IMO-2020 Regulation – The New Age of Commercial Shipping

The Shipping Industry is a crucial asset that governs a nation’s economy. The world has noticed how countries like China who are potential importers as well as exporters are suffering with an economical low if shipping gets impacted (Although this is just for a time being till the CoronaVirus outbreak gets tackled).

Except the Act of god, very few external factors can hamper this industry as this is closely watched and protected by all the nations together with the IMO being a key organization to run this industry smoothly on a global basis.

One potential threat to the industry is the growing emission of SOX gases due to the consumption of HIGH Sulphur fuels consumed by marine vessels.

  • The IMO has thus introduced the IMO-2020 Regulation for controlling the Sulphur emitted by Merchant Vessels.

  • From The 1st of January 2020, The United Nations agency for shipping – the International Maritime Organization (IMO) will ban all ships from using fuels with Sulphur content above 0.5%, compared with 3.5% (which was established in 2012) as used before this regulation.

As per a Statistical research Burning bunker fuel accounts for almost 90% of global Sulphur emissions and the 15 largest ships in the world produce more Sulphur each year than all cars put together.

Earlier regulations were imposed to control the carbon content in the funnel emissions of the merchant vessels. The sea discharges after tank cleaning etc. So this is not the first instance where a preventive measure is taken that can cost Ship owners as well as Charterers.

This will hamper business and activity of Major as well as small scale Shipping Companies.

The Impact on Shipping Trade.

With the IMO 2020 in picture marine fuel buyers (Bunker providers as well as shipowners) will have to purchase a quality of fuel equivalent to the fuels consumed by trucking, planes, trains, and other forms of transportation. With increasing demand of Such low Sulphur fuels by Shipping industry the prices will surge and hence leading to an increased cost of products

to the consumer.

This will be a difficult situation for all consumer goods providers so as to keep the costs to the minimal and maintain quality.

“While it sounds like a noble goal, it will come at a cost,” says Flynn. “The new fuels will tighten supply and drive up costs,” he says, adding that the IMO has said that fuel prices may increase by 20% to 30%. The rules will “put maritime fuel buyers in direct competition with trucking, planes, trains, and other forms of transportation,” Flynn says. “That will lead to a squeeze on supply, raising the cost of goods to consumers.” (Phil Flynn, Price Futures Group)

Impact on the Ship-Owners.

  • Almost all ship owners will opt for the easiest option of buying the low Sulphur fuels.

  • But this will come with a Cost much higher than earlier(estimated to rise by 20-30% by most Chatering and shipping experts).

  • To keep the business running Owners will now have to Choose the newer vessels with optimum speed deliveries to minimise the fuel consumption in longer voyages.

  • Voyage calculations and bunkering will have to be closed watched to reduce the operational cost and make profits.

  • Bunker consumption in a year is approximated to around 5% of the global usage of fuels.

  • As a result of switching to low sulphur fuel, it’s expected that approximately 2.5 million barrels of low sulphur fuel will be required.

  • The demand increase is expected to drive up fuel costs.


Another option to keep all vessels operational is the Installation of scrubbers:

Since the Sulphur emission is a problem and not the content in the fuel, some shipping companies are opting to use scrubbers to ‘capture’ the sulphur before it is released.

Scrubbers trap the sulfur emissions from the exhaust fumes and transfer them to a disposal unit.

By now(as per online updates) only an estimated 1% of vessels have been fitted with scrubbers, and several shipping companies are expecting the output result of these machines prior getting them onboard in order to be cost effective.

Scrubbers take around 4 – 6 months to get manufactured as per specific ship dimensional requirements and 2 – 4 weeks to get installed depending on several factors

Scrubber manufacturers estimate a ROI of around 2 – 4 years complying with the IMO 2020 regulations.

Impact on charterers.

Charterers will be impacted the most in this scenario especially the Time Chartereres and Voyage Charterers.

Bareboat and demise charteres can ask for a reduced price to be paid to the owners but the former two have fewer options left at hand to reduce cost and avoid business slowdown.


These can be discussed as follows

Impacts on freight capacity – and vessel speed

  • Refining the fuels with separately installed set-ups or buying low sulphur fuels can increase the cost of fuels.

  • Speed reduction although is a good option where in running the vessel at economic speeds or slow speeds can save fuel but at the same time is difficult to implement as many shipments are time restricted and need to be delivered within the expected timeframe.

  • This can result in a reduced profit scenario for these Charterers.

Making additional fueling detours

  • Sufficient storage of fuels in low sulphur quality is usually expected to conduct long voyages without a halt.

  • Any shortage can lead to halts and detours to take additional bunkers in order to continue further on the remaining legs of the voyage.

  • This detour or halt although helps in reducing the excess weight of the bunkers carried, it affects the time taken to reach the destination.


Summing up my blog with the fact that this is a situation which will prove fruitful in the coming future to humanity. The act of the moment is precise calculations; maintaining business relations at reduced cost for the time-being, keeping up good business ethics and an up-front responsible behavior in this expensive trade market with effective prices will help brokers and charterers progress in the market. Situations come and go but a real trader(broker/charterer) will always take them as a challenge and prove his ability in cases where others kneel down. Best of luck to all the readers.

#IMO #internationalmaritimeorganization #Maritime #Sulphur #SulphurEmission #Carbonprint #commercial #scrubber #charterer #ship

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