2020: Point of No Return for Maritime
An old proverb teaches that time and tide wait for no man, apparently neither does the International Maritime Organization (IMO). The sulfur cap will come in to effect on January 1st, 2020 and ships will have to use marine fuel with a sulfur content of 0.5% compared to the current limit of 3.5%. There seems to be no budging on this front.
Wait is over – time to see
When this regulation was first announced in 2008, there was very little movement towards rushing to comply. Many shipowners adopted the wait-and-see approach, anticipating others to test the waters and find the most effective solution. Any activity stalled even more because back then IMO was open to the possibility of postponing the cut for another five years or so from 2020. However, IMO secretary-general Ki-Tack Lim is adamant that the original date of implementation will stand and there is no reprieve in the wings.
Even so, there are no long-term plans emerging from shipowners to deal with this looming change. Their reluctance stems from having to make a choice when none of the options are particularly attractive. In order to comply with the sulfur cap, they can change their bunker fuel that comes with a higher price, or invest in a scrubber or a new ship, either of which would require a major upfront capital cost. Not to mention, there is always the possibility that there will be further regulations for other types of emissions, that would make the initial choice obsolete. Especially, since some scrubbers, after removing sulfur from emissions, dump it into the sea, subsequently polluting it.
A similar situation was seen with the Ballast Water Convention, that was amended and postponed to 2024 due to lack of clarity over the required level of ballast water purification and the cost and acceptability of equipment needed to comply. Such developments push some shipowners to consider the possibility of ignoring the regulation with the hope of not getting caught, but that comes with its own risks.
Run and Hide
As of yet, it is unclear how inspection and enforcement of the sulfur cap will be conducted. Especially since outside of countries strongly dedicated to the cause, such as the US, the European Union, Australia and New Zealand, enforcement plans seem to be limited or even non-existent. This could make some ponder whether paying the fine for non-compliance could be less than possible savings in fuel costs.
However, dire predictions from insurers should stop this train of thought. Insurance broker Marsh has made it clear that non-compliance with new regulations could have the ship lose its classification status and liability insurance coverage. It is also expected that, in order not to be declared unseaworthy, vessels will rush to shipyards for retrofitting or conversion to LNG. Those, who are still playing the wait-and-see game, may find themselves at loose ends when all yards are too busy to fit them in. Therefore, the warning from IMO secretary-general should be heeded, and compliance should begin now because there really is no turning back.
Find out how your maritime industry peers are planning to deal with the challenges of sulfur reductions by joining an exclusive, closed-door event – Maritime2020 in Copenhagen, Denmark on June 19, 2018. If you attend, you’ll be able to hear from major shipowners, shipbuilding companies, shipyards, ports, maritime associations and governmental bodies.