IMO 2020, the global regulation that substantially reduces sulphur oxide emissions from ships, has come into effect.
From January 1, 2020 the global upper limit on the sulphur content of fuel oil for ships has been reduced to 0.50% in a bid to bring significant benefits for human health and the environment. The limit is mandatory for all ships operating outside certain designated Emission Control Areas, where the limit is already 0.10%.
This regulation means there will be a 77% drop in overall SOx emissions from ships, equivalent to an annual reduction of 8.5 million metric tonnes of SOx. Particulate matter will also be reduced.
The International Maritime Organisation has issued a series of guidelines to help the shipping sector and its member states to prepare, including ship implementation planning guidance, which addresses issues such as risk assessment for new fuels and tank cleaning, and port state control guidelines.
IMO secretary-general Kitack Lim says: 'For the past three years, IMO member states, the shipping industry and fuel oil suppliers have been working tirelessly to prepare for this major change in the sulphur content of ships' fuel oil. I am confident that the benefits will soon be felt, and that implementation will be smooth.'
According to S&P Global Platts, the new regulation is disrupting multiple market segments, however the pace of change varies. It reports that HSFO prices collapsed in the fourth quarter of 2019 and will stage weak but that 0.5% sulphur bunker fuel (VLSFO) prices have increased rapidly and are now steeply backwardated. This, it says, indicates that the industry is straining to supply sufficient quantities of VLSFO despite drawing on stockpiled low sulphur components from floating storage.
Argus Consulting says that the new regulation will probably cause logistical bottlenecks as the market adjusts. Shipowners who have not secured term bunkering contracts might also face issues with using LSFO from different suppliers as concerns remain around compatibility, depending on each ship's engine specifications. These disruptions are likely to curtail effective supply and lead to temporary rate spikes.
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