Shipping companies now know that within three years all vessels involved in international trade will be required to use fuel with a sulfur content of 0.5% or less—an aggressive standard, considering that in most of the world today, ships are currently allowed to use heavy fuel oil (HFO) bunker fuel with up to 3.5% sulfur. This is a big deal. Ships now consume about half of the world’s residual-based heavy fuel oil, but starting in January 2020 they can’t—at least in HFO’s current form. How will the global fuels market react to a change that would theoretically eliminate roughly half the demand for residual fuels? How will ship owners comply with the rule? What are their options? Today we discuss the much-lower cap on sulfur in bunker fuels approved by the International Marine Organization, and what it means for shippers and refineries.
The international shipping industry is a major energy consumer, and for that reason we’ve blogged about it often. In Against the Wind, we talked about how the International Maritime Organization (IMO) in recent years has been implementing rules that gradually reduce emissions of sulfur (sulphur for many of our non-American readers). In January 2012, the “global” cap on sulfur content in marine fuel was reduced to 3.5% (from the old 4.5%), and—as we said in All the Way From America—in January 2020 (per an IMO decision in October 2016) it will be reduced to a much stiffer 0.5% sulfur cap. There has been an even tougher standard (a 0.1% sulfur cap) in place in the IMO’s “Sulphur Emission Control Areas” (SECAs, or sometimes ECAs), which include Europe’s Baltic and North seas and (more recently) areas within 200 nautical miles of the U.S. and Canadian coasts (dark-shaded areas in Figure 1).
To access the remainder of How Am I Supposed to Live Without You? - A Major Shift in Marine Fuel Rules you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at email@example.com or 888-613-8874.