Industry braces for cost escalation ahead of sulphur cap

Shipping costs for project cargo are expected to rise as the lines convert to low sulphur fuels in compliance with IMO 2020 regulations. The International Maritime Organisation (IMO) has ruled that sulphur emissions from seagoing vessels must be reduced by over 80% from 1 January 2020. This means that vessel operators and owners have to shift to more costly lower sulphur fuels with a sulphur content of 0.5% or less – or will have to retrofit exhaust gas cleaning systems (scrubbers). “Even with moderate projections, the bills for ship owners are indicated to be hefty, running to tens of billions of dollars extra a year for the sector,” according to a special report by S&P Global. Lars Jensen, who heads up SeaIntelligence Consulting, is quoted by the American Journal of Transportation as saying: “If freight rates don’t go up to match this cost increase, carriers will go out of business. “There is absolutely no way the carriers can absorb this cost.” “For us in Höegh, 40 vessels entail over 450 bunker tanks that must be cleaned according to IMO’s guidelines before the end of 2019. This is a huge job,” explains Geir Frode Abelsen, head of technical operations in Höegh Autoliners. “Each tank will be cleaned twice according to a set method before we can be sure that there is no residual from heavy sulphur fuel left in them. This work has already started on board our vessels,” he says. One of the challenges facing lines calling on the smaller ports is the availability of low sulphur bunkers. “There is still uncertainty connected to whether smaller bunker ports will have enough compliant fuel as we move into 2020,” says John Nilsen, Höegh
bunker purchasing manager. “This is where we expect the refineries to show the shipping industry a solution before the new regulations take effect.” Despite the challenges, the International Bunker Industry Association has expressed confidence that low sulphur fuel oil will be available in South African ports by 1 January 2020, says Tony Edwards, shipping and logistics specialist partner at Shepstone & Wylie attorneys. Jonas Östlund, product marketing manager, oil and water solutions at Wilhelmsen, says there are concerns about the quality of the new fuels, and the compatibility of different blends around the world.