The International Maritime Organisation (IMO) has ruled that from 1 January 2020, marine sector emissions in international waters be slashed.
We understand you might have several questions about this new rule.
Please do not hesitate to contact us for more information: +32.3.201.98.10
Hereafter, you'll find some FAQs and their answers.
***********************************************************************
What is IMO 2020?
From January 1st 2020 onwards, all seagoing vessels will have to reduce sulphur oxides by 85%. The new regulation is set by the International Maritime Organisation (IMO) with the aim of cutting sulphur oxide gas emissions, protecting public health and supporting the environment. Vessels must use marine fuels with a maximum sulphur content of 0.5% compared to the current limit of 3.5%.
What is the scope of IMO 2020?
The regulation will apply globally and throughout the industry to fuels used in the open sea. It will affect vessel operators, refineries, and global oil markets. In the Environmental Control Areas (ECA zones) an even stricter regulation remains, limiting the sulphur content to 0.1%.
What are the impacts and risks?
The prospect of IMO 2020 has resulted in a high level of uncertainty about availability of petroleum products and prices. It is currently not possible to indicate an accurate future price level for IMO 2020 compliant fuels, as prices are affected by several factors. In particular, geopolitical events such as sanctions and war, the actions of OPEC (Organisation of the Petroleum Exporting Countries) and the general demand of the world economy for oil influence the price of crude oil and ultimately the price of fuel products. The IMO 2020 regulation will have another significant effect in addition to the regular volatility of global oil prices.
At this stage all we can predict is that it will cost more than currently used fuels.
What impact will IMO 2020 have on health and environment?
With the implementation of IMO 2020, the International Maritime Organisation aims to reduce total sulphur emissions from ships by 77% from 2020 until 2025. The overall objective is to reduce the negative impact of shipping on human health by decreasing air pollution from sulphur emissions by 68% globally and in particular in the coastal areas of Asia-Pacific, Africa and Latin America.
Please note that the IMO 2020 regulation focuses on the reduction of sulphur emissions, not on the reduction of carbon dioxide emissions. So there will not be a direct impact on the global warming, but reducing sulphur emissions helps prevent acid rain and combats ocean acidification.
People benefit the most from this. Significant health improvements list the reduction of stroke, asthma, cardiovascular disease, and lung cancer as well as pulmonary disease. The International Maritime Organisation states that more than 570,000 premature deaths can be avoided between 2020 and 2025 due to the new regulations.
What will be the impact on freight rates and operations?
According to current calculations, the expected increase in costs will have a significant impact on the overall prices of container transportation and on freight rates. Whilst the implementation date for IMO 2020 is January 1st 2020, we anticipate freight rates to increase as early as the end of the third quarter of 2019. Therefore, long-term agreements for both full and part load containers will include a price adjustment method also known as Bunker Adjustment Factor (BAF).
Is there going to be an extra surcharge on top of the Bunker Adjustment Factor (BAF)?
There will be no extra costs apart from the general rise in fuel prices to cover the costs of compliance with the IMO 2020 regulation. Higher fuel costs arise from the consumption of low-sulphur fuels. The energy costs for deep sea transport are referred to as BAF.
In case refineries will not have the capacity to produce enough low-sulphur fuel oil, would prices increase further?
There is a risk that by 1 January 2020 not enough IMO 2020 compliant fuels will be available in the geographical area where the fuel is needed. This will further increase prices, at least temporarily.
Will the transit times / overall Turn Around Time (TAT) of my goods be extended?
So far, we have no information about any planned changes to timetables. However, schedule delays may occur due to insufficient availability of suitable fuels or slower steaming in order to recover the costs for the more expensive IMO 2020 compliant fuel.
