The full impact of the global 0.5 percent sulfur fuel cap, implemented by the International Maritime Organization (IMO) on Jan. 1, 2020, has yet to be felt due to the slowdown in trade caused by the COVID-19 pandemic and the subsequent decrease in fuel usage.
According to Kathy Metcalf, president and CEO of the Chamber of Shipping of America, the larger impact may surface as trade returns to traditional levels and fuel prices adjust. The heaviest burden will be experienced by operators overseas. In North America, U.S. and Canadian coastal fleets already operate below the limit — 0.1 percent while sailing in an Emission Control Area (ECA) that stretches 200 nautical miles from shore.
As regulators continue to mandate new standards for emissions, the cost of doing business — paying for onboard scrubbers, testing biofuels and obtaining compliant fuel — increases. Each company, whether owner or charterer, is left to determine how to make the financial adjustments necessary to remain viable.
“Everybody’s having to bear that cost,” Metcalf said. “The question is whether they’re trying to regain it from their customers.”
With that in mind, Metcalf and other shipping experts are closely watching two primary issues relating to the 0.5 percent cap: fuel availability as the 50,000-vessel global fleet places more demand on the supply of low-sulfur fuel, and potential challenges from how the fuel burns.
“We’ve seen no availability issues in the United States or Canada, but we are concerned about the availability in Africa, South America and some ports in Asia,” Metcalf said.
Supply and demand could impact North America’s bluewater operators if increased usage causes fuel costs to spike. The second concern stems from potential inconsistencies in fuel mixes from bunker suppliers, as well as increased sludge, waxy appearance and viscosity issues.
A survey launched by BIMCO, the International Chamber of Shipping, Intercargo and Intertanko is providing an early look at how compliant fuel is impacting ships. According to operator reports, fluctuating fuel oil properties are creating quality and safety problems. While there have been no major casualties, the process of how best to meet the cap and what adjustments should be made to fuel mixes remain a focus.
For companies that installed emissions equipment on their ships to operate within ECAs, another focus will be the safety of discharges from open-loop scrubbers. While discussions at the IMO have been stalled because of COVID-19, the topic has been pinpointed for when meetings resume.