO). These fuels comply with the new regulations. The cost, availability and specifications of new fuel for use in marine engines are still uncertain at present.
What is the impact of IMO 2020?
The rules apply to fuels used on the high seas on a global and industry-wide basis. Therefore, the regulation affects ship operators, refiners and the global oil markets. In certain environmental control areas (the ECA zones), even stricter regulations apply with a maximum sulphur content of up to 0.1%.
Who monitors the implementation? And are there any fines?
Ships "bunkering" fuel oil must obtain a receipt showing the sulphur content. They must also obtain an International Air Pollution Prevention (IPR) certificate from their flag state. Port and coastal states can use port state control to check whether the ship complies. They check logbooks, use 'sniffing equipment' and drones. They can also assess smoke plumes and other techniques to identify possible violations. Depending on the jurisdiction, violations carry heavy fines, ship arrest or even jail time for the master.
The global container shipping industry expects to have to invest some USD 24 billion to meet the new requirements.
What does it cost exactly?
It is estimated that more than 90% of the global fleet will depend on the right fuels when the rules come into force on 1 January 2020. Shipping companies and ship owners must therefore invest in technologies and operational matters. It will take considerable time and money to prepare ships for the required standards. They also have to negotiate with bunker suppliers on the availability and price of the low-sulphur fuel.
Many of the shipping companies such as CMA-CGM, ONE, OOCL, Maersk and APL have announced that they are passing these investments on to customers. They are doing this by making adjustments to their fuel surcharges or by creating new surcharges such as the Environmental Fuel Fee (EFF).
How is this surcharge different from BAF?
For the time being, the use of fuel oil on board the ships is unavoidable. Oil prices fluctuate greatly and to counteract these fluctuations, shipping companies charge Bunker Adjustment Factor (BAF) as a surcharge on the sea freight cost. This BAF is usually in line with the movement of oil prices, just like the fuel for our cars. When oil prices rise, BAF goes up and when oil prices fall, BAF often goes down as well. While the BAF is designed to absorb increases in bunker-related costs, compliance costs for the new rules are not anticipated anywhere. The additional or new surcharges must therefore cover these costs.
What is the impact on tariffs?
According to calculations, the expected cost increase will affect the total prices of container transport and freight rates. The start date of 1 January 2020 still seems far away. However, we expect that many shipping companies will already adjust their rates and/or surcharges in the third and/or last quarter of 2019.
Does IMO 2020 have other implications for transport, such as capacity and transit time?
In principle, there will be no or few changes to the timetables. Delays may occur due to reduced availability of fuels, although we cannot foresee this at this time. Technical modifications to the ship (e.g. installation of a scrubber) may cause delays or capacity reductions.