Shipping set to 'crash' into new sulphur rules

26 February 2019

The shipping industry is set to “crash” into sulphur-reduction regulations this year, according to A.T. Kearney.

A.T. Kearney’s Global Business Policy Council Year Ahead Predictions for 2019 said there was a “low level of readiness” for the change, which comes into force on 1 January 2020. From that date the International Maritime Organization (IMO) will enforce a ban on ships using fuel that has a sulphur content of 0.5% or higher.

Although ships have the option to purchase “scrubbers” to reduce emissions from higher-sulphur fuel, these cost between $1m and $10m per ship. “It is not surprising that less than 3% of the global fleet has made this investment,” said the consultancy.

The IMO is aiming to reduce the shipping industry’s greenhouse gas emissions by 50% from 2008 levels by 2050.

The new regulations will not affect the stricter sulphur limit of 0.1% in existing Emissions Control Areas in North America, the Caribbean, the Baltic, and the North Sea.

“Given the low level of readiness to comply with these regulations, the global shipping industry will undergo a disorderly and disruptive transition to the new environment in 2019,” said A.T. Kearney.

As the 2020 deadline approaches prices for a variety of fuel types – including high and low-sulphur bunker fuel, diesel fuel, and jet fuel – will be more volatile.

It warns that some of the largest crude oil tankers could see a 25% increase in shipping costs, leading to higher oil and gas prices for consumers.

A.T. Kearney also warned supply chains will be hit by a sand shortage caused by a global construction boom.

Sand is the second most-extracted natural resource after water and forms two-thirds of concrete, which in turn forms of two-thirds of all construction materials.

China used more sand between 2011-13 than the US did during the entire 20th century. India has seen price increases between 100% and 150% in the past two years, as well as the emergence of a violent sand mafia.

With US prices for cement and concrete rising nearly 70% between 2004 and mid-2018, partly due to sand-intensive hydraulic fracturing (fracking), there is a risk supply shortages could lead to the slowing or cancellation of some projects.

Countries such as Singapore, the world’s largest sand importer, will face particular global scrutiny as the issue gains prominence.

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