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What is IMO 2020?
With effect from January 1, 2020, the International Maritime Organization (IMO) has introduced a new fuel regulation that limits sulphur emissions to 0.5% in order to make shipping more environmentally friendly. Going forward, all seagoing vessels must reduce sulphur oxides by 85%.
Who is affected by this new regulation?
The IMO 2020 Emission Regulation means that ships must significantly reduce their emissions, both on the high seas and in coastal areas. This change affects the entire shipping industry.
In order to comply with the new regulations, the industry will invest in low-sulphur fuels or in new technologies. In both cases, costs will increase as compliant fuels and investment in new technologies are expensive.
In Northern Europe, North America and parts of Asia it is mandatory to use an even cleaner fuel with a sulphur content of 0.1%. This special fuel is more expensive and will be charged separately. The remaining areas require a maximum sulphur content of 0.5%.
If the regulation is not implemented from January 1, 2020, fines, ship arrest or even imprisonment of the captain must be expected.
As of January 1, 2020, all seagoing vessels must comply without exception with the new rules, otherwise they will face punishments.
The IMO 2020 Regulation applies to all shipments. Likewise, the fuel consumption values (Trading Factors/Bunker Adjustment Factor BAF) apply to everyone.
Due to the sudden spike in demand for low-sulphur oil brought on by the new regulations, there is a possibility that refineries will not manage to produce the required quantities in a timely manner. This may lead to a temporary increase in prices.
Some of the largest shipping companies in the world plan to equip their fleets with filter systems as a short-term solution. Furthermore, ships will switch to liquefied natural gas (LNG). The remaining ships will switch to fuel with a 0.5% sulphur content.
DB Schenker cooperates with shipping companies that actively work on CO2 reduction and compliance with the IMO 2020. Shipping companies are developing individual solutions, such as the use of new vessels with filter systems, gas systems and new fuels.
Due to the technical innovations that have to be implemented by the shipping companies due to the IMO 2020, higher prices are expected from the customer side. For this purpose, the freight rates are calculated by DB Schenker according to the BAF (Bunker Adjustment Formula) based on the latest price trend.
METHOD: BAF = fuel price per ton x trade factor
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