Since 2015, the International Maritime Organization (IMO) has been actively enforcing strict regulations to reduce emissions from vessels, particularly focusing on reducing the sulphur content in marine fuels. The first significant step came in 2015 with the establishment of Emission Control Areas (ECAs), including the Baltic Sea, North Sea, North America, and the US Caribbean Sea, which restricted the use of fuel oil with a sulphur content exceeding 0.1%.
The 2020 Sulphur Cap and Scrubber Debate
On January 1, 2020, the IMO further extended its sulphur restrictions, capping the sulphur content of fuel oil to 0.5% for vessels operating outside the ECAs. This change led to a marked decline in the use of high-sulphur fuel oil (HSFO) globally. In 2019, ship operators were presented with two options to comply: either install exhaust gas cleaning systems (scrubbers) to continue using HSFO or switch to very low sulphur fuel oil (VLSFO). The decision largely depended on the future price spread between VLSFO and HSFO, creating uncertainty for operators.
Expansion of ECA in 2025
The IMO will expand the ECA to include the Mediterranean Sea starting May 1, 2025, introducing a 0.1% sulphur cap in this region. This expansion will impact vessels transiting through the Mediterranean, as they will be required to meet stricter fuel regulations. However, vessels running on cleaner fuels such as liquefied natural gas (LNG), biofuels, or hydrogen, or vessels equipped with a scrubber, will be exempt. Vessels with open-loop scrubbers may also face additional restrictions on the discharge of scrubber wash water in some regions, like French ports.
Scrubber Retrofits and Market Incentives
The trend of retrofitting scrubbers onto existing vessels (excluding new builds) has increased recently, driven by the financial incentives of using HSFO instead of ultra-low sulphur fuel oil (ULSFO) or 10ppm gasoil. In the Mediterranean, the price difference between HSFO and 10ppm gasoil has fluctuated between $150 and $370 per tonne, making scrubber retrofitting an attractive option for ship owners. Larger vessels, such as Very Large Crude Carriers (VLCCs), are particularly incentivized due to their higher fuel consumption and longer distances travelled, which makes the payback period for the scrubber retrofit more favourable.
Declining Mediterranean Voyages and Scrubber Fleet Usage
In 2023, the number of voyages passing through the Mediterranean has decreased due to lower transits via the Suez Canal, alongside an overall drop in scrubber-equipped vessels. Red Sea attacks have also led to a reduced number of voyages passing through the Mediterranean whetravellingng between the Atlantic and the Pacific Basin. However, there was a slight rebound in scrubber fleet usage in October 2023, which is expected to strengthen as the ECA start date approaches in 2025.
Fuel Supply and Demand Shifts in the Mediterranean
As more vessels in the region seek to comply with the new regulations, demand for HSFO and ULSFO will likely rise, while demand for VLSFO will decrease. This could lead to a surplus of VLSFO in the Mediterranean, potentially redirected to regions in need, such as Asia. Conversely, there will be an increased demand for ULSFO, which may result in gasoil supplies from Northwest Europe being redirected to the Mediterranean to meet this demand.
The IMO’s ongoing regulatory changes are reshaping the global maritime fuel landscape, especially with the expansion of the ECA to the Mediterranean in 2025. As vessel owners adapt to stricter emissions regulations, including retrofitting scrubbers and optimizing fuel choices, these shifts in fuel supply and demand will have lasting effects on the global shipping industry.
The rise in scrubber retrofits, alongside fluctuating fuel prices and evolving regional demand, will continue to shape the maritime sector’s transition toward cleaner and more sustainable operations.
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Source: VORTEXA
