Prices, availability, stability, implementation, enforcement, compliance, verification, assurance!
To state the obvious, IMO 2020 0.5% Sulphur limit in marine fuel comes into force on 1st January 2020. This means that you cannot use fuel with a sulphur content of over 0.5% unless the vessel is equipped with a functional and compliant scrubber.
Two months later on 1st March 2019 vessels will no longer be able to carry fuel with Sulphur greater than 0.5% unless they have scrubbers fitted.
This amendment is intended to allow vessels to deplete stocks not delay fitting of a scrubber.
If you do not have a scrubber fitted and operational on 1st January 2020 and burning high Sulphur fuel you will be operating a non-compliant vessel and face such risks such as detention, fines and loss of insurance cover and sea-worthiness.
Optimain recommends that all vessels affected by IMO 2020 start to implement changeovers well before the implementation date so that technical and commercial issues can be addressed and the supply chain tested.
Issues around the availability of LSFO and ULSFO in main transit areas are unlikely however, this may not be the case for regional shipping as issues will vary between availability and stability of fuel.
Bunker fuel purchasing and price setting needs to be considered now and based upon the expected transit routes, it is imperative that each company develop Ship Implementation Plans (SIPs) for every ship.
The market will adjust and the expectation is that HSFO prices will fall further making purchase by existing vessels with scrubbers attractive, however as the fleet is not expected to be more than 5-10% scrubber ready by 2020, HSFO stocks may cease to be available as the market will have declined proportionally to a 90% contraction in demand. Add to this the issues around maintaining clean barges and reduced tankage availability, continued over-capacity in the fleet and scrubbed HSFO may become an unattractive option.
As we stumble through 2019 and approach the deadline, these risks may shift, strengthen or disappear so we must keep close to the market and look for emerging trends. We must be good at being factual and not biased in our analysis and look at who is behind each piece of information and what their conscious or unconscious bias may be. Independence will be key.
IMO 2020 may not be a latter-day millennium bug due to the realities of the need for compliance. Nor will it be a cliff edge as some predict. The market will become more granular with less stability between regional activity. These effects will be felt more by the smaller operators where margin erosion may be fatal. There will be winners and losers but in the end it will normalise and trade will continue.
Optimain can help develop SIP’s, cylinder oil lubrication monitoring, maintenance policy and strategy development and more – so do get in touch.
Finally, perhaps the bigger issue we should be looking at is not 2020 but 2050 when the hydrocarbon sources of energy will start to look like coal powered steam technologies did after the commercialisation of the large marine diesel engine. That and our growing need for transportation from around the globe, supply and block chain agreements, and the imminent disruption from autonomous technology on road, rail, air and sea.