Vessel Owners Impacted by Sulphur Cap

The International Maritime Organization (IMO) will enforce a new global sulphur cap on fuel content for containerships from 01 January 2020, to reduce harmful emissions.

The International Maritime Organization (IMO) will enforce a new 0.5% Global Sulphur Cap on fuel content from 01 January 2020, lowering from the present 3.5% limit. The global fuel sulphur cap is part of the IMO’s response to heightening environmental concerns, contributed in part by harmful emissions from ships.

There are three options that shipowners can consider in order to comply with the IMO regulations. First, shipowners can install exhaust gas cleaning systems on their ships. Second, owners can simply buy compliant fuels at higher costs. Third, ships can run on the clean gas LNG as fuel.

As IMO 2020 low-Sulphur Fuel Regulations approach, shipping lines are flagging significant increases in rates and Low Sulphur Surcharges to recover their increased costs of compliance.

Many containership owners are keen to offload as many older gas-guzzling vessels as possible, with the current high scrapping rates providing added incentive. 12 vessels with a capacity of 36,000 teu have been sold for demolition in the past 30 days, taking the year-to-date number to 30, for 52,000 teu. This compares with just 48 vessels for 88,000 teu sent to breakers’ yards last year.

While containership owners are set to receive a charter market boost from the forthcoming IMO 2020 regulations, as some incumbent vessels are taken out of service for up to 40 days for the installation of scrubbers and will thus require temporary cover, it is generally in the larger sectors that carriers will be seeking replacements. In terms of new or extensions of charters for panamax sizes, ocean carriers are tasking their brokers with finding the most economical ships on the market.

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