New Regs Make Shipping Waves

Electronics OEMs rely on ocean shipping for transporting much of the heavier goods used in manufacturing, as well as for moving finished product. Whether raw materials or manufactured goods, seaborne trade is a critical piece of the global economy as well.

In fact, there are over 50,000 merchant ships trading internationally for all types of cargo. They generate an estimated annual income of over half a trillion U.S. dollars in freight rates. Ships are registered by 150 nations, employing over a million seafarers, according to the International Chamber of Shipping.

Things in the industry are changing. The International Maritime Organization (IMO), a United Nations agency responsible for ensuring a clean, safe, and efficient global shipping industry, has new regulations on the horizon that promise the impact maritime shipping. Called IMO Sulphur 2020, the new regulations will require a 0.5% m/m (mass by mass) sulfur emissions cap worldwide starting January 1, 2020. The current emissions cap is, by comparison, 3.5%.

In a nutshell, the bunker oil used for ships is a heavy fuel oil that is derived as a residue from crude oil distillation. The sulphur in the crude oil becomes part of ship emissions. Sulphur oxides (SOx) are harmful to humans, causing respiratory symptoms and lung disease. It also has an environmental impact, since it can lead to acid rain, which in turn harms crops, forests, and the ocean. Limiting Sox emissions from ships improves air quality and protects the environment. “It should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts,” the IMO said.

Other unintended consequences are also likely to occur. These may include a price increase for diesel fuel which will be in higher demand, for example. It will also shift shipping rates as shippers pass fuel cost increases on to their customers. Goldman Sachs estimates that, if full compliance is reached, the total impact in raised shipping rates in 2020 could be about $240 billion.

The infographic below by Breakwave Advisors demonstrates how the new emissions regulations taking effect in 2020 may impact on the world of marine shipping vessels. Take a look and let us know whether you have heard your shippers talking about price hikes.

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