ILMA Compoundings - March 2020 - 12

INDUSTRY RUNDOWN

Smooth Sailing for
IMO 2020
As you all know, IMO 2020 went into effect on Jan. 1. It
bans ships from using fuels with a sulfur content above
0.5%, compared to the 3.5% allowed previously by the
United Nations shipping agency, the International Maritime Organization (IMO).
One of the ideas (other than ecological concerns) behind
the ban is to improve human health by reducing air
pollution. To be permitted to continue to burn high-sulfur
fuel, ships must be outfitted with cleaning devices known
as scrubbers. In addition to low-sulfur fuel oils, ship owners
can also choose to run on cleaner sources of fuel, such as
liquefied natural gas (LNG).
Enforcement of IMO 2020 will be the responsibility
of flag and port states, not the IMO, causing some in the
industry to wonder whether there would be full compliance
when the rule took effect. Reuters reports that "failure to
comply with the global regulations will result in fines or
vessels being detained and in some jurisdictions the risk of
imprisonment, which could affect vital requirements such as
insurance cover."
WHO'S IN TROUBLE SO FAR?
Chinese authorities were the first to report breaches of IMO
2020. One ship was caught when it underwent a Port State
Control inspection by the Chinese Maritime Safety Administration. The vessel was found to be using fuel with a sulfur
content of 0.6777% mm.
The second vessel was found to be using noncompliant
fuel, having been at a berth for six days after changing to
compliant fuel. It is speculated that this instance was merely
the result of high-sulfur residue remaining in the engine fuel
system. It is unclear whether the Chinese authorities would
penalize the vessels involved.
FUEL AVAILABILITY
One issue that had the industry panicking in 2019 was the
potential unavailability of compliant fuels. There was fear
this would primarily be a problem in smaller ports. So far, it
has not been a significant issue.
Seatrade Maritime News reported International Chamber
of Shipping Chairman Esben Poulsson, one of the people

12

MARCH 2020

| COMPOUNDINGS | ILMA.ORG

who had voiced those concerns, saying recently, " ... from
everything we are hearing, availability is there."
There has been some anecdotal evidence of owners having
difficulties getting fuel because they did not secure supplies
in advance. Those reports appeared to have been concentrated in the Singapore area.
FUEL PRICE UNCERTAINTY
While availability might not be an issue, price uncertainty
is. At least it is for very low-sulfur fuel oil, otherwise known
as VLSFO.
According to Ship & Bunker, the price of VLSFO in the
world's largest bunkering port of Singapore has softened
slightly to $723.50 per metric ton (pmt) compared to
$740 pmt on Jan. 6, but it remains sharply higher than the
$520-$550 pmt seen between July and November 2019.
At the time of this writing, current levels for compliant
fuels equate to some of the highest prices owners have ever
paid for heavy fuel oil. Many speculate that, eventually, the
market will settle, but until then, uncertainty regarding fuel
prices will continue.


http://www.ILMA.ORG

ILMA Compoundings - March 2020

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ILMA Compoundings - March 2020 - Cover1
ILMA Compoundings - March 2020 - Cover2
ILMA Compoundings - March 2020 - 1
ILMA Compoundings - March 2020 - 2
ILMA Compoundings - March 2020 - 3
ILMA Compoundings - March 2020 - 4
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