- On January 1, 2020, the International Maritime Organization (IMO) imposed new emissions standards designed to significantly curb pollution produced by the world’s ships.
- For some of the world’s biggest oil producers, the new rules imposed into force represent a source of great concern.
- Maritime transport is critical to the global economy, with more than 90% of the world’s trade carried by sea, according to the United Nations (UN).
On January 1, 2020, the International Maritime Organisation (IMO) imposed new emissions standards designed to significantly curb pollution produced by the world’s ships.
2 years after implementation of IMO emission regulations, where do we stand together as an industry towards decarbonisation is still a million dollar question.
Below is the CNBC’s article published in 2019, in which it takes a look at those best placed to cope with the rule change, as well as those likely to struggle with what has previously been described as the “biggest change in oil market history.”
Who are the winners?
“Humankind and nature. It’s a big win,” Cas Pouderoyen, senior vice president of ocean freight at Agility, a global logistics company, told CNBC. The shipping industry is under intense pressure to slash its sulfur emissions because the pollutant has a negative effect on human health and is a component of acid rain — which harms vegetation and aquatic species.
A study on the human health impacts of sulfur oxides, published in 2016 and cited by the IMO, estimates that over 570,000 premature deaths will be prevented between 2020 and 2025 by the introduction of new shipping regulations. It claims a reduction in the limit for sulfur fuel oil used by ships will have “tangible health benefits,” especially for coastal communities or those living near major shipping routes.
“IMO 2020 is important from the environmental side of things. An industry that is more market savvy would have made that the focus,” Patrik Berglund, CEO of Xeneta, a Norwegian-based company that crowdsources freight data, told CNBC.
Who are the losers?
For some of the world’s biggest oil producers, the new rules were a source of great concern. The measures were widely expected to create an oversupply of high-sulfur fuel oil while sparking demand for IMO-compliant products — thus ratcheting up the pressure on the refining industry to produce substantially more of the latter.
This is especially important, energy analysts say, because Middle Eastern oil producers — such as OPEC kingpin Saudi Arabia — are likely to lose out given their over-reliance on crude with a high sulfur content.
“The impact will be quite dramatic — it doesn’t matter whether you are in Sweden or New Zealand, it’s going to get more expensive,” Agility’s Pouderoyen said.This is the opportunity of a lifetime for the shipping lines to jack up prices because the entire industry expects increased costs.
Shipping prices jack up
Maritime transport is critical to the global economy, with more than 90% of the world’s trade carried by sea, according to the United Nations (UN). It is also — by far — the most cost-effective way to move goods and raw materials. More than 170 countries, including the U.S., have signed on to the fuel change.
Starting from 2020, ships found in violation of the new law risk being impounded and ports in cooperating countries are expected to police visiting vessels.
“Everybody thinks that increased costs will hurt imports and exports and hence costs will be passed on to consumers,” Xeneta’s Berglund said. “That might not be the truth — and historically there is no evidence to support that.”
Analysts estimate the container industry — which transports consumer goods such as sofas, designer clothes and bananas — is likely to be among those hit the hardest, with additional costs of approximately $10 billion, according to a Reuters report.
The world’s two largest container shipping lines, A.P. Moller-Maersk and MSC, both reportedly said that falling in line with IMO regulations is likely to incur extra costs of roughly $2 billion each.
“This is the opportunity of a lifetime for the shipping lines to jack up prices because the entire industry expects increased costs,” Berglund said.
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Source: CNBC
