IMO 2020: Should you be ready?
As of 2020, IMO rules will prohibit ships from using fuels with a sulfur content of more than 0.5 percent, compared to 3.5 percent today, unless they are equipped with scrubbers to clean sulfur emissions. The fines are to be imposed and enforced by the member states of the IMO. These new regulations will cost carriers at least $15 Billion per year.
These regulations will come into effect January 1, 2020; however, our customers and carrier partners should start preparing now if they hope to mitigate the effects of the regulations on their shipments.
Was this change necessary?
The shipping industry is one of the greatest contributors to pollution and carbon emissions on the planet: maritime shipping consumes 4.4M barrels of oil per day, accounting for 10 percent of the oil consumption attributed to the entire transportation sector. Maritime transportation is responsible for 5% of Global oil demand.
Ships usually use oil that has 3500 times more sulfur than a normal diesel automotive, that produce sulfur oxide emissions that can cause respiratory and lung diseases, air pollution, weather changes, etc.
How will IMO 2020 affect you?
Consumer good prices will increase in consequence of higher shipping rates.
These new compliance needs will increase port to port movements by around 10 to 20%. Carrier capacity may be decreased by 7-8%. An additional decrease may be experienced throughout the time it will take carriers to install scrubbers on vessels.
Demand will rise for MGO (Marine Gas Oil) which is 55% more expensive than the typical oil. If refineries can’t match the demand, EMS charges will rise 15 to 20 percent.
Price volatility and service disruptions for shippers due to fluctuating fuel prices and reduced carrier capacity.
How to get ahead: Start Now
Shippers must start planning their contingencies before 2020, as it would be a mandatory comply and the costs will increase. The increase may apply before the regulations come into effect on January 1, 2020.
Carrier costs will increase by 15 to 20 percent, depending on distance or route. These cost increases will be passed onto shippers by the carriers.
While IMO 2020 will have negative economic consequences for both carriers and shippers, the environmental consequences of not implementing these regulations could be catastrophic. IMO 2020 is projected to reduce overall sulfur oxide emissions by 85 percent, which will:
- Reduce the occurrence of lightning storms along trade routes, particularly in the Indian Ocean and South China Sea.
- Reduce the occurrence of acid rain, which harms agriculture and crops.
- Reduce respiratory problems and cardiovascular disease in populated port cities and coastal areas.