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SHIPOWNERS
and bunker suppliers at the Platts European
Bunker Fuel conference in Rotterdam have
voiced concern at vast compliance costs
involved with new stringent sulphur regulations,
and called for more clarity on what the
impact would be on prices of imported consumer
goods.
"While
the total costs of 2015 [ECA (emissions
control area) zone] requirements were around
US$500 million, the 2020 requirements could
add an annual cost in the order of $5 billion
to $30 billion for the container shipping
industry," said Maersk Oil Trading
development manager Dea Forchhammer, citing
recent OECD figures.
While
not opposed to the global 0.5 per cent sulphur
cap, Maersk is concerned that other shipping
lines would baulk at these costs, and avoid
compliance by using cheaper, higher sulphur
fuel to undercut them on freight rates,
she said.
Another
delegate argued that all extra costs for
the shipping industry would be passed on
to consumers through higher freight costs,
reported Platts, McGraw Hill of New York.
"Did
anyone disclose to the public that every
imported [consumer good] you buy is going
to cost more, who knows say $100, $200,
because of a lower sulphur content being
given off from ships into the air? Has anyone
announced this, " he said.
Much
of the current thinking pre-supposes the
price of fuel will stay low. One need only
recall scarifying scenarios presented when
bunker was high to appreciate the problem.
Then North Sea ferry and short sea operators
were crying foul and predicting a dire end
of the industries - before the great oil
price plunge.
Clever
Gothenburg saw its silver lining in the
dark clouds of regulation. They would cheerfully
wipe out a prosperous sea trade going deadhead
to northern Baltic ports to pick up lumber,
realising these ships were vulnerable to
fuel prices could only haul cargo one way.
That
was good news for Gothenburg, of home of
furniture making giant Ikea. Sweden's big
Atlantic port saw all this sawn lumber bound
for Japan where millions love Ikea. With
high sulphur fuel mandated all this lumber
would zip cross-country by rail, attracting
direct calls from shipping alliances to
service the monumental - and now containerised
- trade.
Before
the oil price plunge, shipping companies
would have to pay 60 per cent more for low-grade
low sulphur fuel. The trade between St Petersburg
and Montreal could well be stopped dead,
now having to traverse an emission control
areas the length of the Gulf of Finland,
then half of the Baltic Sea, crossing the
whole of North Sea, before running the length
of the English channel before getting brief
transatlantic respite before having to re-enter
the control zone 200 nautical miles off
Newfoundland before enduring it for 1,000
miles to Montreal.
This
situation will certainly give to life to
the old pleas of the Mediterranean ports
like Koper, Trieste, Venice, Genoa, Marseilles
and Barcelona, all longing to siphon off
cargo from the northern range. That would
depend on mounting regulations and a return
of high oil prices to revive such hopes.
Half a world away, it would revive hopes
of former maritime glory in the Port of
Halifax, giving the entire Suez-east coast
North America and whole new lease on life.
But at the same time killing ports and waterways
like the St Lawrence Seaway in these high
regulation zones.
Many
delegates at the conference raised questions
about how prepared the bunker fuel industry
is for a 2020 implementation of the International
Maritime Organisation's planned 0.5 per
cent sulphur cap, and how a troubled shipping
industry would deal with the costs.
Pushing
implementation back to 2025 could save the
shipping industry somewhere between $30
billion and $50 billion, media and communications
manager at the International Bunker Industry
Association (IBIA) Unni Einemo said.
The
IBIA, which represents both suppliers and
end users of marine fuel, does not have
an official stance on whether the IMO should
implement this more stringent sulphur limit
in 2020 or 2025, but Ms Einemo said there
are at least many issues that are unresolved
ahead of the earlier of the two potential
implementation dates.
"It's
such a brutal change, maybe it should be
a phased introduction, even over six months
would help," she said.
Consultancy
CE Delft and its partners have made a provisional
study for the IMO that a 2020 implementation
could be handled by the global refining
sector, given the expansion in secondary
unit capacity to produce more middle distillates.
The
IMO plans to make a decision on the implementation
date of the 0.5 per cent sulphur cap based
on the results of this study, but it is
far from clear what they will decide, Ms
Einemo said.
"There
could be a silent majority of countries
at the IMO who want a 2025 implementation,
we won't know until October," she said.
The
drop from a 3.5 to 0.5 per cent global sulphur
cap (outside ECA zones) is extremely steep,
said many delegates at the Rotterdam conference,
and raises challenges for refiners, shipowners,
and the logistics of multiple tank storage
for the several grades likely to be in use.
Shipowners
with scrubbers will still be able to use
3.5 per cent sulphur fuel oil, but if these
are still a minority of ships in 2020, as
seems likely, 3.5 per cent sulphur fuel
oil could become a more niche product, and
perhaps be more expensive than expected,
delegates said.
In
addition, it will be increasingly difficult
to match 0.5 per cent sulphur to the currently
prevalent ISO: 8217 specifications, said
Ms Einemo, as though they're categorised
as residual fuels, in many ways they are
superior.
Even
if the IMO delays implementation to 2025,
the EU still going ahead with a 0.5 per
cent limit in 2020.
This
would create a more complex-shaped low sulphur
emissions zone in territorial waters of
EU countries, including around islands such
as the Canary Islands.
"Ships
might try to hug the North African coastline
to avoid sailing within EU waters,"
said Ms Einemo. "What would happen
at the straits of Gibraltar, where there
is a two-way system to cope with vessel
traffic?"
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