The International Maritime Organisation (IMO – IMO) concluded an agreement in April 2018 to reduce greenhouse gas emissions from the maritime sector by at least 50% by 2050.
The new “Low Sulphur” regulation will enter into force on 1 January 2020, setting the maximum sulphur content in fuels at 0.5% compared to the current 3.5%.
This compliance generates costs for shipping companies which are passed on in their tariffs.
An eco-friendly regulation
Since 2015, in agreement with the International Maritime Organisation, ships operating in Northern Europe, the Baltic Sea and North America have been complying with a maximum sulphur content of 0.1% in the fuel used.
These are the areas called ECA (Emission Control Area). By 1 January 2020, all global sea areas will have to comply with 0.5% sulphur content.
The new regulations require shipowners to invest in a solution that effectively reduces their sulphur emissions (SOx).
Shipping companies have three ways to do this:
Use marine fuel oil with a low sulphur content (0.1% sulphur content). The most obvious solution, it represents an additional cost of 50% compared to the heavy fuel oil currently used.
Install systems to purify the gases emitted by the engines (scrubbers). This option allows the use of the current heavy fuel oil thanks to the exhaust gas purifiers.
Use alternative fuels such as liquefied natural gas (LNG). A solution that has not been adopted because it requires a specific supply infrastructure.
Repercussions and surcharges
Regardless of the option chosen by shipowners, these changes have an impact on the operational costs of ships and therefore on the costs of maritime transport.
Some shipping companies are introducing a specific surcharge, others are increasing their existing fuel surcharge. Shipowners have also chosen a mix of the two solutions depending on whether they are short-term or long-term rates.
The method of calculation and the date of application remains at the discretion of the shipowners. Most shipping companies have added a specific surcharge as of December 1st. According to the shipowners, they have different denominations such as:
- LSS (Low Sulfur Surcharge),
- EFF (Environmental Fuel Fee),
- ITC (IMO 2020 Transition Charge),
- NBF (New Bunker Factor),
- BAF (Bunker Adjustment Factor),
- etc.
More information?
If you would like more information on the new SULPHUR regulations, you can visit the IMO website.
The CERL teams support you in these developments and we remain at your disposal for any further information.
