News Center

When browsing:
Your location-News Center-Industry News

Industry News

Private sector differs with public sector on damage of IMO 2020


EXPERTS from intergovernmental organisations, like the OECD's International Energy Agency (IEA) and the UN's International Maritime Organisation (IMO) differ with private sector groups like the shipowners' BIMCO and consultancies like AlixPartners on the negative impact of next January's virtual sulphur ban on ship emissions.

According to the Paris-based International Energy Agency (IEA) the sulphur cap will not have the devastating impact on global maritime carriers that Bimco and AlixPartners analysts predict.

'Prices for gasoil could rise at first as demand from the marine sector increases, but sluggish growth from inland sources of demand will limit the pressure,' said the IEA.

e believe that industry players are in a strong position to adjust in the medium term,' it said.

The International Energy Agency, like the UN, is an autonomous intergovernmental organisation established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis.

Gasoil is more expensive than high-sulphur fuel in the short term, but according to the IEA, the maritime industry will transition to very low sulphur fuel oil (VLSFO) in the medium term.

The IEA predicts that VLSFO prices will be competitive in the future due to an increase in global supply and limited demand.

The IEA's supply forecast shows US oil production growing at an unprecedented pace, far surpassing previous expectations. The US is now forecast to account for more than 70 per cent of worldwide oil production growth from 2019 to 2024, says Bloomberg.

When the IMO's sulphur cap takes effect, it will require carriers to use bunker fuel with no more than 0.5 per cent sulphur content, compared to the current limit of 3.5 per cent.

London-based Baltic and International Maritime Council (BIMCO), representing global shipowners, warns of bankruptcies.

Said BIMCO analyst Peter Sand: 'Unless these costs can be passed on to the end consumer through the whole supply chain, this may result in outright bankruptcies in the container shipping industry.'

Agreeing, New York consultancy, AlixPartners' latest Global Container Shipping Outlook said the IMO mandate could raise fuel costs US$10 billion annually, $3 billion alone on the eastbound transpacific and Asia-to-Europe routes.

'The price difference between low-sulphur and high-sulphur fuel may become even wider, 'and if it does go up sharply, that is enough to drive carriers into bankruptcy if they can't recover that cost,' said its report.