IMO 2020 - what is the impact?

The International Maritime Organisation (IMO) enforces new regulations that lowers the limit ​​for sulphur in marine fuel, which is the fuel used by ships.

It is the International Maritime Organisation that sets the global guidelines and the new regulation lowers the limit for sulphur in marine fuel to 0.5% - reduced from the current 3.5%. Emissions are thereby cut by 80% and the environmental impact of shipping is vastly reduced. The IMO estimates the new rules will prevent acid rain and avoid more than 570,000 premature deaths between 2020 and 2025.

To comply with the new regulations, shipping companies have the following options:

Switch to the more expensive Low-Sulphur Fuel Oil (LSFO) and comply with the regulations.
Continue with HSFO (High-Sulphur Fuel Oil) and install scrubbers / filters to remove pollutants from the ship’s exhaust.
Switch to non-petroleum-based fuel such as liquefied natural gas.

The new sulphur limit rises costs

All shipping companies must comply with the new IMO 2020 rules. Maersk has announced that the rules will incur additional fuel costs of around USD 2 billion annually (USD 100-200 per TEU). The additional costs are expected to be added during Q4 2019.

IMO 2020 might extend transit times

Besides additional costs, the shipping industry expects extended transit times. It is a consequence as:

Older vessels most likely will be taken out of service.
Increasing demands for low-sulphur fuel and plunging demand for high-sulphur fuel will result in higher fuel costs. Moreover, installation of scrubbers cost 5-10 million USD per ship and each ship will be out of rotation for 4-6 weeks. Resulting in temporarily disrupted sail schedules which is expected to reduce capacity by 7-8%.

If you have any questions about IMO 2020, please feel free to contact your local Prime Cargo contact.

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