Lower Sulfur, Higher Rates–IMO 2020 is Coming

December 12, 2019
By Danielle Leonard

IMO 2020

January 1, 2020 is almost here, which means the International Maritime Organization’s (IMO) new regulation that will further limit sulfur content in ocean vessel’s fuel oil, is also almost here. Ahead of IMO 2020—as the regulation has been nicknamed—some carriers have started to implement surcharges, as of December 1, 2019. More rate hikes are expected, as the end of the year approaches.

Why Limit Sulfur?

Bunker oil for ships—the most commonly used fuel oil—is mainly made of heavy fuel oil, which is a byproduct of crude oil distillation. Crude oil contains sulfur which, due to combustion in the engine, results in sulfur oxide emissions from vessels. Sulfur oxides are known to be harmful to not only the environment but also to human health, especially for those living close to ports and coasts. Thus, the reasoning behind the new regulation.

Alternative Fuel Options

Carriers currently using high sulfur fuel will need to switch to one of the several alternate fuels, or install scrubbers, in order to stay compliant with IMO 2020. Alternate options include:

Very Low Sulfur Fuel Oil (VLSFO)–A blend of 0.5% sulfur made from a product called vacuum gasoil.

Marine Gasoil–A familiar fuel to carriers, use of this diesel-type product will likely increase in the coming months.

Scrubber Installation–To avoid hiking prices due to new fuel, some carriers are looking to install scrubbers. These scrubbers will allow the continued use of high sulfur fuel by scrubbing out sulfur emissions.

Impacting Ocean Rates

Mohawk will work to mitigate costs where we can. In the meantime, be on the lookout for a rise in rates, as carriers begin the transition to low sulfur fuel oil before the effective date.

If you have questions, please reach out to your Mohawk customer service representative.

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