- It is confirmed: marine transport will have to shift to low sulfur fuels.
- The environmental mandate creates multi-billion opportunities and risks.
- The largest impact equivalent to nearly doubling revenues for a number of companies is far down the supply chain.
The fuel standard used for the bulk of marine shipping is set to change from 2020. This is yet another seismic shift in an industry already dominated by devastatingly low rates, overcapacity in most categories, the resulting bankruptcies and consolidation across the board.
Although it is difficult to see how the confluence of these factors will impact the industry (for an attempt, see an earlier SA article), there are a few industries down the supply chain that will see revenues increase significantly (possibly by a factor of 2). As the analysis here relies on supply networks, it will take time before the affected markets fully digest the implications of this news item on respective companies.
The International Maritime Organization announced on October 27 that it would go ahead with a global sulfur content cap on marine fuels of 0.5% from January 1, 2020. Up to now, vessels have been using fuel oil (bunker) with a maximum allowable sulfur content of 3.5% everywhere in the world, except in narrowly defined coastal areas (so-called ECA zone), where the limit has been set at 1%. The overall limit as of 2020 will be 0.5%, which is a significant and abrupt move.
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