NOVEMBER 2019 –
In this advisory, we bring you the latest updates of the new industry-impacting regulations known as IMO 2020, effective January 1st, 2020.
What is IMO 2020?
The International Maritime Organization (IMO) will put a cap on the Sulphur emissions for the marine sector in international waters. The sector will have to reduce Sulphur emissions by 80%. This can be done by switching to lower Sulphur fuels or by installing of scrubbers. The current maximum limit for fuel oil Sulphur will fall from 3,5 weight percent (wt%) to 0,5 wt% – the largest regulation ever in transportation fuel.
Why is it necessary?
The marine sector is responsible for half of the global fuel oil demand. Per day 3,8 million barrels of fuel are consumed. Problem is, the difference between IMO compliant and non-compliant fuels is vast. Ship operators that now need to change to a different fuel type are competing directly with other modalities.
Who are affected by these regulations?
We expect that the new regulations will send a shockwave through the entire maritime industry. The impact however, can vary between regions as ship size, fuel cost and carrier readiness all play a part. The effects should be noticeable starting Q4, 2019 and onwards. Expected is, that the impact will last for a few years as the shipping sector adapts to the new situation.
What does IMO 2020 mean for business?
The most probable result of the growing demand for the new fuel type, is an increase in prices across the sector. Ocean carriers are unable to absorb the increase costs and as such, it is expected that these will be passed on to the cargo owners. Either the base ocean freight rates increase, or surcharges are implemented to recover these cost increases.
How are the surcharges implemented?
We currently see a highly diversified way of implementation by carriers. As a result, we also expect that there will be differences in the amounts that are being charged. For your LCL business we will implement a surcharge based on carrier calculations, exact details to follow.
As soon as we have more information, we will bring you another update. Should you have any questions in the meantime then please contact one of our representatives.