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IMO 2020: Challenge to the industry to go clean and green

All the stakeholders of the shipping industry have been grappling with this new strict regulation that demands the industry to change and change fast with just two years to go.

It appears to be the biggest disruptions in the shipping industry in living memory, SeaNews rightly argues. 

The IMO ruling will certainly lead to such a massive drop in the demand of High Sulphur Fuel Oil (HSFO) that ‘No entity along the value chain — from refineries, trading, logistics, ports to shipowners, will be untouched.’

Among options, low sulphur fuel oil (LSFO) and Liquified  Natural Gas (LNG) appear to have emerged as the preferred options; of course, scrubbers or exhaust gas cleaning systems too have claimed attention of the industry. But, the investment in fixing scrubbers seems to be rather a negative point; it is said investment ranges between $1-9 million per ship depending on its size; it may cost an arm and a leg. Shipowners are not that comfortable with finance that such investment could be done without hesitation or consideration. As SeaNews points out, the industry is in ‘a low margin environment’. Between compliance and penalty, there is possibility some operators might choose the latter.

In the absence of a ‘global game plan, there is a consensus that conformity for post-2020 bunkering will help trim overall costs and improve energy supply and security.

Compliance to IMO 2020 carries a steep price tag in a cash-strapped energy industry. Consultants Wood Mackenzie estimated last year that a full compliance scenario would incur an increase of up to $60 billion per year in global bunker fuel costs from 2020, while S&P Global Platts said the impact of these changes will reach $1 trillion over five years. The line between winners and losers in the early 2020s could be well-defined between those who can afford to evolve — and those who cannot.

In a post 2020 scenario, indeed, refiners get a terrific opportunity to make money.

The IMO 2020 regulations have, no doubt, created an atmosphere of chanciness within the shipping industry, SeaNews concludes. Identifying problems and constraints would enable companies to put the necessary projects in place well before the 2020 implementation date.

The take-home message is the IMO 2020 regulation will be an opportunity for some shippers, but for others it will be a significant challenge. In either case, there are a number of approaches one should consider to improve position and ensure overall competitiveness in the period between 2020 and 2024 when a new equilibrium is found. The more effective approaches are technology-enabled, but all come back to a focus on enabling the workforce to adapt to new operational realities posed by IMO 2020.

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