The International Maritime Organization (IMO) has finally gave in to pressure and has announced to change ship pollution regulation, after 30 years of collective outrage. The new policies for the marine industry which will be effective from 2020 put forwards a considerable effort in checking ship pollution, the report says.
Current Regulation
IMO rules currently allow ships to burn fuel containing up to 4.5% sulfur — that is 4,500 times more than is allowed in car fuel in the European Union. This high-sulfur fuel — or bunker fuel as it’s known — is the dirtiest residual combustible material left over in refineries. When burned, it releases plumes of black smoke, familiar to anyone in a port area watching a large container or cruise liner leaving a haze over the port area.
Unlike most environmental air pollution issues that talk of carbon emissions, the marine industry is still facing issues addressed on land back in the 1950s and 1960s. Pollution from particulate matter (PM), nitrogen oxides (NOx), unburned hydrocarbons (UHC), sulfur oxides (SOx), carbon monoxide (CO), as well as carbon dioxide (CO2).
Effect on the environment
A ship is said to emit around 50 times as much sulfur as a modern lorry per metric ton of cargo, while of total global air emissions, shipping accounts for 18 to 30% of the nitrogen oxide and 9% of the sulfur oxides, in addition to carbon dioxide and carbon particulate matter. One possibly alarmist article in the Daily Mail suggested the largest ships can each emit as much as 5,000 tons of sulfur in a year – the same as 50 million typical cars, each emitting an average of 100 grams of sulfur a year. With an estimated 800 million cars driving around the planet, the article suggests that means 16 super-ships can emit as much sulfur as the world fleet of cars.
Switch To Low-sulphur fuels
A Financial Times article quotes the SEB, a Nordic research house, saying only 2,000 of the 18,000 vessels that carried crude, dry cargo and other container ships would have scrubbers installed by 2020. Together they consume close to 4 million barrels a day of what is known in the industry as high-sulfur fuel oil. So, the rest will seek to be fuel-compliant, switching to low-sulfur derivatives.
Almost all European and North American refineries can produce low-sulfur fuel oil and not be left with unsaleable waste. But refiners are not going to miss the opportunity to raise margins from the switch to higher grades; indeed, the process has already begun.
In the European Union, the rule change will raise refining margins by an average of 60 cents, to $8.10 per barrel in 2020, JPMorgan is quoted as saying by Bloomberg. The fuel shift is already starting to appear in futures prices. In Europe, the premium that low-sulfur fuel oil attracts over its dirtier counterpart in January 2020 has grown by 66% since the start of the year, according to Bloomberg.
The SEB, quoted by the Financial Times, agrees, reporting the 2020 high-sulfur fuel oil to gas oil price spread traded at $220/metric ton on a forward basis in the early autumn of 2017. Then it blew out to as much as $350 at the start of 2018 and SEB expects a further widening to $450 later this year. With half the variable costs of a shipping line taken up by fuel, this heralds a rise in global freight rates as we near 2020 and shipping lines are required to pay for low-sulfur fuel oil.
So, the new regulation is already showcasing a dynamic shift which is changing the shipping industry’s business perspective.
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Source: Metal Miner
