About 90% of global trade moves in approximately 51,000 ships composing the world fleet. In the meantime, the insatiable demand for the fuel that drives maritime global trade is estimated at 2.1 billion barrels (88.2 billion gallons) annually, or 244 million gallons per day.
The noxious emissions largely sulphur oxides, as well as nitrous oxides and particulate matter, have become a major environmental concern and have been proven to adversely affect global health as they’re discharged into the atmosphere. According to a Goldman-Sachs study, burning standard bunker fuel (Heavy Fuel Oil or HFO) accounts for almost 90% of a sulphur emission globally, with the largest 15 vessels producing more sulphur than the combined total of all the world’s automobiles.
The International Maritime Organization (IMO) regulations limiting sulphur content of bunker fuel to 0.5% (down from 3.5%) will take effect on January 1, 2020.
Goldman Sachs estimates that the overall impact on consumers in 2020 could be as much as $240 billion, as the added costs cascade across global supply chains, adding approximately $40 billion in increased shipping costs.
The fallout
There is little question that costs will rise: The key question is where the hammer will fall and who will bear the additional cost.
The world’s two biggest container shipping lines—Denmark’s Maersk and Swiss headquartered MSC—say that they face annual extra costs of more than $2 billion each. These are significant numbers so Delamode will be keeping a very close eye on the market advising our ocean freight customers of the impact IMO2020 will have on their freight costs.
It is predicted that the increase will come in the form of a higher Low Sulphur surcharge.