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Shipping Industry unprepared for IMO 2020 say Commodity Traders

Possibly the major preoccupation of the shipping industry will be the IMO 2020 sulphur cap regulations effective January 1, 2020. Compliance with this regulation requires that sulphur cap on marine fuel is 0.50%. And the global commodity giants say that the shipping industry is not ready and prepared for this IMO regulation.

“ Do you think the market is perfectly prepared? Absolutely not,” FT reported  Trafigura’s Ben Luckok, co-head of group market risk as saying during the recent FT Commodities Global Summit in Lausanne.

Speaking at the same event,  FT quoted Franco Magnani, chief executive of Eni Trading and Shipping as saying there was still a lot of uncertainty  surrounding the position of the shipping industry on IMO2020 with clarity over the number of vessels opting for scrubbers as their compliance route a particular case in point.

Offering an answer to this was Bjarne Schieldrop , chief commodities analyst at SEB who pointed to a report by him firm indicating 2,000 of an 18,000 strong group of crude, dry cargo and box ships would have scrubbers by 2020.

IMO, in its original estimate as part of the official fuel availability study, had previously predicted  that world-wide there would be 3,800 scrubber equipped vessels.

Lourdes Rodriguez , executive director of trading at Respol, meanwhile, said during the first two years  of the new sulphur cap compliant fuels will be the dominant choice for ships. “Time is not enough to have a different solution” she reasoned.

The IMO 2020 sulphur cap being a matter of utmost concern for the industry, many shipping-related international bodies have had detailed discussions on it analyzing the pros and cons of the regulation with  a primary focus on the feasibility of the regulation being effectively implemented and the possibility of the industry taking to full compliance.  Almost all discussions ended in suggestions not against the regulation which is not desirable and possible but to ease the industry of the difficulties involved in moving towards compliance. One suggestion was to postpone the year for making the regulation effective in force from 2020 to 2025. Pushing back the implementation to 2025, it was argued, would save the industry somewhere between $30 billion and $50 billion a year; this idea was expressed by media and communications manager at the International Bunker Industry Association Unni Einemo said in the Platts conference in 2016.

The industry also pointed out the massive cost involved in getting ready to comply with the regulation. The industry was not already in a brilliant phase as it was before 2008.  Overcapacity and declining freight rates have turned the market depressive. To the question ‘Why do it?’, the simple direct answer was human health. It was pointed out that about 50,000 premature deaths occur in Europe alone each year because of air pollution from shipping.

 

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