Tackling 2020: the impact of the IMO and how shipowners can deal with tighter sulfur limits

At the risk of stating the obvious, shipowners are in a tight spot. The International Maritime Organization has left them with just over three years to choose between a sharp rise in fuel bills with no guarantee of consistent quality, a huge up-front capital cost for a scrubber or a new ship, or the legal risk of ignoring the sulfur cap and hoping the law doesn’t catch up with them. And hanging over everyone is the possibility of the status quo being upended again in a few years as regulators turn to addressing other types of emissions.

Shipowners will first need to have a clear view of their finances, to see if they can access the credit for a scrubber, or whether they’ll be an a position to take a cut in profits from higher fuel bills in 2020 – or pass the cost on to their customers. They’ll then need to assess the routes their vessels travel on, and talk to suppliers at their regular bunkering ports about the likely availability and price of their preferred fuel. They’ll need to take a view on whether non-compliance will be an option for them under certain circumstances, and think about the potential reaction from their investors, clients, regulators in their home country and the general public if they get caught. And they’ll need to look at what their competitors are doing – those who find the least painful method of coping with the sulfur cap will be able to offer the lowest freight rates, and take market share from rivals.

For many shipowners the process of making this choice will be a miserable experience, coming as it does at a time of prolonged stress on the finances of much of the industry. But the upside that rarely gets discussed in shipping circles is the improvements we’re likely to – pollution campaigners estimate as many as 200,000 premature deaths may have been avoided by pushing on with the change in 2020. The process of weaning the shipping industry off a cheap fuel 3,500 times more sulfurous than road diesel was always going to be problematic, but it was an inevitable change that will be welcomed by many.

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