- The Mediterranean Sea will be included in the IMO’s ECA zones starting May 2025, limiting sulphur content in fuel oil to 0.1%.
- Shipowners face decisions between retrofitting scrubbers to use high sulphur fuel oil (HSFO) or switching to compliant fuels like very low sulphur fuel oil (VLSFO) or ultra-low sulphur fuel oil (ULSFO).
- With increased demand for ULSFO and HSFO, VLSFO supplies may flow towards Asia, and gasoil from Northwest Europe may fill ULSFO shortages in the Mediterranean.
The International Maritime Organization (IMO) continues its efforts to reduce global sulphur emissions, expanding the Emission Control Area (ECA) zones to include the Mediterranean Sea in 2025. This change is expected to significantly impact shipping practices, fuel choices, and trade flows in the region, reports Breakwave Advisors.
Expansion of Emission Control Areas (ECAs)
Starting May 1, 2025, the Mediterranean Sea will become an ECA, enforcing a sulphur limit of 0.1% for marine fuel oil. This regulation will apply to most vessels, with exemptions for those running on cleaner fuels like LNG or hydrogen or those equipped with scrubbers.
The expansion aligns with IMO’s long-standing goals of reducing emissions and combating air pollution. However, shipowners with open-loop scrubbers must navigate local regulations, such as discharge restrictions in French ports.
Sulphur Regulations and Fuel Choices
The IMO initially capped sulphur emissions for vessels in ECAs at 0.1% in 2015, later introducing a global cap of 0.5% in 2020. The tightening regulations led to a decline in HSFO use, but scrubber retrofits allowed some vessels to continue using HSFO economically.
The Mediterranean’s large price spread between 10ppm gasoil and HSFO, ranging from $150-$370/t, has incentivized scrubber retrofits, especially for large vessels like VLCCs, where the payback period is shorter.
Declining Mediterranean Voyages
Voyages through the Mediterranean have declined in 2024, partly due to reduced Suez Canal transits and geopolitical tensions in the Red Sea. This decline also affected scrubber-equipped vessels bypassing the region.
However, scrubber fleet usage in the Mediterranean rebounded slightly in October 2024, and this trend is expected to solidify as the ECA start date approaches, with operators aligning their fleet strategies.
Changes in Fuel Oil Demand in the Mediterranean
The introduction of the ECA will reshape fuel dynamics in the Mediterranean. With reduced demand for VLSFO, these supplies are likely to flow to Asia to address shortages. Simultaneously, the region will experience higher demand for ULSFO, potentially supplemented by gasoil from Northwest Europe.
These shifts underscore the need for fleet optimization by shipowners, considering fuel type, price spreads, and operational routes to meet ECA compliance.
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Source: Breakwave Advisors
