As SCDigest has reported several times, there is much concern about new rules coming out of the International Maritime Organization (IMO) that will require cargo ships to either use new very low sulfur fuels or install very expensive scrubbers at the tune of multiple millions of dollars each.
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The new rules are scheduled to go into effect Jan. 1, 2020 – 15 months away.
Observers have warned the rules could cripple the already financially struggling cargo carriers with much higher fuel and/or scrubber costs that the lines will be unable to cover with surcharges to shippers. In fact, the CEO of one carrier said the rules could cause bankruptcies for some companies
"We're all going to go bust," Junichiro Ikeda, CEO of Japanese container carrier MOL, said in June.
The changes are likely to lead to also lead to rising diesel prices for everyone, as overall demand for certain light crudes soars, and also drive still more slow steaming, and even pull back in global trade.
As carriers decide how they are going to meet the mandate, a new concern has arisen: the new low sulfur fuels being developed could cause major damage to ship engines.
As reported by the ATA's Transport Topics web site, the "primary worry is the lack of a single fuel type that complies with the rules. Since refineries across the world are creating different solutions to meet the sulfur-reduction target, owners say their ships' engines could be damaged by inadvertently mixing incompatible products."
Transport Topics quotes Harald Fotland, chief operating officer at Odfjell SE, one of the world's largest shippers of chemicals, as observing that "The marine fuels that can be used when the 2020 regulation is implemented are believed to be more unstable and contain other compounds than what is the case today. Therefore, we have to be even more cautious in selecting fuels."
The issue appears to be less the impact of a single new fuel, but rather the mixing of different fuels going into the tanks.
"The way the different products work together can produce instability of fuel, which can create sediments that can damage the pumps and engines eventually," says, Dragos Rauta, technical director at trade group Intertanko, the largest trade group for operators of ships moving everything from oil to gas to chemicals.
The mixed fuels could cause a ship's engine to stop - something that would be particularly dangerous in bad weather in busy shipping lanes close to land.
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As a result, ship owners are likely to need to conduct more extensive and frequent testing to ensure fuels are safe, adding more expense at a time of rising fuel costs.
Maersk Line, the world's largest container carrier, expects a whopping $2 billion increase in its annual fuel bill from the change, which would hammer its bottom line.
It could get complex. There may not be enough blended fuel to go around, Transport Topics notes. Some smaller ports may not have access to it, meaning companies will have to use a combination of diesel-like products and low-sulfur fuel oil on each voyage, taking care to ensure the two aren't mixed.
The IMO says it is working to develop a list of compliant fuels, which should not cause operational issues, it says. That may be true in isolation – but will it be true if fuels are mixed in the tanks?
Will all of this cause any reprieve in the January 1, 2020 date for compliance? Thus far the IMO has not indicated it is considering any delays, but we'll see how things progress in 2019.
Do you think we will see any delay in the IMO mandate? Let us know your thoughts at the Feedback section below.
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