UK-Australian resources firm BHP estimates that the new International Maritime Organization (IMO) rules, which will lower the sulphur limit in marine fuels to 0.5pc, will add $2-3/t for shipping iron ore from Western Australia to China and $4-5/t for iron ore freight from Brazil to China, reports Argus Media.
BHP is estimated to have shipped 265mn-270mnt of iron ore from its mines in the Pilbara region of Western Australia in the July 2018-June 2019 fiscal year, which means additional costs for the new fuel specifications will be $530mn-810mn based on 2018-19 export volumes.
Additional Costs
The new IMO standards, known as IMO 2020, will take effect early next year in a bid to create a more sustainable freight industry, which is a significant emitter of greenhouse gas (GHG) emissions.
“Operators across the shipping supply chain are bracing for additional costs triggered by the new standards,” BHP vice-president freight Rashpal Bhatti wrote on BHP’s online blog, Prospects. “We estimate that IMO 2020 fuel and refitting requirements will add $2-3/t from Western Australia to China freight and $4-5/t from Brazil to China freight, with the market to determine how these costs are absorbed,” he said.
Competitive Edge to BHP?
This additional cost could provide a competitive edge to BHP and its fellow iron ore exporters Rio Tinto and Fortescue Metals, which together account for almost 95pc of Australia’s iron ore shipments. Australia shipped 835mn t of iron ore in calendar 2018 and around 680mn t, or 81pc of the total, were shipped to China.
BHP’s Strategy
BHP is exploring other ways to transition to lower GHG emissions for freight, Bhatti wrote.
- BHP worked with a ship vetting partner, RightShip, in 2017 to introduce a carbon dioxide (CO2) ratings system that moved charters towards ships with lower emissions.
- In response, shipowners improved engine performance and reduced the drag of hulls to improve their sustainability rating.
- This resulted in a 12pc decline in CO2 emissions for vessels BHP charters, he said.
“We are also involved in projects that accelerate the use of alternative shipping fuels. This includes designing ships that can transport iron ore and coal using LNG and testing low-emission biofuels on existing vessels with one of our shipping partners,” he said.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Argus Media
