The International Maritime Organization (IMO) will implement a new E-Emission target set to take effect from 1 January 2020.

Shipping lines across the globe will need to conform to the new regulations set by the IMO agency.

On 1 January 2020 as per the new regulations, shipping lines globally are required to use marine fuels with a sulphur content of no more than 0.5%. This effectively classifies as Very Low Sulphur Fuel Oil (VLSFO). This will replace the current sulphur content regulation of 3.5% known as (IF0380) Intermediate Fuel Oil. This is part of the coordinated global effort to reduce E-Emissions at sea for a greener future.

Shipping lines have one of 2 options currently:

1 Use compliant fuels with 0.5% sulphur content or less. The cost of this fuel will be higher than the cost of intermediate fuel. This would reflect directly on the bunker cost from shipping lines.

2 Shipping lines would install retrofitted scrubbers to their vessels, which would still allow them to use the higher Sulphur fuels (@ 3.5%).

Shipping lines are adopting different strategies to comply with the new regulation. Pioneer Freight will be monitoring the shipping lines different strategies, and of course will be taking this into consideration with rate negotiations.

The new regulation will increase outlay costs for the carriers. These costs will manifest in various ways into the market: either through an increased freight rate, a special Low-Sulphur-Bunker-Cost-Surcharge or a current bunker level increase.

Costs from some shipping lines might begin to increase already in Q 4 2019. Word on the street is that the bunker cost is expected to increase by approximately USD60.00 per TEU as of 1 January 2020.

We thank you for your continued support and we will keep you updated as much as possible through this exciting new era towards a greener future.